1 Alberta Business Beat Volume 5, April 2014

2 Background and Methodology

3 Business & Agriculture Background & Objectives Background ATB Financial commissioned NRG Research Group to conduct a survey of 300 randomly selected small- to medium-sized businesses in Alberta each quarter, beginning in Q The purpose of these studies is to gain an understanding the challenges faced by small- to medium-sized businesses in Alberta, and to track confidence in the business climate in Alberta. Research Objectives »Measure business owners and managers perceptions of the current business climate compared with six months ago, as well as their assessments of what the business climate will be like six months from now; »Understand the need of cash flow management and the habits and tools business owners use to maintain an understanding of their companys financial management. »Explore gender differences when it comes to managing their business, cash flow management and future investment plans; and, »Profile the firmographics as well as respondent demographics for small- to medium- sized businesses in Alberta.

4 Business & Agriculture Methodology Alberta SMEs Alberta SMEs Qualifying Businesses < 500 employees <$20 million annual revenues Must be financial decision makers or influencers Excluded agriculture, government, financial institutions, media, market research, PR, advertising and communications sectors Excluded agriculture, government, financial institutions, media, market research, PR, advertising and communications sectors Field dates: Mar 19 - Apr 1, 2014 Telephone Telephone Over 3,000 businesses contacts made and 300 completed the survey Over 3,000 businesses contacts made and 300 completed the survey An oversample of 100 female entrepreneurs were added for all gender comparisons An oversample of 100 female entrepreneurs were added for all gender comparisons Margin of error is +/- 5.8% Margin of error is +/- 5.8%

5 Business & Agriculture ATB – Business Optimism Index grew again this quarter to reach a new record! Majority of small businesses do not prepare cash flow projections, but are impacted by seasonal cash flows. Female entrepreneurs generally approach business in similar ways to their male counterparts; although there are some subtle differences Key Insights

6 Business Confidence

7 Business & Agriculture A very optimistic future Alberta Economy 89% will be better off or the same Your Company 95% will be better off or the same How do you think… will be six months from now? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, 300 respondents. (±) Change from last quarter % FEMALE 96% MALE 91% FEMALE 88% MALE 54% better/ somewhat better 65% better/ somewhat better 46% better/ somewhat better 50% better/ somewhat better

8 Cash Flow Management

9 Business & Agriculture What are the main issues SMEs face with their cash flow management? TIMING FOR THE RECEIVABLES AND PAYABLES. CUSTOMERS ARE TAKING DAYS TO PAY. SO IT IS HARD TO PAY THE PAYABLES, WHEN THE RECEIVABLES ARE NOT COMING IN QUICK ENOUGH. Vice President, Retail Trade, 38 years in business, employees, $3M to $5M in revenues. Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those who report having a main issue with their business cash flow management (n= 216; DKs removed); responses mentioned by 5% or more are shown.

10 Business & Agriculture Seasonality impacting cash flow 63% of SMEs report seasonality affects their cash flows. HOW DO YOU MANAGE THROUGH IT? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those who report seasonality affects their cash flows (n= 190 ); responses mentioned by 3% or more are shown. Industries that appear most impacted by seasonality include: Retail Trade, Construction, Automotive & Arts/Entertainment & Recreation.

11 Business & Agriculture Less than half of all SMEs prepare cash flow projections. 42% of SMEs prepare cash flow projections. OVER WHAT TIME PERIOD DO YOU FORECAST YOUR CASH FLOWS? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=124 ). 49% SMEs in the Start-up (100%) or Expansion Phases (56%) are the most likely to be forecasting their cash flows.

12 Business & Agriculture How often are cash flow projections revised? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126 ).

13 Business & Agriculture What tool(s) are being used for cash flow management? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126 ).

14 Business & Agriculture Who is responsible for developing the cash flow projections? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126 ); responses mentioned by 4% or more are shown. 91% of the cash flow forecasts are being done in-house (versus 9% who use outside help).

15 Business & Agriculture Who is responsible for the day-to-day management of your cash flow or position? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126 ); responses mentioned by 4% or more are shown.

16 Business & Agriculture How often is the cash balance or position being monitored? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126 ).

17 Female vs Male Entrepreneurs

18 Business & Agriculture Just how different are women and men entrepreneurs? (Summary) FEMALE MALE Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. Own/operate a small business with 5 to 49 employees (50% vs. 34% females). Own/operate a micro-business with 0 to 4 employees (57% vs. 43% males). Spend most of their time managing their business operations (33% vs. 21% females). Be more optimistic about their companys future (65% much/somewhat better off vs. 54% males). Consider the most important aspect of running their business to be operations (18% vs. 8% females). Spend most of their time with strategy/future planning (10% vs. 4% males), accounting (10% vs. 4% males) and administration (8% vs. 2% males). Have the most difficulty with human resources & labour (34% vs. 23% females) and sales & customer acquisition (16% vs. 9%). Consider the most important aspect of running their business to be the strategy/future planning (17% vs. 9% males). Have plans for purchasing new equipment or machinery (63% vs. 53% females) or purchase or build new commercial real estate (20% vs. 13% females). Have the most difficulty with financing & cash flow (13% vs. 6% males) and marketing, advertising & PR (13% vs. 7% males). THEY ARE MORE LIKELY TO…

19 Business & Agriculture Just how different are women and men entrepreneurs? (Summary) (contd) FEMALE MALE Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. Plan to spend a greater portion of their capital investment in Alberta (95% vs. 88% females). Have plans for investing in IT (46% vs. 36% males) or commercialize new products/services (38% vs. 28% males). Have an older business (mean 25 years in operation vs. 19 years females). Plan to spend a greater portion of their capital investment in other parts of Canada (8% vs. 3% males) Have a business in the mature phase (22% vs. 8% females). Have a business in the start-up (8% vs. 1% males) or initial growth phases (13% vs. 5% males). Be in the energy or oil & gas (19% vs. 9% females) or construction (13% vs. 6% females) industries. Be in the health care & social assistance (13% vs. 2% males) or education (6% vs. 2% males) sectors. Be located/ have locations in a rural area (23% vs. 15% females). Be located/ have locations in an urban area (55% vs. 45% males). Have a store front (57% vs. 47% female).Not have a store front (53% vs. 43% males). THEY ARE MORE LIKELY TO…

20 Business & Agriculture Just how different are women and men entrepreneurs? (Summary) (contd) FEMALE MALE Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. Have annual revenues less than $1M (65% vs. 45% males). Be younger (45% 18 to 44 vs. 25% males). THEY ARE MORE LIKELY TO…

21 Business & Agriculture Just how different are women and men entrepreneurs? Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. DEMOGRAPHICS MALEFEMALE Age18 to 34 (9%) 35 to 44 (16%) 45 to 54 (31%) 55 to 64 (31%) 65 or older (13%) 18 to 34 (14%) 35 to 44 (30%) 45 to 54 (34%) 55 to 64 (17%) 65 or older (5%) Decision makerSole decision-maker (48%) Shared responsibility (45%) Influencer (7%) Sole decision-maker (39%) Shared responsibility (46%) Influencer (15%)

22 Business & Agriculture Just how different are women and men entrepreneurs? (contd) FIRMOGRAPHICS Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. MALEFEMALE Number of employees0 to 4 (43%) 5 to 49 (50%) (7%) 0 to 4 (39%) 5 to 49 (46%) (15%) Number o f years in operation in Alberta 25 years (mean)19 years (mean) Intentionally trying to grow their business 75%81% Business life stageStart-up (1%) Initial growth (5%) Established (44%) Expansion (17%) Mature (22%) Winding down (11%) Start-up (8%) Initial growth (13%) Established (44%) Expansion (22%) Mature (8%) Winding down (5%) Have a store front Yes (57%) No (43%) Yes (47%) No (53%)

23 Business & Agriculture Just how different are women and men entrepreneurs? (contd) FIRMOGRAPHICS Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. MALEFEMALE Main industry (4% or greater)Retail Trade (20%) Energy or Oil & Gas (19%) Construction (13%) Manufacturing (7%) Prof, Scientific, Tech (6%) Automotive (4%) Transport & Warehouse (4%) Retail Trade (14%) Health Care & Soc Asst (13%) Energy or Oil & Gas (9%) Prof, Scientific, Tech (8%) Construction (6%) Education (6%) Manufacturing (6%) Arts, Entertain & Rec (5%) Transport & Warehouse (5%) Hospitality/ Restaurant (4%) Wholesale Trade (4%) Business locationsUrban area (45%) Rural area (23%) Both (32%) Urban area (56%) Rural area (15%) Both (29%)

24 Business & Agriculture Just how different are women and men entrepreneurs? (contd) FIRMOGRAPHICS Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents. MALEFEMALE Markets servicedWithin Alberta (99%) Other Canada (48%) US (22%) International (12%) Within Alberta (99%) Other Canada (55%) US (25%) International (17%) Revenues<$250k (11%) $250k-<$500k (16%) $500k-<$1M (19%) $1M-<$3M (25%) $3M-<$10M (21%) $10M+ (10%) <$250k (37%) $250k-<$500k (13%) $500k-<$1M (15%) $1M-<$3M (15%) $3M-<$10M (12%) $10M+ (8%) Typical Borrowing Needs None (51%) Less than $1M (40%) $1M+ (9%) None (57%) Less than $1M (37%) $1M+ (6%)

25 APPENDIX: Firmographics & Respondent Demographics

26 Business & Agriculture Half of Alberta SMEs earn revenues in excess of $1,000,000 Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents. Number of Employees Annual Revenues 2013 Change from last quarter 89% of revenues comes from within Alberta; 7% from other parts of Canada; 2% from the US; and 2% Internationally (outside Canada/US).

27 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, with 300 respondents. Business Firmographics Business Life Stage Phase Intentional Growth 72% of SMEs are TRYING to grow their business Change from last quarter

28 Business & Agriculture Business Firmographics Source: ATB Financial, Survey on Alberta SMEs, Jan 2014, with 300 respondents. $1MM + 8% Borrowing Needs # of Years in Operation MEAN 26 years Change from last quarter

29 Business & Agriculture Business Firmographics Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents, responses mentioned by 4% or more are shown. Industry Franchise Industry (n=32) Retail 9 Food Services 6 Automotive 4 Health 2 Travel, Leisure & Accommodation 2 Energy/ Oil & Gas Services 1 Financial Services/ Insurance 1 Advertising & Printing 1 Non-profit 1 Other 5 11% of SMEs are franchises Change from last quarter

30 Business & Agriculture Business Firmographics Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents. Business Location(s) 51% of SMEs only conduct business in Alberta Business Scope Change from last quarter

31 Business & Agriculture Business Firmographics Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, with 300 respondents. Does your business have a store front? Change from last quarter

32 Business & Agriculture Respondent Demographics Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents, responses mentioned by 3% or more are shown. 38% 55+ Title/ Role Age Change from last quarter

33 Business & Agriculture Respondent Demographics Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents. Role in Financial Decisions Gender Change from last quarter

34 Judy Duncan Director Marketing, B&Ag (403) Cody Tousignant Senior Research Manager Customer Insights (403)