Comparing Small & Mid-Sized Businesses Across America

SMBInsights2016

REGIONAL PERSPECTIVESSmall & Mid-Sized Businesses Across America

5-499 Sized Companies

National Market Studyvia

TelephoneàInternet

Fielded January 2015

Owners/Partners, C-Suite, Key

Decision Makers

2

Research Method

Interviews per Market:

272 Northeast471 South

316 Midwest309 West

Preface

3

Small and mid-sized business owners, no matter where they live in the United States, are an elite group. Their ranks consist largely of men (66%) who are well educated and upscale. Their businesses are well-established and moderately sized (23.9 employees on average). In 2014, their annual sales reached an average of $7.7M. The large majority (93%) generate sales in their local market.

The purpose of this analysis is to highlight the differences in the behaviors and attitudes of SMB owners that occur across the four Census regions. As this report details, some of these differences are quite pronounced, while others are more subtle and nuanced. Taken in total, the hope is to provide a fuller view of SMB owners across the country, and help to ensure that each region’s particular dialect of business is more fully understood.

Note: A +/- 4% point difference between regions is statistically significant at the 90% confidence level or higher.

REGIONAL PERSPECTIVES

Insights2016SMB

4

PageExecutive Summary 5Regional Snapshot 6Western SMBs 7Southern SMBs 15Midwestern SMBs 23Northeastern SMBs 31Regional Summary 39

Executive Summary

5

Small and mid-sized business owners share many characteristics no matter where they happen to live. Yet, each region shows interesting characteristics, attitudes and approaches that sets it apart from all the others.

Western SMBs: Change AgentsWestern SMBs zig when the rest of the country’s SMBs zag. They strongly see themselves as leaders and visionaries. They join local organizations and Boards to make their voices heard. They care about the environment, see technology as a badge, and display a lot of diversity and new ways of working. Skills shortage is a major concern.

Southern SMBs: DrivenSouthern SMBs do not have the sales and income levels of the northeast and west, but they are on a mission to change that. Their annual sales growth rate is testament to their efforts;; it is the second growth region in the country. Southern SMBs are autonomous decision makers, are concerned about taxes, and are driven to achieve financial success. One big standout: half are Republicans, the highest level of any region in the country.

Midwestern SMBs: Status QuoMidwestern SMBs are the most laid back of any region in the country. They run the largest, most well-established businesses;; and support their employees well by providing a host of benefits. They display the strongest local focus of any region, perhaps due to being located in more non-urban settings than the other SMBs. Technology is not their forte: nearly half find it hard to keep up, and their adoptions rates are lower than other SMBs. They are not the wealthiest SMBs, but are the ones most confident they will have enough money to retire. In this area, they are covered.

Northeastern SMBs: AchieversNortheastern SMBs are the most affluent and well educated of all regions, and also the hardest working. Their annual sales are the highest, even though their sales are not increasing at the high clip of SMBs in the South and West. Their businesses are mostly in white collar industries (e.g., services). Although 87% generate sales locally, their reliance on their local community for sales success is lower than SMBs in other regions. Their adoption of technology lags slightly, even though they are quick to point out that they have no difficulty keeping up with the latest and greatest.

6

REGIONAL SNAPSHOT

Change Agents1.79M Businesses (+.80% v 2014)

24% of SMB owners

Status Quo1.63M Businesses (+.28 v 2014)

22% of SMB owners

Driven2.66M Businesses (+.44% v 2014)

35% of SMB owners

*Businesses with 1-999 employees (no sole proprietors)Source: Small Business Research, Q4 2015 projection (based on CENSUS data)

Insights2016SMB

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WESTERN SMBs:CHANGE AGENTS

Western SMBs strongly see themselves as leaders & visionaries...more so than SMBs in other regions

8

79%

74%75%

69%

I often find myself in a leadership position I am forward thinking-have a vision

Western SMBs Other 3 Region Average

“Following are a series of statements that may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree with each one, using a 0-to-10 scale.”

Business Attitudes Among Western SMBs

Western SMBs are highly successful; they run smaller, younger companies, with high sales and strong sales growth

9

$183K

22.3

$9.8M

25.8

$199K

24.8

$7.6M

20.6

Household Income (avg)

# Employees (avg) Annual Sales (avg) Annual sales % Increase*


*Among companies with sales increases…roughly 70% of companies across all regions

Western SMBs -- Key Indicators

22%

10%

Under 10 Years in Operation


Western SMBs include more women and minority-owned businesses; they are less inclined to hunt & fish

10

37%

22%28%

15%

Women-Owned Businesses Minority-Owned Businesses


5%

-7%

4%5%

-15%

-9%

88%

66%55%

36% 33% 33%

-130%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Difference Vs. Other 3 Regions Westerm SMBs

Lifestyle Activities % Engage in Regularly/Occasionally

Women & Minority Ownership

“Would you describe your company as women-owned, that is, is 50% or more of your company owned by women?” “Is 50% or more of your company owned by a Hispanic, African-American, Native-American, Asian or any other members of a racial or ethnic minority group?” “How frequently do you engage in each of the activities listed below?”

33% 33%

31% 31%

17% 16%


11

SMB owners in the West are confident in the success of their companies; they are planning to expand dramatically

Extremely Confident

Confident

Very Confident

81% 80%

Confidence in Own Company Success Next 24 Months

74%

74%

77%

82%

Other 3 Region Average

Western SMBs

2015

2014

Percentage Planning to Hire New Full-Time Employees in the Next Year

“What is your level of confidence in the success of your company (based on revenue, profitability & growth) over the next 24 months?” “Approximately how many full-time employees are you planning to hire over the next 12 months?”

Despite higher unemployment rates, Western SMBs exhibit the highest degree of concern about finding the ‘right’ employees

12

54%

48%


Very Concerned About Finding & Keeping Good Employees

5.5%

6.4%

4.9%

5.4%


Western SMBs

Dec-15

Dec-14

Unemployment Rate

Source: Bureau Labor Statistics, Regional and State Employment and Unemployment, December 2015“Let’s face it you’re one of the people in your business who has to be concerned with all of the issues related to running the business. So what are the issues that you’re most concerned about?”

Western SMBs are more concerned about the environment and global warming; they join organizations to make changes

13

50%

58%

57%

62%

Very/Somewhat concerned about the world environment

& global warming

Agree that company respects 'green' values & is

conscious of the environment


36% 36%30% 31%

Served on committee/officer for local organization

Served on Board of Directors


“Following are a series of statements that may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree with each one, using a 0-to-10 scale.” “Let’s face it – you’re one of the people in your business who has to be concerned with ALL of the issues related to running the business. So what are the issues that you’re most concerned about?”

Environmental Attitudes Civic Activities

Western SMBs see technology as a badge and are heavy users of multiple technology products & services

14

57%

52%


“The Kind of Technology I Have Reflects the Type of Business Person I Am”

% Agree Completely/Mostly

Product and Services Used Past Year for Business

36%

38%

40%

53%

66%

42%

44%

46%

59%

71%

Online providers (LinkedIn, Monster)

for recruitment

Email marketing

Ethernet & data networking

Apps

Laptop computers


“Please indicate the extent to which you agree or disagree with each of the following statements about technology.” “Which of the following products or services have you used in the past year for your business?” “Where do you plan to source your new hires from?”

15

Western Summary

*Businesses with 1-999 employees (no sole proprietors)Source: Small Business Research, Q4 2015 projection

+25.8%sales growth

‘green’&

diversityExpansion…Skills shortage concern


24%

Insights2016SMB

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SOUTHERN SMBs:DRIVEN

Southern SMBs run somewhat smaller & younger companies, with lower sales, yet high sales growth

17

$166K

22.324.6

$5.7M

24.9

$194K

24.827.5

$9.0M

20.9

Household Income (avg) # Employees (avg) Years In Operation (avg) Annual Sales (avg) Annual sales % Increase*

Southern SMBs Other 3 Region Average

Southern SMBs -- Key Indicators


Southern SMBs comprise an average share of women and minority-owned businesses; they like sports, jogging & hunting

18

33%

15%

29%

13%




7%5% 5%

-6%-4% -4%

81%

53%43% 38%

29%22%

-130%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Difference Vs. Other 3 Regions Southern SMBs



32% 33%

35% 30%

17%16%


19

SMB owners in the South are highly confident in the success of their own companies, and exhibit modest expansion plans

Extremely Confident

Confident

Very Confident

84%79%

Confidence in Own Company Success

73%

75%

79%

78%


Southern SMBs

2015

2014



Southern SMBs make purchase decisions more autonomously than other regions & are driven by financial gains

20

25%

29%

30%

30%

34%

35%

37%

40%

29%

35%

36%

37%

39%

39%

41%

46%

Commercial real estate

Marketing

Business Software

Technology Hardware

Financial/Investments

Business Insurance

Telecom

Accounting


Purchase Decision Making by Industry‘I Make the Decision Myself without Seeking

Advice from Others’

47%

42%


“The Amount of Money I Make is More Important Than What I Do”

% Agree

“Following are a series of statements that may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree with each one, using a 0-to-10 scale.” “Your company undoubtedly interacts with & uses the services of many industries. Please indicate how vendor & brand decisions are made by your company for each industry listed below…You make the decision by yourself.”

Half of southern SMBs are Republicans; they have greater concern about taxation on their businesses

21

Republican50%

Independent23%

Democrat15%

Other/None12%

Republican40%

Independent28%

Democrat20%

Other/None12%

Southern SMBs


Political Affiliation

42%

47%


Southern SMBs

Very Concerned About‘Possible Tax Changes that Could Hurt

Your Business’

“Politically, do you consider yourself…?” “Let’s face it – you’re one of the people in your business who has to be concerned with ALL of the issues related to running the business. So what are the issues that you’re most concerned about?”

Southern SMBs are less inclined to view technology as a badge; nonetheless, they are avid technology users

22

49%

54%


“The Kind of Technology I Have Reflects the Type of Business Person I Am”



31%

40%

47%

53%

67%

73%

37%

45%

51%

59%

71%

78%

Mobile/internet payment devices


Tablet

Apps

Text messaging

SmartPhone


“Please indicate the extent to which you agree or disagree with each of the following statements about technology.” “Which of the following products or services have you used in the past year for your business?”

Social media is an important tool that Southern SMBs use to move their businesses forward…significantly more than other regions

23

73%

30%

68%

25%

Use Social Media for Business Generate Revenue Directly from Social Media


Social Media Usage for Business

“Which of the following Social Networks do you or your company currently use?” “Has your company generated revenue directly from Social Media?”

24

Southern Summary


+24.9%sales growth

50%

AutonomousHighly confident Driven

2.66M Businesses (+.44% v 2014)35%

MIDWESTERN SMBs:STATUS QUO

Insights2016SMB

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Midwest SMBs skew toward non-urban areas (C/D counties); and generate lower sales and personal income than other regions

26

$179K

$1.55M

$5.5M

19.7$194K

$1.56M

$9.0M

22.6


Net worth (avg) Annual Sales (avg) Sales % Increase (avg)*

Midwestern SMBs Other 3 Region Average

Midwestern SMBs – Key Indicators

66%

32%

72%

18%

College Grad+ C/D Counties



Midwest SMBs run larger, more well established companies; their sales are more locally focused than other regions

27

32.026.125.0 23.5

Years in Business (avg.) # of Employees (avg.)


Midwestern SMBs -- Other Business Indicators

Midwestern SMBs


Generate Any Sales

Locally 98% 91%

Nationally 57 63

Internationally 23 28

“Including yourself, how many full-time employees does your company have in total, that is, at all locations including all the divisions, subsidiaries and branches of your company?” “How many years has your company been in operation?” “Let’s get a quick overview of the geographic markets your company serves. Using 100 % points, how would you break down your company’s 2014 sales among the following three categories: within your local area, the rest of the US, outside the US.”

Midwest SMBs comprise fewer minority-owned businesses; in general, they like sports, hunting & volunteering locally

28

30%

8%

30%

15%




7%5%

-10%

9%

-6%

8%

81% 78% 77%

46% 44% 40%

-130%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Difference Vs. Other 3 Regions Midwestern SMBs



35% 32%

26% 33%

17% 16%


29

Midwest SMBs are less confident in the success of their own companies; yet their expansion plans are on par with other regions

Extremely Confident

Confident

Very Confident


74%

73%

79%

78%


Midwestern SMBs

2015

2014


78% 81%


Among Midwest SMBs who provide employee benefits, the degree of coverage is greater than that of other regions

30Offer Employee Benefits/Health Insurance: Northeast (68%), Midwest (64%), South (66%), and West (67%) “What insurance benefits do you offer your employees?“

Offer Employee Benefits & Health Insurance

Insurance Benefits Offered to Employees(Base: SMBs Offering Benefits)

21%

26%

35%

35%

38%

85%

25%

30%

42%

43%

55%

85%

Accident insurance

Hospital insurance

Retirement/Pension Plans

Disability Insurance

Life Insurance

Health insurance


64%

67%


Despite lower incomes, Midwest SMBs have less concern about their financial futures; they rely heavily on financial professionals

31

Not Very Concerned About Having Enough Money to Retire

“Let’s face it – you’re one of the people in your business who has to be concerned with ALL of the issues related to running the business. So what are the issues that you’re most concerned about?” ”What percentage of your personal investment portfolio consists of investments purchased for you by a financial planner or investment company?” “How much do you agree or disagree with the following statements about your personal finances and investments?”

61%52%


48%

59%

80%

59%

66%

84%

Share of portfolio purchased by investment professional

Use a financial planner to help me manage my wealth

It's important to seek professional help in making

investment decisions


(Agree Strongly/Somewhat)

Attitudes About Personal Investing

Midwest SMBs find it harder to keep up with technology; penetration of tech product usage is slightly lower

32

48%

43%


“I Find it Hard to Keep Up With the Latest Technology”




34%

35%

49%

56%

70%

75%

28%

28%

45%

50%

64%

71%

Mobile payment devices

Cloud computing/cloud-based services

Tablets

Apps

Text messaging

Smartphones


33

Midwestern Summary


Local!

Status Quo1.63M Businesses22% (+.28% v 2014)

Good Benefits Set for Retirement

Insights2016SMB

34

NORTHEA TERN SMBs:ACHIEVERS

$

Northeastern SMBs are well-educated, affluent achievers with the highest sales of all regions

35

$203K

$1.7M

$11.5M

17.2$181K

$1.5M

$7.0M

23.5


Net Worth (avg) Annual Sales (avg) Annual sales % Increase*

Northeastern SMBs Other 3 Region Average

Northeastern SMBs – Key Indicators

75%

69%

College Grad+



Northeastern SMBs run larger well-established, white collar businesses; they work longer hours than SMBs in other regions

36

27.8

26.026.4

23.5

Years in Operation # Employees (avg)


Northeastern SMBs – Other Indicators

68% 68%

62%64%

White Collar Industries Work 50+ Hours/Week

Northeastern SMBs

SMBs in the Northeast include fewer women and minority-owned businesses; wine & gourmet food is especially popular among them

37

20%

8%

33%

15%



7%

-5%

7%

10%

-6%

10%

-5%

6%

90%81%

49% 46% 40% 40% 36%29%

-130%-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Difference Vs. Other 3 Regions Northeastern SMBs




32% 32%

34% 31%

14% 17%


38

SMB owners in the Northeast are confident in the success of their own companies, and are showing modest expansion plans

Extremely Confident

Confident

Very Confident

80% 80%


75%

74%

79%

76%


Northeastern SMBs

2015

2014



Like all SMBs, the large majority of northeasterners generate sales locally, however, they are less reliant on local business alone

39

“Following are a series of statements that may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree with each one, using a 0-to-10 scale.” “Let’s get a quick overview of the geographic markets your company serves. Using 100 % points, how would you break down your company’s 2014 sales among the following three categories: within your local area, the rest of the US, outside the US.”

Local Business Attitudes% Agree

62%

57%

57%

50%

First and foremost our company tries to do business with other

local companies

Marketing/selling directly to the local community is a key

component of our company's success


87%

64%

32%

94%

60%

25%

Locally Nationally Internationally


% Generating Sales in Each Geographic Location

Northeastern SMBs travel for business…but to a lesser extent than other regions by plane, and to a greater extent by rail

40

33%

64%

16%

30%

70%

8%

Business Travel 1+ Times/Month

Share of business trips by plane

Travel by rail


Frequency and Means of Business Travel

“Approximately how often do you travel outside of your local area for business?” “What percentage of your business trips utilize airline travel?” “Which of the following products or services have you used in the past year for your business?”

Northeastern SMBs have little difficulty keeping up with technology, however, they are less avid adopters

41


43%

56%

69%

74%

75%

37%

50%

63%

68%

70%


Apps

Laptop computer

Company website

SmartPhone



59%

55%

Don't find it hard to keep up w/ technology


Technology Attitudes% Agree

42

Eastern Summary


$11.5Mannual sales

$

43

Regional Summary


$11.5Mannual sales

$

+25.8%sales growth

+24.9%sales growth

‘green’&

diversityExpansion…Skills shortage concern

50%

AutonomousHighly confident

Local!


24%

Status Quo1.63M Businesses22% (+.28% v 2014)

Driven2.66M Businesses (+.44% v 2014)

35%

Good Benefits Set for Retirement

Research:

Jessie Shaw212-500-[email protected]

44

Tyler Reavis704-973-[email protected]

CONTACTS

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