IT MATTERS WHO YOU BANK WITH® Welcome to the 2019 edition of our annual Nevada State Bank Small Business Survey.

This marks our sixth year of surveying small business owners and decision makers throughout the Silver State. We find great value in measuring their opinions about the local and national economies and important issues that impact Nevada businesses.

The results of this year’s survey are mostly positive, with some tempering of last year’s buoyancy. This overall optimism is understandable, given the mostly good news about the economy over the past year or so.

More than half of the respondents in this year’s survey reported increases in their business revenues more than the past year. Better yet, more than 60 percent of all respondents believe their revenues will increase again during 2019.

Of course, small business owners face their share of challenges, including concerns about everything from rising healthcare costs to finding good people to work for them. These concerns are also detailed here.

HIGHLIGHTS FROM THIS YEAR’S SURVEY INCLUDE:

• More than 81 percent of those surveyed believe Nevada’s economy is headed in the right direction. That was roughly 10 percent more than those who said the same thing about the national economy.

• The percentage of people who believe Nevada’s economy is headed in the right direction is still higher than it was in most years, though it’s down 6 percent from its peak of 87.3 percent in our 2018 survey.

• Over the past three years, respondents have reported an increasing rise in revenue or sales, with a peak of 53.5 percent this year.

This year’s survey was conducted in January and included interviews with more than 400 Nevada business owners, operators and senior management executives in companies with annual sales ranging from $250,000 to $10 million.

We take pride in giving a voice to the people who run the small businesses that are so important to the overall health of our economy. We’re committed to doing all we can to understand and meet their needs today and during the years ahead, and to seek solutions to issues that affect their operations.

The following pages summarize our findings. To share a copy or save the digital version, visit our website at NevadaSmallBusiness.com/survey.

TERRY SHIREYPresident and CEO, Nevada State Bank

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CONTENTSNational Economy ......................................................................1

Nevada Economy ........................................................................ 3

Outlook ........................................................................................ 5

Employment................................................................................ 7

Opportunities ............................................................................. 9

Community ................................................................................ 11

The Small Business Survey is conducted annually by Applied Analysis as commissioned by Nevada State Bank. All percentages are rounded to the nearest tenth. You can find additional resources

and the monthly Economic Briefing, prepared by Applied Analysis, at NevadaSmallBusiness.com.

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NATIONALECONOMYThe Majority of Respondents Continue to Believe the National Economy is Heading in the Right Direction. More than 7 in 10 (71.4 percent) of small business respondents believe the national economy is heading in the right direction. However, this is a decrease of 11.2 percentage points from 82.6 percent a year ago. When looking further back, small business respondents are more optimistic than they had been prior to 2018. Since 2016, the share of small businesses that believe the national economy is heading in the right direction is up 30.9 percentage points from 40.5 percent.

Do you believe the national economy is generally headed in the right direction or wrong direction?

Some economists have suggested that the United States will experience a recession in 2020. Based on what you see in your business, do you strongly disagree, somewhat disagree, somewhat agree, or strongly agree with this prediction?

2015 2016 20182017 2019

42.5% 40.5%82.6%68.9% 71.4%

% RightDirection

7.7% STRONGLY AGREE

35.8% SOMEWHAT AGREE

16.4% NOT SURE

27.6% SOMEWHAT DISAGREE

12.4% STRONGLY DISAGREE

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13.4% POSITIVE IMPACT

Small Businesses Show Signs of Uncertainty for the Future, but a Majority Believe That Interest Rates Will Increase Over the Next Year. More than half (50.2 percent) of respondents expect interest rates to increase modestly in 2019, following the rate increases in 2018. However, when asked about an upcoming recession, respondents showed signs of disparity despite economists suggesting that the United States will experience a recession in 2020. Based on what they see in their business, roughly 43.5 percent of respondents agree that there will be a recession in 2020, whereas 40.0 percent disagree, and 16.4 percent are unsure of what the future holds. Furthermore, more than two-fifths (40.8 percent) believe that the United States House of Representatives shifting from Republican to Democratic control will have a negative impact on their small business.

During 2018 interest rates generally increased. In 2019, do you expect interest rates to...?

8.0% INCREASE SIGNIFICANTLY

50.2% INCREASE MODESTLY

28.9% STAY ABOUT THE SAME

3.7% DECREASE MODESTLY

0.7% DECREASE SIGNIFICANTLY

8.5% REFUSED/NO ANSWER

The United States House of Representatives has shifted from Republican control to Democratic control. Do you believe this will have a positive, negative, or neutral impact on your business?

More than half of respondents expect interest rates to increase modestly in 2019.

40.8% NEGATIVE IMPACT

34.3% NEUTR AL IMPACT

11 .4% NOT SURE

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NEVADAECONOMYA Large Majority of Local Small Businesses Believe Nevada’s Economy Is Heading in the Right Direction. More than four-fifths (81.3 percent) of respondents believe Nevada’s economy is heading in the right direction, which is roughly 10 percentage points higher than those who said the same thing regarding the national economy. This percentage has declined 6.0 percentage points from 87.3 percent in 2018.

Thinking back over the past year, would you say the business environment in Nevada has gotten better, worse, or stayed the same?

Since 2015, a majority of small businesses believe Nevada’s economy is headed in the right direction.

2015 2016 20182017 2019

63.4% 61.5%87.3%77.0% 81.3%

Nearly 3 in 5 Respondents Believe Nevada’s Business Environment Has Gotten Better Over the Past Year. In addition, more than half (53.5 percent) of small business respondents saw increases in their business revenues or sales over the past 12 months. Furthermore, roughly two-fifths of respondents reported increased business profitability, an increase of 3.2 percentage points from 40.8 percent in the prior year.

2019 is the most optimistic year yet, with 57.2 percent seeing improvement in Nevada’s business environment.

2015 2016 20182017 2019

40.8% 38.8%56.0%44.7% 57.2%

% Gotten Better

% RightDirection

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Housing Affordability is a Concern. Nearly 3 in 10 respondents (29.6 percent) are very concerned that the price of available homes does not align with average incomes in their community. When combined, more than three-fourths (77.1 percent) are somewhat-to-very concerned.

Since 2015, a majority of small businesses believe Nevada’s economy is headed in the right direction.

2019 is the most optimistic year yet, with 57.2 percent seeing improvement in Nevada’s business environment.

In the past 12 months, have your business revenues or sales increased, decreased, or remained about the same?

53.5% INCREASED

9.5% DECREASED

36.3% REMAINED THE SAME

0.7% REFUSED/NO ANSWER

Over the past three years, an increasing number of business owners have seen a rise in their revenue or sales.

2017

46.7%

2018

52.7%

2019

53.5%

In the past 12 months, has your business’ profitability increased, decreased, or remained about the same?

44.0% INCREASED

7.2% DECREASED

46.5% REMAINED THE SAME

2.2% REFUSED/NO ANSWER

How concerned are you that the price of available homes does not align with average incomes in your community?

29.6% VERY CONCERNED

20.6% SOMEWHAT CONCERNED

26.9% MODERATELY CONCERNED

16.4% NOT CONCERNED

6.5% REFUSED/NO ANSWER

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OUTLOOKHealthcare Costs Continue to Be the Leading Concern Among Small Business Owners. Healthcare costs continue to be the primary concern of small business owners in Nevada, with more than two-fifths (44.0 percent) of respondents citing that they are very concerned with healthcare costs. Small business owners are also concerned about business taxes and government regulation. Roughly 9.5 percent of respondents cited government and legislation as the single most important challenge they face.

2015 2016 2017 2018 2019TOP THREE CONCERNS FOR SMALL BUSINESSES

1 Healthcare

Costs2

Government Regulation

3 Business

Taxes

1 Business

Taxes2

Healthcare Costs

3 Government Regulation

1 Healthcare

Costs2

Business Taxes

3 Government Regulation

1 Healthcare

Costs2

Business Taxes

3 Government Regulation

1 Healthcare

Costs2

Government Regulation

3 Business

Taxes

Outlook Continues to Be Optimistic. About half (48.8 percent) of these small business respondents expect Nevada’s business environment to get better over the next year and 60 percent expect their revenues or sales to increase over the next year. Just over half of respondents believe they will experience increased profitability in the coming year.

Do you expect the business environment in Nevada to get better, get worse, or stay the same over the next 12 months?

48.8% GET BETTER

12.7% GET WORSE

34.6% REMAIN THE SAME

4.0% REFUSED/NO ANSWER

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Do you believe your business revenues or sales will increase, decrease, or remain about the same in the next 12 months?

60.2% INCREASE

4.5% DECREASE

34.6% ABOUT THE SAME

0.7% REFUSED/NO ANSWER

Do you believe your business’ profitability will increase, decrease, or remain about the same in the next 12 months?

54.2% INCREASE

6.0% DECREASE

37.8% REMAIN THE SAME

2.0% REFUSED/NO ANSWER

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Finding Qualified Workers Continues to Be a Concern. Nearly two-thirds (65.9 percent) of small businesses are planning to keep their employee base the same in the next 12 months. The number of businesses planning to increase their employee base decreased from 42.3 percent in 2018 to 31.8 percent.

This change may be a result of the consistent response over the last five years that it is difficult to recruit quality job candidates from within their market. This year, more than one-third (34.3 percent) of respondents stated it was very difficult to recruit quality job candidates from within their market.

EMPLOYMENT

Hiring/Retaining Quality Employees 24.9% Hiring/Retaining Quality Employees 24.9%

Attracting Customers/Competition 18.4%

Financial Stability/Cash Flow 10.7%

Government/Legislation 9.5%

Healthcare/Obamacare 6.5%

Costs of Running the Business 5.7%

Taxes 5.0%

Changes in Technology 2.5%

Hiring and Retaining Quality Employees Was a Standout Again as the Single Most Important Challenge Faced by the Respondents. At nearly 25 percent, it has increased 2.5 percent, while last year’s top challenge of Attracting and Retaining Customers has dropped to less than 19 percent—perhaps a sign of more profitable times.

What is the single most important challenge you face as a small business?

2016 20182017 2019

15.0%22.4%17.5%

24.9%Hiring and retaining quality employees has been an increasing challenge since 2016.

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In the next 12 months, do you plan to increase your number of employees, decrease your number of employees, or keep your employee base the same?

31.8% INCREASE

1.0% DECREASE

65.9% ABOUT THE SAME

1.2% REFUSED/NO ANSWER

2015 2016 20182017 2019

61.4% 66.1% 68.9%70.9% 69.4%How easy or difficult is it for you to recruit quality job candidates from within your market?

Nearly 7 in 10 respondents indicated it was somewhat-to-very difficult to recruit quality job candidates from within their market.

What would you say is the main reason you find it difficult to recruit quality job candidates from within your market?

COMMON RESPONSES1. Lack of Qualified Candidates2. Poor Work Ethic3. Lack of Education, Training or Experience4. Competition5. Low Pay

Lack of qualified candidates continues to be the primary reason cited, while poor work ethic has moved up to second position, and both competition and low pay are new to the list.

% of Somewhat-to-Very Difficult

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Are you in favor of, opposed to, or neutral regarding the state’s use of incentives to attract new business investment?

OPPORTUNITIESNew Investments Provide Opportunities for Small Businesses. To help bring new businesses and large investments into the region, Nevada has provided tax abatements, tax credits and other incentives to companies. Nearly two-fifths (39.1 percent) of respondents are in favor of using incentives to attract new business investments to the state. Furthermore, the discussion of bringing major sporting events to Southern Nevada has been circulating around the new Las Vegas Stadium. Roughly 38.1 percent of respondents believe that bringing major sporting events to Southern Nevada will have a positive impact on their small business.

During 2018, Governor Sandoval created the Southern Nevada Sporting Event Committee to identify potential sporting events and associated activities to host in Southern Nevada

and evaluate potential costs and benefits associated with such events. Do you believe bringing in major sporting events such as a Super Bowl®, NCAA® Final Four® or NHL® All-Star Game

to Las Vegas will have a positive, negative, or neutral impact on your business?

38.1% POSITIVE IMPACT

1.7% NEGATIVE IMPACT

51.5% NEUTRAL IMPACT

8.7% NOT SURE

IN FAVOR

39.1%

NEUTRAL

38.6%

REFUSED/ NO ANSWER

6.5%OPPOSED

13.9%NOT SURE

2.0%

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Those who planned to expand their workspace, add a new building, or renovate a current location within 12 months.

Obtaining Financing is a Difficult but Decreasing Problem for Small Businesses. The share of small businesses reporting difficulty obtaining financing has been steadily decreasing over the past five years and is down 14.7 percentage points from 78.6 percent in 2015. Of those who found it very difficult to obtain financing, more than two-fifths (41.3 percent) anticipate applying for financing over the next 12 months. Overall, 18.9 percent of respondents anticipate applying for financing over the next year, with the leading reason being to expand operations (19.7 percent). Business expansion overall continues to be a consistent theme for the past four years.

2015 2016 20182017 2019

15.7% 21.0% 22.1%22.7% 22.6%

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COMMUNITYSmall Businesses Are Active in the Community. Nearly three-fifths (59.0 percent) of small businesses budget for charitable giving each year, with nearly one-fourth (23.9 percent) giving back to the community more this year than last. In-kind donations (26.6 percent), cash donations (23.5 percent), sponsorships (19.8 percent), employee volunteerism (14.6 percent) and employee service on boards/committees (10.1 percent) are the leading ways that small businesses give back to the community. Small businesses cited youth/family/women’s services as the social cause or community need that is most important to their organization. This was followed by homeless/poverty/housing and healthcare.

Does your business budget for charitable giving each year?

59.0% YES

35.1% NO

6.0% REFUSED/NO ANSWER

Which of the following ways, if any, does your business give back to the community?

In-Kind Donations

Cash Donations

Sponsorships

Employee Volunteerism

Board/Committee Service

None of the Above

Other

26.6%

10.1%

19.8%

2.5%

23.5%

2.8%

14.6%

Note: This is a multiple response question. Data represents those who indicated they gave back to the community.

Would you say your business is giving back to the community more, less,

or about the same as last year?

23.9% MORE

3.5% LESS

66.9% ABOUT THE SAME

5.7% REFUSED/NO ANSWER

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Of the ways your business gives back, which would you say you invest the most in?

In-Kind Donations

Cash Donations

Sponsorships

Refused/No Answer

Employee Volunteerism

Board/Committee Service

Other

33.4%

5.9%

14.4%

2.1%

31.6%

5.1%

7.5%

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TOP FIVE The top five social causes or community needs cited as most important to the respondents:

1. Youth/Family/Women’s Services2. Homeless/Poverty/Housing3. Healthcare4. Schools/Education5. Veterans/Elderly

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