U.S. entrepreneurs feel increasingly optimistic about the future, as their confidence in the economy, revenue and long-term growth has reached the highest level since 2015, according to the spring 2018 Bank of America Business Advantage Small Business Owner Report.
The report, based on a semiannual survey of 1,000 small business owners across the country, finds 54 percent of entrepreneurs are confident the national economy will continue to climb in 2018, up 2 percentage points from last year and 25 from two years ago. Similarly, 56 percent of small business owners are confident their local economy will improve in 2018 (compared to 50 percent in spring 2017 and 38 percent in spring 2016).
This renewed confidence in the economy has translated into an improved business outlook on revenue and long-term growth. Sixty percent of entrepreneurs believe their revenue will increase in 2018 (compared to 48 percent in spring 2017 and 51 percent in spring 2016), while 60 percent plan to grow their business over the next five years (compared to 56 percent in spring 2017 and 55 percent in spring 2016). Meanwhile, hiring plans have improved since last year, returning to the same level as two years ago (22 percent in spring 2018 and spring 2016, 18 percent in 2017).
“Small business owner optimism about the economy and their business outlook has reached the highest levels we’ve seen since 2015,” said Sharon Miller, head of small business, Bank of America. “Many entrepreneurs believe changes to the tax policy and emerging technologies will work to their advantage, and they are seizing the opportunity to invest in their business.”
Tax reform seen as a game-changer, concern over interest rates and commodities pricing on the rise
According to the report, one of the greatest opportunities for small business owners in the near term may be the new tax changes. Fifty-eight percent cite the policy as a game-changer for small businesses overall, while 63 percent say it’s made them more optimistic about their own business’ outlook.
Thirty-seven percent of entrepreneurs have altered their business plans for 2018 as a result of the new tax law. Furthermore, 71 percent expect to receive savings because of the policy and plan to use these funds to fuel further growth in a variety of ways, including:
- Investing back into their business (37 percent).
- Awarding raises and bonuses to employees (21 percent).
- Hiring more employees (14 percent).
- Expanding operations (14 percent).
- Making capital improvements (12 percent).
Despite the optimism surrounding the new tax policy, there are several challenges anticipated for the year ahead. For the fifth year in a row, health care costs remain a top economic concern of small business owners (75 percent). The report also found a variety of mounting economic concerns for 2018, including:
- Interest rates (51 percent, up 14 percentage points year over year).
- Commodities pricing (50 percent, up 14 percentage points year over year).
- Strength of U.S. dollar (45 percent, up 9 percentage points year over year).
- U.S. and global stock market (43 percent, up 9 percentage points year over year).
All-digital payments predicted within the next five years, while smartphone use continues to expand
In exploring entrepreneurs’ adoption of certain technologies, the report found digital payments to be one of the most significant innovations disrupting the small business marketplace. Fifty-two percent of small businesses predict all business payments will be digital within the next five years.
The report also found that mobile use is nearly universal among small business owners, with the overwhelming majority (89 percent) using smartphones and other mobile devices to manage their business, including:
- Basic tasks (79 percent).
- Digital banking (41 percent).
- Social media updates (38 percent).
- Digital payments (29 percent).
- Hiring (10 percent).
Two decades into the internet era, the role of the business website is less significant, as only 59 percent of entrepreneurs report having a website. Sixty percent of business owners who have a website say its primary function is to share basic information, while 31 percent primarily use it to drive sales.
Greater adoption and reliance on technology comes with some risk
Greater reliance on technology can also create challenges for entrepreneurs, as 46 percent believe their business would suffer if the internet crashed for a week, including 34 percent who say they would lose revenue and one-quarter who would lose customers. Eight percent of entrepreneurs say they have been impacted by a data breach in the last year. Of those affected, more than three-fourths reported damaging consequences, such as compromised business information and customer data, as well as financial setbacks.
Although there are some risks with the increasing role of new technologies in business, small business owners believe the positives far outweigh the negatives, with 77 percent believing their future success is dependent on technology as opposed to being threatened by it (23 percent). In addition, 77 percent make annual investments in technology, and 34 percent do so at least once per quarter.
Emerging technologies set to transform the small business landscape, blockchain remains a big question mark
With an eye toward the future, small business owners continue to invest in emerging technologies at a rapid pace. Forty-four percent of respondents report they currently use or are exploring advanced technologies for their business, specifically:
- The Internet of things (24 percent).
- Data analytics (15 percent).
- 3-D printing (11 percent).
- Artificial intelligence (7 percent).
- Virtual reality (7 percent).
There is still a lot to learn, they say, about blockchain. Sixty-five percent report they aren’t familiar with distributed ledger technology, and only 13 percent believe it will be relevant to their business in the near future.
For a complete, in-depth look at the insights of the nation’s small business owners, read the spring 2018 Bank of America Business Advantage Small Business Owner Report and for additional insights, download the Small Business Owner Report infographic.
Bank of America Business Advantage Small Business Owner Report
GfK Public Communications & Social Science conducted the Bank of America Small Business Owner Report Survey for spring 2018 online between February 12 and March 26, 2018 using a pre-recruited online sample of small business owners. GfK contacted a national sample of 1,031 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between two and 99 employees. In addition, a total of approximately 300 small business owners were also surveyed in each of 10 target markets: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, San Francisco and Washington, D.C. The final results were weighted to national benchmark standards for size, revenue and region.
Prior to 2016, waves of the Small Business Owner Report Survey were conducted by telephone, and while best efforts were made to replicate processes, differences in sample, weighting and method suggest caution when making direct statistical comparisons of the results from pre-2016 and post-2016.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 36 million active users, including approximately 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.