CHARLOTTE, N.C.--(BUSINESS WIRE)--Small business owners are getting by with a little help from their friends, family and community, with 83 percent reporting they receive financial, operational and/or emotional assistance from their family, according the fall 2016 Bank of America Small Business Owner Report.
The report, based on a semi-annual survey of 1,000 small business owners across the country, found that 38 percent have received financial gifts or loans from family and/or friends to fund their business, and 53 percent rely on family to serve important roles in their business, whether as advisers, employees, investors or partners. When asked who helps them most with running their business, 35 percent responded “friends and family,” exceeded only by “employees” (44 percent).
Support from family, friends and community has proven to be a bright spot in an otherwise challenging business environment. Overall optimism about the national (31 percent) and local economies (37 percent) improving remain in line with lower levels reported in the spring. Revenue expectations, as well as plans to grow and hire, also held steady from spring to fall. Fifty-two percent of entrepreneurs predict revenue growth in 2017; 55 percent plan to grow their business over the next five years; and only 25 percent plan to hire in the year ahead – all among the lowest projections recorded in the survey since 2012.
“We know small business owners are inherent self-starters making significant personal sacrifices on behalf of their businesses, but what’s fascinating is this dimension of family, friends and community that they see as core to their success,” said Sharon Miller, head of Small Business, Bank of America. “As apprehension about the economy stalls plans for many to grow and hire, small business owners are forging ahead with a foundation of support from loved ones and local networks. It shows why it’s so important for us at Bank of America to serve and support business owners, their families and local communities.”
The importance of community to small business owners is illustrated by the fact that 62 percent report that residents in their community actively support local businesses, with 47 percent saying their local community plays an important role in the success of their own individual enterprise. To show appreciation for this patronage, a majority of small business owners (67 percent) invest in their communities by supporting local charitable and/or nonprofit organizations.
New small businesses significantly more optimistic about economy; more reliant on family
One exception to the dampened outlook is the newer subset of small business owners – those whose businesses are less than five years old, who are more optimistic about the economy and their business growth. Fifty-two percent of these entrepreneurs are optimistic their local economies will improve in the year ahead, compared to 43 percent of growing businesses (six to 10 years) and 31 percent of well-established businesses (11+ years). To a lesser degree, the trend also holds for 12-month outlooks on the national economy (39 percent vs. 34 percent vs. 28 percent). New small business owners are also more optimistic about projected revenue growth in 2017, with 78 percent expecting growth, compared to 65 percent of growing businesses and only 42 percent of well-established firms.
Owners of newer small businesses not only are more optimistic than their more established peers, they also are more likely to receive financial support from family and friends. Thirty-four percent of new small business owners report that family and/or friends helped fund their business when they were first starting out, compared to only 18 percent of both growing and well-established business owners. Taking a broader look to when the small business is up and running, 54 percent of new entrepreneurs report that family/friends have gifted or lent them money for their business at some point, compared to 42 percent of growing businesses and 32 percent of well-established firms.
Concern over health care costs, consumer spending
The top economic concern cited by small business owners this fall was health care costs. Three-quarters of respondents reported concern over the impact of health care costs on their business over the next 12 months. Consumer spending, which was among the lower-rated concerns in the spring, is now on the minds of 51 percent of small business owners heading into the holidays.
Life cycle of small business financing
Small business owners report shifting sources of capital over the lifetime of their business. As their businesses were just getting off the ground, small business owners were most likely to rely on financing from personal savings (76 percent), followed by personal credit cards (36 percent), bank loans (25 percent) and gifts or loans from family and/or friends (21 percent). Once a business has been established, bank loans become the top source of capital (43 percent), followed by personal credit cards (42 percent) and support from family and/or friends (7 percent).
End-of-year revenues, seasonal sales and holiday perks
Despite a cautious outlook on the year ahead, 68 percent of small business owners expect to hit their year-end revenue targets, while 40 percent of those in the retail, consumer products and wholesale industries expect to generate more revenue this year than in 2015. They don’t, however, expect much of a boost from commercial holidays.
Sixty-eight percent of retail small business owners said that Black Friday was not important to their business, while 67 percent said the same about Cyber Monday.
When it comes to holiday perks for employees, small business owners appear to be tightening their belts. Just 72 percent of small business owners plan to reward employees with a holiday perk this season, down from 92 percent in 2015 and 89 percent in 2014. In past years, more than half of small business owners said they planned to give employee bonuses; this season only 31 percent said they would.
Holiday parties are also on the decline, with only one-quarter reporting they’ll host one for employees, compared to close to half of small business owners in previous years.
For those who are planning to reward employees this holiday season, 37 percent say they will have to make some sort of personal sacrifice, whether it’s working longer hours themselves (15 percent), sacrificing at least a portion of their own wage (14 percent), or forgoing vacation or days off (11 percent).
EMV ambivalence; one-third haven’t implemented
One-third of small business owners acknowledge they have not implemented Europay, MasterCard, Visa (EMV) chip card reader technology in their payment systems despite an October 2015 deadline. Forty-five percent of those who are required to implement it but haven’t done so report they don’t see the value or importance of the technology, while 17 percent say they lack the funds. Of small business owners who have adopted EMV technology, nearly two-thirds say they don’t feel any more secure now than before the technology was in place.
For a complete, in-depth look at the insights of the nation’s small business owners, read the fall 2016 Bank of America Small Business Owner Report, and for additional insights, download the Small Business Owner Report national infographic here.
About the Bank of America Small Business Owner Report
GfK Public Affairs and Corporate Communications conducted the Bank of America Small Business Owner Report survey for fall of 2016 online between August 7 and October 4, 2016 using pre-recruited online sample of small business owners. GfK contacted a national sample of 1,000 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between 2 and 99 employees. In addition, small business owners were surveyed in 10 target markets: Atlanta, Boston, Chicago, Dallas/Fort Worth, Houston, Los Angeles, Miami, New York, San Francisco and Washington, D.C. A total of 300 small business owners were surveyed in Atlanta, Boston, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, San Francisco and Washington, D.C., and 100 small business owners were surveyed in Houston. The final results were weighted to national benchmark standards for size, revenue and region.
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 4,600 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with approximately 34 million active accounts and more than 21 million mobile active 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 in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
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