Bay Area small business optimism on the rise

San Francisco entrepreneurs are feeling optimistic about the current business landscape and expressing more confidence in their plans to expand and grow

Emily Shanks
small business northwest division executive at Bank of America

Local entrepreneurs are increasingly optimistic about the economy, growth and revenue for their businesses when looking toward the future, 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 and in the greater San Francisco area, found 59 percent of local entrepreneurs are confident their local economy will improve in 2018, up 10 percentage points from last spring. Similarly, 46 percent of San Francisco small business owners are confident the national economy will improve in 2018, up 2 percentage points from last spring.

 

Economic confidence and optimism has led to an improved outlook on revenue and long-term growth. Sixty-four percent of entrepreneurs believe their revenue will increase in 2018 (up 7 percentage points year over year), and 63 percent plan to grow their business over the next five years. Additionally, the percentage of those who plan to hire in the year ahead (30 percent) has improved since spring 2017 (26 percent), and is well ahead of the national average (22 percent).

“San Francisco entrepreneurs are feeling optimistic about the current business landscape and expressing more confidence in their plans to expand and grow,” said Emily Shanks, small business northwest division executive at Bank of America. “We believe several factors are contributing to the trend of climbing confidence, including recent changes to the federal tax code and a sense of excitement about new technologies that are allowing business owners to position themselves for growth.”

San Francisco entrepreneurs split on tax reform, while concerns rise over the strength of the U.S. dollar and interest rates

According to the report, San Francisco small business owners are split when it comes to the new tax code and its impact on small business. Half of San Francisco entrepreneurs cite the new policy as a game-changer for small businesses overall, 8 percentage points lower than the national average. In addition, while 49 percent say it has made them more optimistic about their business outlook, this number trails the national average by 14 percentage points.

Only 39 percent of San Francisco entrepreneurs have altered their business plans for 2018 as a result of the new code. Despite this, 69 percent of San Francisco entrepreneurs expect to receive savings for their business because of the policy, and they plan to use these funds to fuel further growth, including: 

• Investing back into their business (35 percent).

• Paying off loans (17 percent).

• Awarding raises and bonuses to employees (14 percent).

• Making capital improvements (14 percent).

Looking beyond the new tax policy, San Francisco business owners anticipate some economic challenges in the year ahead. Health care costs remain a top concern (69 percent), while concerns over the strength of the dollar, the stock market and other economic areas have increased since a year ago: 

• Strength of the U.S. dollar (54 percent, up 9 percentage points year over year).

• Interest rates (51 percent, up 7 percentage points year over year).

• U.S. and global stock market (49 percent, up 6 percentage points year over year).

• Compliance with government regulation (48 percent, up 8 percentage points year over year).

• Consumer spending (47 percent, up 6 percentage points year over year).

Digital-only payments predicted within the next five years, while smartphone use is widespread 

In exploring entrepreneurs’ adoption of emerging technologies, the report found digital payments to be one of the most significant innovations disrupting the small business marketplace. Sixty-five percent of those surveyed predict all payments at small businesses will be digital within the next five years.

The report also found that mobile use is nearly universal among area entrepreneurs, with 93 percent using smartphones and other mobile devices to manage their business, including:

• Basic tasks (76 percent).

• Digital banking (59 percent).

• Social media updates (47 percent).

• Digital payments (40 percent).

Two decades into the internet era, the role of the business website is less significant, as 64 percent of San Francisco entrepreneurs report having a website. Sixty-three percent of local business owners who have a website say its primary function is to share basic information, while 30 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 55 percent believe their business would suffer if the internet crashed for a week, including 40 percent who say they would lose revenue and 33 percent who would lose customers. Ten percent of San Francisco entrepreneurs say they have been impacted by a data breach in the last year.

Although there are some risks with the increasing role of new technologies in business, San Francisco small business owners think the positives far outweigh the negatives, with 83 percent believing their future success is dependent on technology more so than threatened by it (17 percent). In addition, 86 percent make annual investments in technology and 41 percent do so at least once per quarter.

Emerging technologies set to transform the small business landscape, while blockchain remains a big question mark

Small business investment in emerging technology is advancing at a rapid pace in San Francisco, with 52 percent of local respondents reporting they currently use or are exploring advanced technologies for their business, specifically:

• The Internet of things (23 percent).

• Data analytics (18 percent).

• 3D printing (15 percent).

• Artificial intelligence (8 percent).

• Virtual/augmented reality (8 percent).

There is still a lot to learn, they say, about blockchain. Fifty-five percent of San Francisco business owners say they aren’t familiar with distributed ledger technology, and only 16 percent believe it will be relevant to their business in the near future.

Download the spring 2018 Bank of America Small Business Owner Report

6/13/2018


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