Nearly two-thirds of Los Angeles entrepreneurs foresee long-term growth

Despite short-term concerns about the local and national economies, Los Angeles entrepreneurs are optimistic about their revenue outlook in the year ahead and are poised for long-term growth

Franco Terango
small business southwest division executive at Bank of America

Sixty-four percent of Los Angeles entrepreneurs plan to grow their business over the next five years, the strongest small business growth forecast recorded in Los Angeles since fall 2016, 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 the greater Los Angeles area, indicates that long-term growth projections are up, but Los Angeles business owners have the least confidence in both their local and the national economies among business owners surveyed in 10 major markets. Only 37 percent of local entrepreneurs are confident the national economy will improve in the year ahead, down 9 percentage points from spring 2017 and 17 percentage points below the national average. Los Angeles business owners are more optimistic about their local economy, with 43 percent believing it will improve in 2018 (compared to 42 percent in spring 2017) — though they still trail the national average by 13 percentage points.

 

As opposed to their decline in economic confidence, Los Angeles business owners are much more optimistic about revenue prospects for their business. Sixty-two percent of entrepreneurs believe their revenue will increase in 2018 (up 13 percentage points year over year).

Meanwhile, hiring plans (24 percent plan to hire) remain steady since spring 2017 (25 percent) and slightly above the national average national average (22 percent).

“Despite short-term concerns about the local and national economies, Los Angeles entrepreneurs are optimistic about their revenue outlook in the year ahead and are poised for long-term growth,” said Franco Terango, small business southwest division executive at Bank of America.

“Los Angeles entrepreneurs are hopeful about the new tax code and are embracing cutting-edge technologies, creating a positive environment for business growth.”

Tax reform seen as a game-changer, while concern over the stock market and interest rates on the rise

According to the report, one of the greatest opportunities for Los Angeles small business owners in the near term may be changes to the tax code. Fifty-three percent cite the new policy as a game-changer for small businesses overall, and 55 percent say it has made them more optimistic about their own business’ outlook.

Thirty-eight percent of Los Angeles entrepreneurs have altered their business plans for 2018 as a result of the new tax code. Furthermore, 76 percent expect to receive savings for their business because of the policy, and they plan to use those funds to fuel further growth in different ways, including:

• Investing back into their business (39 percent).

• Awarding raises and bonuses to employees (15 percent).

• Paying off loans (14 percent).

• Hiring more employees (14 percent).

• Expanding operations (14 percent).

• Making capital improvements (14 percent).

Despite the optimism surrounding the new tax policy, the survey found there are several challenges anticipated for the year ahead in Los Angeles. Health care costs remain the top economic concern of Los Angeles business owners (73 percent). The report also found a variety of economic concerns on the rise from last spring, including:

• U.S. and global stock market (56 percent, up 19 percentage points year over year).

• Interest rates (56 percent, up 9 percentage points year over year).

• Strength of the U.S. dollar (56 percent, up 8 percentage points year over year).

• Compliance with government regulation (54 percent, up 10 percentage points year over year).

All-digital payments predicted within the next five years, while smartphone use is widespread

In exploring entrepreneurs’ adoption of certain technologies, the report found digital payments to be one of the most significant innovations disrupting the Los Angeles small business marketplace. Sixty-four percent of Los Angeles business owners predict all business payments will be digital within the next five years.

The report also found that mobile use is nearly universal for local entrepreneurs. Among business owners surveyed in 10 major markets, Los Angeles entrepreneurs report the highest smartphone use, with 96 percent using smartphones and other mobile devices to manage their business, including:

• Basic tasks (79 percent).

• Digital banking (49 percent).

• Social media updates (48 percent).

• Digital payments (38 percent).

Two decades into the internet era, the role of the business website is less significant, as only 56 percent of Los Angeles entrepreneurs report having a website. Fifty-nine percent of Los Angeles business owners who have a website say its primary function is to share basic information, while 28 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 Los Angeles entrepreneurs, as 60 percent believe their business would suffer if the internet crashed for a week, including 41 percent who say they would lose revenue and 38 percent who say they would lose customers.

Twelve percent of Los Angeles entrepreneurs say they have been impacted by a data breach in the last year, 4 percentage points higher than the national average.

However, Los Angeles business owners believe the positives of new technologies far outweigh the negatives and risks, with 78 percent believing their future success is dependent on technology more so than threatened by it (22 percent). In addition, 87 percent make investments in technology at least annually, with 46 percent doing so at least once per quarter.

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

Small business investment in emerging technology is advancing at a rapid pace in Los Angeles. Among business owners surveyed in 10 major markets, Los Angeles entrepreneurs lead the way in advanced technology usage, with 58 percent reporting they currently use or are exploring advanced technologies for their business, specifically:

• Internet of things (35 percent).

• Data analytics (19 percent).

• 3D printing (14 percent).

• Virtual/augmented reality (13 percent).

There is still a lot to learn about blockchain. Sixty-two percent of Los Angeles business owners say they aren’t familiar with the technology, and only 18 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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