Two-thirds of Boston entrepreneurs foresee long-term growth – highest since 2015

Boston’s small business owners are cautiously optimistic about the new tax code and are embracing cutting-edge technologies, creating a positive environment for business growth

Kevin Kelly
Northeast small business division executive at Bank of America.

Sixty-seven percent of local entrepreneurs plan to grow their businesses over the next five years, the strongest small business forecast recorded in Boston since fall 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 and the greater Boston area, finds 47 percent of local entrepreneurs are confident the national economy will improve in 2018, level from last spring. Similarly, 51 percent of Boston small business owners are confident their local economy will improve in 2018, up 5 percentage points from a year ago.

Steady economic confidence has translated into a solid outlook on revenue and long-term growth. Sixty-three percent of entrepreneurs believe their revenue will increase in 2018 (up 6 percentage points year over year), and 67 percent plan to grow their business over the next five years (up 8 percentage points year over year). Meanwhile, hiring plans (26 percent plan to hire) dipped slightly since spring 2017 (28 percent), but remain above the national average (22 percent).

 

“A steady economic climate has Boston entrepreneurs eager to expand operations and target new customers,” said Kevin Kelly, Northeast small business division executive at Bank of America. “Boston’s small business owners are cautiously optimistic about the new tax code and are embracing cutting-edge technologies, creating a positive environment for business growth.”

Boston entrepreneurs split on tax reform, while concern over interest rates and strength of the U.S. dollar on the rise

According to the report, Boston entrepreneurs are split when it comes to the new tax code and its impact on small business. Forty-eight percent of Boston entrepreneurs cite the new policy as a game-changer for small businesses overall, 10 percentage points lower than the national average. In addition, while 51 percent say it’s made them more optimistic about their business outlook, this number trails the national average by 12 percentage points.

Thirty-six percent of Boston entrepreneurs have altered their business plans for 2018 as a result of the new tax law. Furthermore, 70 percent of Boston 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 (40 percent).

• Awarding raises and bonuses to employees (17 percent).

• Paying off loans (16 percent).

• Expanding operations (16 percent).

• Hiring more employees (14 percent).

• Making capital improvements (14 percent).

Looking beyond the new tax policy, Boston business owners anticipate some economic challenges in the year ahead. Health care costs remain a top concern for Boston entrepreneurs (70 percent), and the report found a variety of other mounting economic concerns, including:

• Interest rates (53 percent, up 14 percentage points year over year).

• Strength of the U.S. dollar (52 percent, up 13 percentage points year over year).

• Commodities pricing (50 percent, up 9 percentage points year over year).

• U.S. and global stock market (48 percent, up 12 percentage points year over year).

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

Perhaps one of the most significant innovations disrupting the small business marketplace is in the digital payments space, with 60 percent of Boston small businesses predicting all business payments will be transacted digitally within five years.

The report found that mobile use is nearly universal among local business owners, with 87 percent using smartphones and other mobile devices to manage their business, including:

• Basic tasks (75 percent).

• Digital banking (55 percent).

• Social media updates (44 percent).

• Digital payments (35 percent).

• Hiring (13 percent).

Two decades into the internet era, the role of the business website is less significant, as only 62 percent of Boston entrepreneurs report having a website. Fifty-four percent of local business owners who have a website say its primary use is to share basic information, while 37 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 Boston entrepreneurs, as 46 percent believe their business would suffer if the internet crashed for a week, including 31 percent who say they would lose revenue and one-quarter who would lose customers. Five percent of local entrepreneurs say they have been impacted by a data breach in the last year, making Boston entrepreneurs the least likely to suffer a data breach out of 10 major cities surveyed.

Although the expanding role of new technologies presents some risks and challenges, Boston business owners believe the positives far outweigh the negatives. Seventy-eight percent believe their future success is dependent on technology, more so than threatened by it (22 percent). Additionally, 81 percent of Boston business owners make annual investments in technology, and 41 percent do so at least once per quarter.

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

Boston business owners are investing in emerging technology at a rapid pace, with half of survey respondents reporting they use or are currently exploring the use of advanced technologies for their business, specifically:

• The Internet of things (24 percent).

• Data analytics (18 percent).

• 3D printing (16 percent).

• Artificial intelligence (8 percent).

Boston entrepreneurs are still uncertain about blockchain and cryptocurrencies. Sixty-five percent are unfamiliar with the distributed ledger technology, and only 11 percent believe it will be relevant to their business in the near future. Likewise, 23 percent of Boston business owners anticipate accepting cryptocurrency in the next five years—tied for least likely among small business owners in 10 major markets surveyed.

Download the spring 2018 Bank of America Small Business Owner Report

6/13/2018


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