Despite This Lower Confidence, Area Entrepreneurs Are More Likely to Plan for Long-Term Growth and Seek Loan Funding Compared to Counterparts
Bay Area entrepreneurs have the lowest level of confidence in the national economy compared to business owners in 10 markets surveyed, according to the spring 2017 Bank of America Small Business Owner Report. This spring, less than half of Bay Area small business owners believe the national economy will improve over the next 12 months—8 percentage points lower than the national average, and flat from fall 2016 (43 percent). Confidence in the local economy has dropped slightly among Bay Area entrepreneurs with 49 percent reporting it will improve (vs. 55 percent in fall 2016).
The report, based on a semi-annual study of small business owners in the Bay Area and across the country, also found that San Francisco small business owners’ hiring plans for the year ahead declined from just six months ago. This spring, only 26 percent of Bay Area small business owners plan to hire—a precipitous 17 percentage-point decline from fall 2016. Additionally, only 57 percent of San Francisco small business owners expect their revenue to increase over the next 12 months (vs. 59 percent in fall 2016).
There are, however, a few bright spots among Bay Area business owners this spring. When looking to the future, 62 percent of San Francisco entrepreneurs plan to grow their business over the next five years—6 percentage points higher than the national average. And, 17 percent of Bay Area small business owners plan to apply for a loan in 2017—8 percentage points higher than their counterparts nationwide.
“Despite a dampened economic outlook, we find it promising that a majority of Bay Area entrepreneurs are planning for long-term growth,” said Emily Shanks, small business northwest region executive at Bank of America. “San Francisco small business owners are squarely focused on the future, and we look forward to seeing how these positive five-year growth plans translate into action.”
In contrast to their declining confidence in the national and local economies, the survey found that Bay Area entrepreneurs’ concerns over certain economic factors have decreased since fall 2016, with the most significant declines showing in:
Health care costs (66 percent, down 3 percentage points since fall 2016).
Strength of the U.S. dollar (45 percent, down 9 percentage points since fall 2016).
Interest rates (44 percent, down 13 percentage points since fall 2016).
Corporate tax rates (42 percent, down 14 percentage points since fall 2016).
Consumer spending (41 percent, down 8 percentage points since fall 2016).
While health care costs remain the top economic concern for Bay Area small business owners, they are more likely to believe that their business’ health care pricing, quality and availability have improved over the past five years compared to their national counterparts. Of the 39 percent of area entrepreneurs who contribute to employee insurance benefits:
Forty percent believe the pace of annual health care cost increases have improved (21 percent nationwide).
Forty-five percent believe the quality of health care has improved (25 percent nationwide).
While 76 percent of Bay Area entrepreneurs say work interferes with their home life, the same number say they have achieved work-life balance. Still, it appears Bay Area business owners are getting less sleep than their peers nationwide. Sixty percent say work regularly interferes with their ability to get enough sleep, versus just over half of small business owners nationwide. Additionally, 35 percent of San Francisco small business owners report having had a nightmare about their business failing.
When asked to describe an average work week, Bay Area entrepreneurs say “enjoyable” (52 percent), “interesting” (48 percent) and “fulfilling” (43 percent). However, it doesn’t mean they’re not stressed—49 percent say their job is “demanding,” 28 percent say it’s “stressful” and 20 percent say it’s “exhausting.”
Though many Bay Area small business owners tend to work overtime—with 65 percent reporting that they work more than 40 hours a week—a strong majority (77 percent) also say they are satisfied with the amount of time they can spend with family and close friends. Also, nearly all Bay Area entrepreneurs value the flexibility of their work location (90 percent) and schedule (90 percent).
When asked for their top predictions about small business 20 years from now, most San Francisco small business owners envision a virtual and cashless future. Top predictions include:
More offices will be virtual than physical locations (44 percent).
Cash will disappear with transactions becoming digital (41 percent).
Business will go paperless (41 percent).
Operations will be conducted by automation (40 percent).
Hours of operation will be obsolete (20 percent).
Most businesses will employ a robot (13 percent).
Eighty-four percent of Bay Area entrepreneurs say encouraging innovation in the workplace is a priority, and 85 percent say it is a key contributor to their business success. Eighty-one percent have taken some sort of innovative action in the past two years, from upgrading business technology (49 percent) to creating a process to increase efficiency (29 percent). Only 8 percent say they are “industry-leading,” while 36 percent say they’re “ahead of the curve,” and 47 percent say they “keep the same pace” with other business owners in their sector.
GfK Public Communications & Social Science conducted the Bank of America Business Advantage Small Business Owner Report for spring 2017 online between February 21 and March 19, 2017 using a pre-recruited online sample of small business owners. GfK contacted a national sample of 1,001 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between 2 and 99 employees. Additionally, a total of 300 small business owners were surveyed in 10 target markets: Atlanta, Boston, Chicago, Dallas/Fort Worth, Houston, Los Angeles, New York, Miami, San Francisco and Washington, D.C. An oversample of 150 interviews was also completed among respondents in the technology and medical/health care fields. The final results were weighted to national benchmark standards for size, revenue and region.
Waves of the Small Business Owner Report before 2016 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 to results from previous years.
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 15,900 ATMs, and award-winning digital banking with approximately 35 million active users and more than 22 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 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.
Reporters May Contact:
Colleen Haggerty, Bank of America