Tax Reform Contributing to Entrepreneurs’ Confidence as Digital Payments and Cutting-Edge Technologies Poised to Reshape the Small Business Landscape
Sixty-three percent of entrepreneurs in the greater Washington area are confident that their local economy will improve over the next year — up 5 percentage points from last spring, and the highest level of local economic optimism forecasted in D.C. 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 Washington, D.C. area, marks this year as the highest optimistic outlook on the national economy among Washington, D.C. entrepreneurs since fall 2015, with more than half of greater Washington, D.C.-area entrepreneurs confident the national economy will improve in the next 12 months.
This steady economic confidence has translated into a solid outlook on revenue and long-term growth. Sixty-eight percent of local entrepreneurs expect their revenue to increase in the next 12 months, up 3 percentage points from last year. Seventy-eight percent of greater Washington, D.C.-area entrepreneurs plan to grow their business over the next five years (up 8 percentage points YOY), and 33 percent of greater Washington, D.C.-area entrepreneurs plan to hire new employees (vs. 25 percent last spring).
“We’re excited to see how this economic optimism will translate into small business growth, or an increase in the use of new technology in the short term and long term,” said Michael Bonura, greater Washington, D.C. small business banker manager at Bank of America. “This community of small business owners has traditionally been tech-savvy, and their continued exploration of cutting-edge technologies continues to position them for future business success.”
According to the report, one of the greatest opportunities for Washington, D.C. small business owners in the near term may be changes to the tax code. Fifty-one percent of Washington, D.C. entrepreneurs cite the policy as a game-changer for small businesses overall, while 55 percent say it’s made them more optimistic about their own business’ outlook. Furthermore, of the 74 percent who expect to receive savings, many plan to use these funds to fuel further growth, including:
Invest back in their business (43 percent).
Expand operations (21 percent).
Award employee raises and bonuses (20 percent).
Despite the optimism surrounding the new tax policy, the survey also found there are several challenges anticipated for the year ahead in Washington, D.C. Health care costs remain the top economic concern of Washington, D.C. business owners this spring (69 percent). The report also found heightened levels of concern on several economic factors, up significantly since last spring:
Interest rates (56 percent, up 9 percentage points year over year).
Commodities price (45 percent, up 10 percentage points year over year).
Minimum wage increase (36 percent, up 6 percentage points year over year).
Perhaps one of the most significant innovations disrupting the small business marketplace is in the digital payments space, with 63 percent of Washington, D.C. entrepreneurs predicting all business payments will be digital within five years.
The report also found that mobile use is nearly universal among small business owners across the country, with 94 percent of Washington, D.C. entrepreneurs using smartphones and other mobile devices to manage their business, including:
Basic tasks (78 percent).
Digital banking (53 percent).
Two decades into the internet era, the role of the business website is less relevant, as 68 percent of Washington, D.C. entrepreneurs report having a website. Fifty-five percent of business owners who have a website use it to share basic information, while 27 percent primarily use it to drive sales.
Greater reliance on technology can also create challenges, as 56 percent of Greater Washington, D.C.-area entrepreneurs believe their business would suffer if the internet crashed for a week, including 40 percent who say they would lose revenue and 29 percent who would lose customers. Nine percent of entrepreneurs say they have been impacted by a data breach in the last year. Of those affected, more than 89 percent reported damaging consequences, including compromised business information, financial setbacks and compromised customer data.
Although there are some risks with the increasing role of new technologies in business, Washington, D.C. small business owners believe the positives far outweigh the negatives, with 82 percent believing their future success is dependent on technology more so than threatened by it (18 percent). In addition, 88 percent make annual investments in technology, and 44 percent do so at least once per quarter.
Small business investment in emerging technology is advancing at a rapid pace in Washington, D.C., with 54 percent of survey respondents reporting they use or are currently exploring the use of advanced technologies for their business, specifically:
Internet of things (24 percent).
Data analytics (18 percent).
3D printing (12 percent).
Drones (9 percent).
Virtual/augmented reality (9 percent).
There is still a lot to learn, they say, about blockchain. Fifty-one percent of Washington, D.C. business owners say they aren’t familiar with distributed ledger technology, and only 20 percent believe it will be relevant to their business in the near future. Greater Washington, D.C. entrepreneurs also appear to be hesitant to using cryptocurrency, with only 24 percent foreseeing they will use it as a form of currency in the next five years.
GfK Public Communications & Social Science conducted the Bank of America Small Business Owner Report Survey for spring 2018 online between February 12 and March 26, 2018 using a pre-recruited online sample of small business owners. GfK contacted a national sample of 1,031 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between two and 99 employees. In addition, a total of approximately 300 small business owners were also surveyed in each of ten target markets: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, San Francisco and Washington, D.C. The final results were weighted to national benchmark standards for size, revenue and region.
Prior to 2016, previous waves of the Small Business Owner Report Survey were conducted by telephone and while best efforts were made to replicate processes, differences in sample, weighting and method suggests caution when making direct statistical comparisons of the results from pre-2016 and post-2016.
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 4,400 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 36 million active users, including approximately 25 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 across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Reporters May Contact:
Don Vecchiarello, Bank of America