Tax Reform Contributing to Local Entrepreneurs’ Confidence as Cutting-Edge Technologies Poised to Reshape the Los Angeles Small Business Landscape
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.”
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).
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 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.
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.
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:
Colleen Haggerty, Bank of America