Tax Reform Contributing to Entrepreneurs’ Confidence as Digital Payments and Cutting-Edge Technologies Poised to Reshape the Small Business Landscape
New York City entrepreneurs feel increasingly optimistic about the future, as their confidence in the economy, revenue and long-term growth has reached the highest level since 2016, according to the spring 2018 Bank of America Business Advantage Small Business Owner Report. Plans to hire among New York entrepreneurs are also on the rise from last year, outpacing the national average.
The report, based on a semiannual survey of 1,000 small business owners across the country and in the greater New York City area, finds that 53 percent of local entrepreneurs are confident the national economy will improve in 2018, up 3 percentage points from last spring. Similarly, 54 percent of New York small business owners are confident their local economy will improve in 2018, up 8 percentage points from spring 2017.
Steady economic confidence has translated into a solid outlook on revenue, hiring and long-term growth. Sixty-three percent of New York entrepreneurs believe their revenue will increase in the year ahead, up 7 percentage points from spring 2017. Plans to hire have climbed as well, to 31 percent (up 6 percentage points from spring 2017), exceeding the national average of 22 percent. Additionally, 65 percent of New York entrepreneurs plan to grow their business over the next five years, steady year over year.
"Over the past few years, optimism among New York entrepreneurs has steadily increased, and as a result, we’re seeing a rise in expected revenue growth and a more active hiring market,” said Corey Price, New York small business banker manager at Bank of America. “While many factors contribute to individual business owners’ outlooks, our report shows that rising confidence in the economy — both nationally and locally — and tax reform are setting the stage for growth.”
According to the report, one of the greatest opportunities for New York small business owners in the near term may be recently enacted changes to the tax code. Sixty-one percent of New York entrepreneurs cite the new tax policy as a game-changer for small businesses overall, and similarly, 61 percent say it’s made them more optimistic about their own business’s outlook.
Furthermore, 46 percent have altered their business plans for 2018 as a result of the new tax law. Seventy-seven percent expect to receive savings for their business because of the policy, and they plan to use those funds to fuel further growth, including:
Investing back into their business (34 percent).
Expanding operations (19 percent).
Awarding raises and bonuses to employees (18 percent).
Paying off loans (18 percent).
Hiring more employees (18 percent).
Making capital improvements (16 percent).
Despite optimism from the new tax policy, New York entrepreneurs anticipate some economic challenges in the year ahead. Health care costs remain a top concern for New York entrepreneurs (67 percent), while concern over other economic areas rose since spring 2017, including:
Interest rates (57 percent, up 12 percentage points year over year).
Commodities pricing (46 percent, up 10 percentage points year over year).
Corporate tax rates (50 percent, up 7 percentage points year over year).
Strength of the U.S. dollar (53 percent, up 4 percentage points year over year).
In exploring New York entrepreneurs’ adoption of emerging technologies, the report found digital payments continue to be one of the most significant innovations disrupting the small business marketplace. Sixty percent predict all payments at small businesses will be digital within the next five years.
According to the report, mobile use is nearly universal among local business owners, with 91 percent of New York entrepreneurs using smartphones and other mobile devices to manage their business, including:
Basic tasks (66 percent).
Digital banking (43 percent).
Social media updates (41 percent).
Digital payments (27 percent).
Hiring (18 percent).
Two decades into the internet era, the role of the business website is less significant, as only 62 percent of New York entrepreneurs report having a website. Fifty-two percent of New York local business owners who have a website say its primary function is to share basic information, while 37 percent primarily use it to drive sales.
Greater reliance on technology can also create challenges for entrepreneurs, as 57 percent of New York local small business owners believe their business would suffer if the internet crashed for a week, including 38 percent who say they would lose revenue, and 29 percent who would lose customers. Fourteen percent of New York local entrepreneurs say they have been impacted by a data breach in the last year.
Although the expanding role of new technologies presents some risks and challenges, New York business owners believe the positives outweigh the negatives. Eighty-one percent of New York entrepreneurs believe their future success is dependent on technology. Additionally, 80 percent of New York business owners make at least annual investments in technology, and 45 percent do so at least once per quarter.
New York business owners are investing in emerging technology at a rapid pace, with 55 percent of local respondents reporting they currently use or are exploring advanced technologies for their business, including:
The Internet of things (30 percent).
Data analytics (21 percent).
3D printing (14 percent).
Virtual/augmented reality (14 percent).
New York entrepreneurs are hesitant but intrigued by blockchain and cryptocurrencies. While 54 percent report they’re unfamiliar with the technology, a quarter believe it will be relevant to their business in the near future. Similarly, 35 percent of New York business owners anticipate accepting cryptocurrency 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:
Susan Atran, Bank of America