Transcript
Visa Small Business | 4Q16 Report | March 2017
Spend Insights “Coming off higher holiday revenue in 2016, many small business owners appear confident they will experience growth in 2017, and they intend to expand accordingly — many cite plans to increase inventory, employee pay and marketing efforts. However, a growing number are concerned about inflation, interest rates and labor supply. When it comes to payments, financial institutions still have opportunities to promote acceptance and usage of credit cards among small business owners.” — Janet Zablock, Vice President, Small Business, Visa Inc.
Findings at a glance
Top 5 Individual Concerns of 4Q161 This quarter
Current climate: Shifting concerns
Future outlook: Plans for growth
Concerns about inflation and interest rates rose significantly in 4Q16 while concerns about consumer confidence fell significantly. At the same time, keeping and hiring good employees, and finding good suppliers are top of mind for small business owners. Read more >
Small business owners are more confident in their local economies and expect higher revenue in 2017. This could be driving reported plans to expand their businesses, increase inventory and pay employees more. They also plan to increase their use of digital marketing — all pointing to a focus on growth. Read more >
Payment preferences Checks are still the most commonly used and accepted payment method among small businesses, but several factors point to continued growth in usage and acceptance of cards. Fees remain a commonly cited barrier keeping small business owners from accepting and using cards. Read more >
Year-over-year holiday revenue More small business owners reported an increase in holiday revenue while fewer reported a decrease. This marks the largest reported increase — by 2X — since Visa started measuring this in 2012. Read more >
Now we would like to ask you about concerns that other small business people have mentioned. For each one, please indicate whether this is a critical concern, a major concern, a minor concern or no concern at all to your business. 2 What major issue facing the economy most concerns you as a small business owner? 1
1 Attracting new customers 2 Cost of health insurance 3 Retaining existing customers 4 Rising taxes 5 Keeping good employees
Last quarter vs. A year ago
1 - 1 2 - 2 4 3 3 i 4 6 6
Top 5 Macroeconomic Concerns of 4Q162 This quarter
1 Possibility of increasing inflation 2 Decline in consumer confidence 3 Rising interest rates 4 Increase in energy prices 5 Falling value of the dollar
Last quarter vs. A year ago
2 2 1 i 1 i 5 3 4 - 5 3 i 4 i
Visa Small Business | 4Q16 Report | Page 2
Current climate: Shifting concerns
Top concerns shift from consumer confidence toward inflation Concern about declining consumer confidence dropped significantly in 4Q16 — after five consecutive quarters as the top macroeconomic concern. However, concerns about inflation, interest rates, hiring and keeping good employees, and finding quality suppliers all trended upward. Concerns about energy prices, the value of the dollar and the housing market remained relatively flat from 3Q16 to 4Q16. 40% 30%
“We are constantly striving to get more customers and retain our current ones, so we try to have an active website and offer specials.”
Shifting macroeconomic concerns2 20% Increasing inflation, declining consumer confidence, rising interest rates and the falling value of 10%dollar have shifted compared to a quarter ago and a year ago. However, they each remain the among the top four concerns. 40%
3Q15
30%
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1Q16
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3Q16
— Recreation
4Q16
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20% 50%
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Finding10% and hiring 4Q15 the right new employees
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Increasing inflation 3Q15
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Keeping good employees 3Q16
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Declining consumer confidence
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quality RisingFinding interest ratessuppliers
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Spend Insight
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4Q15 1Q16 50%
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Year-over-year (YOY) spend for hiring employees increased by 14.3%, which aligns with small business owners’ increasing concerns about finding and keeping good employees.
Falling value of the dollar 4Q16
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50% Critical business concerns1 Concerns about hiring the right employees, keeping good employees and 40% 40% 40% finding 50% quality suppliers all rose 50% in 4Q16.
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Finding and hiring the30% right new employees
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Finding quality suppliers
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Keeping good employees
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Finding and hiring the right new employees
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Finding quality suppliers
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hat major issue facing the economy most concerns W you as a small business owner? Now we would like to ask you about concerns that other small business people have mentioned. For each one, please indicate whether this is a critical concern, a major concern, a minor concern or no concern at all to your business.
4Q16
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Visa Small Business | 4Q16 Report | Page 3 Future outlook: Plans for growth
Increasing confidence in the economy may signal plans for growth A greater percentage of small business owners expect to increase revenue, employee pay and inventory levels — trends that could be related to rising confidence in their local economies. Additionally, a greater percentage of small business owners plan to increase their marketing efforts with a focus on online channels. Others cited plans to expand their businesses through product line extensions.
Key confidence factors3 Small business owners’ increasing confidence in their local economies and expectations of revenue growth may be contributing to plans to increase employee pay and inventory.
“We’ve already been planning more inventory to expand our business and we’ll continue to do so in 2017 — especially when we can read what will be a hot seller.”
33 46
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Stronger local economy
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Revenue increase Stronger local economy Revenue increase 39
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35 Pay employees more Will increase inventory
Will increase inventory
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YOY spend was up 22.9% in Advertising Services and 28.8% in Management, Consulting and Public Relations — trends that align with small business owners’ plans to increase marketing and grow their businesses.
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Increased ad/marketing efforts Increased ad/marketing efforts
Increased ad/marketing efforts
31% 36% 4Q16 % % 36 313Q16 % 36% 3Q16
Spend Insight
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41 38
4Q16
Marketing plans3,4 More small business owners are planning to increase marketing efforts with 9 out of 10 planning some form of eMarketing — another potential sign of growth-related strategies for 2017.
3Q16
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Will increase inventory
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Revenue increase Pay more Payemployees employees more
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— Greenhouse
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Stronger local economy
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Expansion plans5,6 As a further indication of plans for growth, many product-oriented small businesses are either planning or have undertaken product line extensions. 4Q16 line extension plans
4Q16 eMarketing plans 4Q16 eMarketing plans
4Q16 eMarketing plans
63 63 63% 63% 63% %24 %
Digital
Digital
%
Social Media
Social Media
6324 Digital
% Social Media
Mobile
%
Mobile
4Q16 line extension plans
4Q16 line extension plans
22 22%
%
Undertaken
Undertaken
23% 23%%
Planning to
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Planning to
Undertaken
24% Mobile
³ Thinking of the business in which you are an owner, partowner, partner or the financial decision maker, please tell me how likely each of the following is to occur: ⁴ You mentioned you planned on increasing your marketing efforts in the next 6 months. What areas do you plan to focus on? (n=137) ⁵ What business expansion efforts have you undertaken in the past year? ⁶ What business expansion efforts are you planning in the next 12 months?
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Planning to < Previous | Next >
84%
69%
52%
Payment preferences
Debit cards*
Visa Small Business | 4Q16 Report | Page 4
Several signs indicate card usage may increase 50%
52%
38%
Currently used
40%
Checks remain the most widely accepted form of payment, but a growing number of small business owners see cards as an efficient way to get paid. Similarly, checks remain the top method used for paying business expenses, but cards are a close second — and viewed as more efficient 30% than checks when it comes to paying. Considering the top barriers to accepting and institutions may need to better % % using plastic, financial % % educate small business owners about the benefits of payment cards. 20%
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Currently accepted
accepted for receiving Credit cards Debit cards Currently Acceptance⁷ Currently accepted customer payments Checks are still the most widely accepted payment % % method. However, the % Cash number of small business Checks Checks owners who feel cards are Currently accepted more efficient is trending up Currently accepted while the number who feel Currentlyisused checks are more efficient Currently used % % % trending down.
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84 69
52% 33% 46% 38% 84
69
52% 84 % 84% 33
Cash
Checks
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% Debit cards
Credit cards Currently accepted Credit Credit cardscards
69% 5250%
%
Credit cards
Cash
69
%
Cash
Checks
Cash
Cash
30%
38%% 20% 69 % % 74 74
Debit cards*
Credit cards
Cash
Checks
40%
Currently used to pay business expenses Usage⁹ Currently used % % % % Although checks are still Cash Checks Credit cards Debit cards* more % widely used than % % % cards, credit cards are a close Cash Checks % % Credit cards Debit cards second. Additionally, more Merchant/vendor methods Cash % Checks % small business owners % Other % sayconvenient does not accept more Card fees Currently used credit cards are the "best % % % and most efficient" payment Cash Cash Cash method.
84 84
69 74
52 46 78
46% 26 33% 21 69
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%
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51 Credit cards 69% 26% Checks %Credit cards
Card fees
Other methods more convenient Cash
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18
46
69
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%
Cash
21 Debit cards % 18% 74
Credit cards Merchant does %cards Debit
not accept
Credit limit Cash is too low
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Debit cards
Best2014 and most efficient 2015 2016 Viewed bestefficient and most efficient for receiving Best andasmost for receiving customer payments⁸ customer payments⁸ for receiving customer payments⁸
50% Best 50%and Most Efficient for business expenses⁸
% 52 38
% 40% Debit cards* 40%Credit cards
38%
Debit cards*
%
Cash
20% 20%
% 522013 38%2015 % 2014 33 2014 2013 2014 2015 % % 462013 3320162015 Credit cards
Debit cards*
Debit cards Credit cards
2016 2016
Checks Debit cards
Credit cards
40% 40%
Best and Most Efficient for business expenses⁸ Viewed bestEfficient and most Best andas Most for efficient business expenses⁸ for paying business expenses10
74%
33%
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Credit limit Credit cards% Lack of integration Debit cards 30% with reporting solution is too low
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30%
% 20% 74 20% Cash
Debit Lack cards of integration
2013 2013
with reporting solution
2014 2014
2015 2015 Checks
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2016 2016 Credit cards
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%
%
Barriers to plastic11, 12 Cash Cash Barriers to accepting and using cards present education opportunities to financial institutions. Acceptance
Usage
% % 69% % % % 46 Merchant/vendor Lack of integration Other methods Credit limit 51 27 26 21 % % Lack % Merchant/vendor % integration Other methods Credit limit % % % % does not accept with of reporting solution more convenient is too low Card fees 26 13 21 18 reporting solution Card fees 26 more convenient 21 does not accept 18 is too low 13 with Card fees Cash
Other methods more convenient Cash
Not done in this type of business
“We’re actually using credit cards as a process improvement. More vendor payments with credit cards means more cash back, which goes straight back into our operating budget.” — Manufacturing
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30% 30%
50% 50%
%
%
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Credit cards
2013
Credit cards
Debitcards cards Debit Checks
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Cash
Checks
Currently used
% %
38%
Cash Best and most efficientCredit cards for receiving customer payments⁸
Checks
Fees
Spend Insight YOY spend in Small Capital Investments was up 14.2% and YOY transaction volume in Utilities was up 14.3%. This increased card usage in categories often associated with checks could indicate that small business owners’ payment preferences may be shifting toward plastic. 7 Please indicate which payment methods your company accepts for purchases and payments from customers. 8 When receiving payments, which of the following do you feel is the best and most efficient payment tool for your business? 9 Next, please click the payment methods your company uses for business expenses. 10 When making payments, which of the following do you feel is the best and most efficient payment tool for your business? 11 What is the primary reason you do not take payment cards? (“Invoices typically larger than card limits” was the number one response, but omitted to show top two responses regarding invoices likely to be paid with plastic.) 12 What are some barriers to using plastic cards?
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Visa Small Business | 4Q16 Report | Page 5
Year-over-year holiday revenue
Small business owners report increased holiday revenue The number of small business owners reporting a YOY increase in holiday revenue rose significantly in 2016. The top reasons cited for these revenue increases were more customers and the economy. Additionally, the number reporting a YOY decrease dropped significantly. The top reasons cited for YOY holiday revenue decreases were the current U.S. political climate and the economy. It’s interesting to note that both groups cited the economy as a reason for their revenue changes.
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% % 2016 holiday revenue132016 2015 % Significantly more small business
25 31
owners reported YOY holiday 2016 increases. revenue
31% % 31% % 25 % 31 25 2016 2016
18 %
% 18 9%
9% 2016
2015 2016
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2015
9% 18%% 18 2016
2015
2015
More customers
The economy
Top two reasons given for an decrease in 2016 holiday revenue15
2015
%
— Retail
Top two reasons given for an increase in 2016 holiday revenue14
2016
2015 2015
“Our holiday season business was better this year. We saw a clear revenue increase compared to the 2015 holidays.”
Half as many small business owners reported a YOY holiday revenue decrease.
9%% 9
Spend Insight YOY Visa Business Card transaction volume was up 9.7% and YOY sales volume was up 9.4 % in department stores, which could be related to the reported increases in holiday revenue.
2016
2016
The current U.S. political climate
The economy ¹³ Has your business revenue during the 2016 holiday season been higher, similar to, or lower than the same time period last year? ¹⁴ Why do you think your business revenue during the 2016 holiday season has been higher in comparison to the same time period last year? 15 Why do you think your business revenue during the 2016 holiday season has been lower in comparison to the same time period last year?
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Visa Small Business | 4Q16 Report | Page 6
Small business resources Small businesses that seek solutions to help manage their business can turn to Visa Business for support. For information about Visa’s small business solutions, visit visa.com/business About Spend Insights methodology Visa Small Business Spend Insights monitors the economic confidence of small business owners by cross-referencing actual behavior spend data with responses to a quarterly survey exclusively commissioned from TNS by Visa. This study of businesses with $50,000–$25,000,000 in annual revenue was based on small business survey data from April 2007 through December 2016 and also consists of 600 interviews conducted between November 30–December 11, 2016. NOTE: This survey is in no way meant to represent or reflect the true nature of the economy. Rather, it is presented as an additional data set meant to help the reader gather information and develop an informed conclusion.
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