A MARKET IN TRANSITION

The 14th Annual, Nationally Representative

EXECUTIVE SUMMARY

2

1 Women & Minority-owned businesses are increasing substantially

2 Millennial numbers are surging; they will become the business owners of the

future

3 Economic concerns increase, impacting both confidence and sales growth

4 The presidential outcome & its business impact are top of mind

5 The skills shortage is gaining momentum

6 New order of the day: “work-life blend”

7 70 is the new 60

8 Environmental consciousness has awakened

9 Mobility products & applications gaining greater depth of usage

10 Brand TRUST.a strategic imperative

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THE BIG PICTURE

FOLLOWED BY: • SMB SNAPSHOT

• NEW & NOTABLE SHIFTS

• PURCHASE DYNAMIC THEMES

• BUSINESS OF BRANDS

Sole Proprietors

1-4

5-19

20-49

50-99100-999

SMALL & MID-SIZED COMPANIES NUMBER 7.6M

4

23.2M

4.11M

2.38M

670K

228K

173K

7.6M Businesses (Without Sole Proprietors)

Source: Small Business Research Center, based on Census and Bureau of Labor Statistics data; Q4 2015 projection

GROWTH IN THE NUMBER OF BUSINESSES IS GREATEST AMONG LARGER COMPANIES

5

0.64%

0.35%

0.61%

2.05%

1.65%1.73%

SoleProprietors

Under 5Employees

5-19Employees

20-49Employees

50-99Employees

100-999Employees

Growth in Number of SMB Businesses 2015 Versus 2014

Source: Small Business Research Center, based on Census and Bureau of Labor Statistics data; Q4 2015 projection

THE NUMBER OF WOMEN & MINORITY OWNED BUSINESSES HAS INCREASED SUBSTANTIALLY

6

7.8

9.9

12.5

2.33.3

4.8

5.6

7.9

10.9

2007 2012 2017 (projected)

Women-Owned Hispanic-Owned Minority-Owned

Number of Women, Hispanic and Minority-Owned Businesses (In Millions)

Source: US Census Bureau, Survey of Business Owners (2012 data published 8/18/15); Base: All US Non-farm businesses operating in the 50 states and District of

Columbia. NOTE: 2017 projected using 2012 vs. 2007 growth rates. Minority-Owned businesses include Black/African American, American Indian, Asian, Asian Indian,

Chinese, Filipino, Japanese, Korean, Vietnamese, Native Hawaii and other Pacific Islanders.

(39%)

(56%)

(Women-Owned, 36% of all US firms)

(Hispanic & Minority-Owned, 41% of all US firms)

Projection:

MILLENNIALS ACCOUNT FOR 16% OF SMB OWNERS & ARE THE LARGEST LABOR FORCE

7

Millennials’ Share of SMB Business Owners & Employees

Source: U.S. Small Business Administration, Office of Advocacy, from the US Census Bureau, Survey of Income & Program Participation (SIPP); Issue Brief

#6, Demographic Characteristics of Business Owners, 2013. Note: Businesses with under 500 employees, includes sole proprietors.

16%

38%

33% 32%

52%

29%

Business Owners Employees

Millennials, Under 35 Gen X, 35-49 Boomers, 50+

8

78%

56%

32%35%

52%

65%

77% 77% 76%73% 73%

81%78%

Jan 08 Aug 08 Oct 08 Mar 09 Aug 09 Nov 09 Dec 09 Dec 10 Dec 11 Dec 12 Jan 14 Jan 15 Jan 16

Optimism and Confidence in Future Business Prospects

“How do you think your company’s prospects will change over the next 12 months? By prospects, we mean the general success of your business.” (2008-

2013) “What is your level of confidence in the success of your company (based on revenue, profitability & growth) over the next 24 months?” (2014-2016)

BUSINESS CONFIDENCE IS SLIGHTLY DOWN VERSUS YEAR AGO AMONG SMBs

SMB SALES GROWTH HAS REMAINED FLAT OVER THE PAST YEAR

9

37%27%

21% 24% 26% 29% 31%36% 33%

37%

34%

21%20%

24%

30%34%

35% 37%

2007 2008 2009 2010 2011 2012 2013 2014 2015

1-10% Sales Growth 11%+ Sales Growth

SMB Owners Experiencing Sales Growth

74%

42%

71% 70%

61%

44%50%

59%65%

Actual Year

“What would you estimate your company’s average, annual percentage sales growth rate has been over the last three years, that is on a

per year basis, from 2013 through 2015?

KEY CHARACTERISTICS OF SMALL AND MID-SIZED BUSINESS OWNERS

10

68% men | 32% women

$185K household income (average)

52.8 average age

74% married; 30% kids at home

68% college graduates+

$8.5M annual sales (average)

28.5 years in operation (average)

25 employees (average)

SMB OWNERS RUN COMPANIES THAT ENCOMPASS AN ARRAY OF BUSINESS LIFE STAGES

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Start Ups3%

Growing29%

Maturing36%

Re-inventing15%

Surviving12%

Declining2%

Transitioning3%

“Which of the following best represents the business phase your company will be in for the next 3-5 years? Start Ups, Maturing, Re-inventing, Surviving (business is under

pressure because of the economy, competition, and/or decreased sales/customers/credit), Declining (closing or preparing to close the company), Transitioning (selling or

otherwise exiting the business).”

Increasing sales, employees, locations or knowledge

Settled, established, stable, business is steady

Re-defining the business, or finding a specific niche in the market either from personal desire, or out of necessity to stay competitive & profitable

Recently started the business, still learning, getting things in place

Current Business Life Stage

SMBs ARE MOST ENGAGED IN WHITE COLLAR INDUSTRIES, ESPECIALLY SERVICES

12

1% 1%

8%13%

4% 3%7%

12%9%

37%

1%5%

Total SMB Owners

Any White CollarServices

37%

Misc business services 11

Engineering, management

services

8

Amusement recreation 3

Health services 3

Miscellaneous services 3

Personal services 2

Social services 2

Hotel, recreational lodging 1

Legal services 1

Educational services 1

Membership organizations 1

Blue Collar 30% | White Collar 65

SMB Industries

*FIRE = Financial, insurance and real estate

SMB OWNERS THINK & ACT LOCALLY

13

% Generating Sales:

Locally 92%

Nationally 61

Internationally 24

58%

63%

64%

70%

Our company lives or dies byhow much business it generates

locally

Marketing/selling directly to thelocal community is a key

component of our co's success

Our company is activelyinvolved in the local community

to promote good will & generatebusiness

First & foremost our co tries todo business with other local

companies

% Agree

“Following are a series of statements which may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree

with each one, using a 0-to-10 scale, where 10 means you ‘strongly agree’ and 0 means you ’strongly disagree.’ Using 100 % points, how would you break down

your co’s 2015 sales among the following three geographic categories? ...Within your local area, The rest of the U.S., Outside of the U.S.”

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NEW & NOTABLE

THE U.S. ECONOMY HAS RE-SURFACED AS A TOP CONCERN AMONG SMB OWNERS

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1 Cost of health insurance & other employee

benefits (rank 2015 #1)

2 Being able to attract customers (#2)

3 The U.S. economy (#8)

4 Rising costs of doing business (#5)

5 Maintaining our existing customer base (#3)

“What are the issues that you’re most concerned about related to running a business?”

Today’s Top Concerns

REPUBLICANS ARE WORRIED ABOUT THE UPCOMING PRESIDENTIAL ELECTION & ITS IMPACT ON BUSINESS

16

33% 31%

42%

30%37%

31%

38%51%

21%

31%

38%

38%

Total SMBs Republicans Democrats Independents Women Men

Very

Concerned

Somewhat

Concerned

69%

61%63%

82%

71%75%

Concern About the Outcome of the Upcoming Presidential Election on Your Business

“What are the issues that you’re most concerned about related to running a business?”

WITH DECREASED UNEMPLOYMENT RATES, THE SKILLS SHORTAGE HAS INCREASED AS AN ISSUE

17

5.1%4.6% 4.6%

5.8%

9.3%

8.1%

5.5%4.9%

Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 13 Jan 15 Jan 16

Unemployment Rate

50%

58%

Jan 15 Jan 16

It is Difficult to Find New Employees with the Skills & Education to Meet the

Needs of Our Business(Strongly Agree)

Unemployment rates sourced from the Bureau of Labor Statistics

“Following are a series of statements which may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree

with each one, using a 0-to-10 scale, where 10 means you ‘strongly agree’ and 0 means you ’strongly disagree.”

50%

40%

38%

37% 37% 38%

25%

28%

37%

52%

75%

74%

2007 2009 2011 2013 2015 2016

SMARTPHONES HAVE LESSENED TIME CONCERNS RESULTING IN A NEW TYPE OF ‘WORK-LIFE BLEND’

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“Which of the following products or services have you used in the past year for your business?” “What are the issues that you’re most concerned about

related to running a business?”

Very Concerned about Demands on Your Time

Use SmartPhonefor Business

PLANNED SMB RETIREMENTS ARE BEING PUT OFF; 70 IS THE NEW 60

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3%

6%

8%

24%

26%

32%

64%

69%

Don't know who wouldsell/transfer business to

Want to try a differentcareer

Want to start anotherbusiness

Need money to make endsmeet

Keep healthinsurance/other benefits

Want money to buy extras

Enjoy working

Want to stay active &involved

Under 6012%

60-6419%

6512%

66-6925%

70+19%

Never13%

Planned Retirement Age

Over 6557%

65 or Younger43%

Reasons to Continue Working

“At what age are you expecting to retire?” “What are your reasons for wanting to continue working later in life? Please select all that apply.”

54%

46% 46%

47%

50%

40% 40%41%

48%

47%

46%

52%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

ENVIRONMENTALLY NOT CONSCIOUS

Our company respects ‘green’ values & is conscious of the environment

Our company respects ‘green’ values & is conscious of the environment

Environmental Issues J Agree Strongly

SUSTAINABILITY EFFORTS & ENVIRONMENTAL CONCERNS ARE ON THE RISE AMONG SMBs

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Businesses today have a responsibility to address key social & environmental issues

Businesses today have a responsibility to address key social & environmental issues

Working to make ‘sustainability’ an integral part of our products/services

Working to make ‘sustainability’ an integral part of our products/services

“Following are a series of statements which may/may not reflect how you think about business, or life in general. Please indicate whether you agree/disagree

with each one, using a 0-to-10 scale, where 10 means you ‘strongly agree’ and 0 means you ’strongly disagree.’

SMARTPHONE USAGE IS GAINING DEPTH AMONG SMB OWNERS

21

“In lieu of of paper, I often use my SmartPhone for boarding passes, tickets, other payments and receipts”

“How much do you agree or disagree with each of the following statements about technology?” “What percentage of your total weekly time taking in business

news or information is accessed via smartphone, tablet, computer or a print publication itself?” “For each social network, please click whether it is used for

business purposes, personal reasons or both.”

% Agree Completely/Mostly

Use SmartPhone to Access Business News/Information

57%

75%

2015 2016

53%

44%

25%

10%

Facebook LinkedIn Twitter Instagram

Use for Business Purposes

33%

44%

2014 2016

MOBILITY PRODUCTS BRING REVENUE AND INCREASED PRODUCTIVITY TO SMBs

22

Top Three Values Mobility Products & Service Provide the Business

18%

30%

32%

44%

48%

55%

73%

Decrease IT costs

Gain competitive advantage

Higher employee satisfaction

Improve/maintain existing competitiveadvantage

Improve field service operations

Increase sales/revenue

Increase employee productivity

“Please rank the top three values that mobility products and services provide for your organization.”

SMBs WILL CONTINUE TO LEVERAGE TRADITIONAL MEDIA WHILE ADOPTING NEW CHANNELS – IT’S ADDITIVE

23

31%

24%

19%21%

18% 19%16%

13%

9% 9%

4% 5%7%

3%

35%

28%25% 25%

23%20%

18%

12% 11%9% 9%

7% 6%3%

2015 2016

“Which of the following will your company use more of in the next 1-2 years?”

Marketing and Advertising Vehicles Plan to Use More of Next 1-2 Years

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PURCHASE DYNAMICS

“We would like to get your overall impressions of several major industries in the US. For each, please give your overall view of it.”

Very/Somewhat Positive

19%

20%

20%

17%

54%

28%

71%

26%

44%

44%

46%

50%

58%

73%

Health Insurance

Banking

Credit Cards

Financial, Investment

Telecom

Travel

Technology Hardware

2016

2009

INDUSTRY PERCEPTIONS HAVE REBOUNDED VS. THE RECESSIONARY LOWS OF 2009

25

THE MAJORITY OF SMB OWNERS WILL BE MAKING BRAND/VENDOR CHANGES IN THE NEXT TWO YEARS

26

Making Changes

61%

Not Making Changes

39%

Health Insurance 40%

Technology hardware (computers, mobile devices, peripherals)

36

Business software 30

Marketing (marketing/media buying co’s, social media co’s, email marketing co’s, PR firms)

24

Telecom services providers & carriers (cable, phones, internet, cloud providers)

24

Banking 19

Property & Casualty insurance 17

Office supplies 17

Financial / investment 15

“For which of the following industries will your company be changing or adding brands/vendors in the next two years?”

31%

52%

48%

36%

47%

42%

32%

49%

31%

37%

48%

40%

49%

58%

Marketing

Travel

Business Services

Insurance

Financial

Telecom

Technology

Make Decision Yourself Seek Advice From Others

90%

87%

84%

84%

83%

80%

90%

Decision Making Across CategoriesSMB OWNERS DRIVE BRAND CHOICE ACROSS MULTIPLE LINES OF BUSINESS

27

“Your company undoubtedly interacts with and uses the service of many industries. Please indicate how vendor and brand decisions

are made by your company for each industry listed below.”

SOURCES OF ADVICE VARY BY INDUSTRYJPEERS & COLLEAGUES ARE OFTEN CONSULTED

36%34% 34%

29%

35%

41% 41%

30% 29%

21%19%

28%

21%

25%

19%21%

29%

22%20%

22% 23%

26%

19%

16%

37%

12% 11%

20%

Technology Telecom Financial Insurance BusinessServices

Travel Marketing

Business Colleagues/Peers In-house Expert/Dept Head Other Owner/Partner Outside Consultant

28

Expert/Dept HeadOther Owner/Partner

Consultant

“Listed below are the industries in which you mentioned seeking the advice from others before a final decision is made. For each industry, please

indicate the specific sources of that advice.”

TRUST IS A CRUCIAL COMPONENT OF THE BRAND SELECTION PROCESS

29

27%

29%

33%

35%

38%

40%

57%

60%

Offers cutting edge solutions

Works with our co's businesspartners/consultants

Recommended by peers in industry

A co/brand have worked with in past

Is well known & respected

Provides a special offer/good pricing

Proven track record of strong customerservice/support

Is a brand or company I trust

% Rating Extremely

Important

Important Criteria When Selecting a Brand or Vendor

“How important are each of the following criteria when deciding which brand or vendors to consider?”

30

BUSINESS OF BRANDS

BRAND EVALUATION CRITERIA

31

KEY MEASURES

Leadership

Differentiation

Value

Ethics

Customer Service

Momentum

Relevance

6

7

8

9

10

1

2

3

4

5

TOP TEN BRANDS

32

Business

Credit Card

EIGHT NEW BRANDS ENTERED INTO THE TOP 25 IN 2016

33

Vs. 2015

3 1 Amazon.com

1 2 Apple

2 3 Southwest

4 4 Google

14 5 Dropbox.com

22 6 Visa

33 7 Square

18 8 Visa Business Credit Card

5 9 Citrix GoToMeeting

7 10 Samsung

6 11 UPS

10 12 Microsoft

30 13 Vanguard

Vs. 2015

21 14 Intel

46 15 DoubleTree by Hilton

9 16 FedEx

37 17 Hilton

26 18 Courtyard by Marriott

19 19 FedEx Office

8 20 Adobe

27 21 American Express

OPEN

16 22 The UPS Store

13 23 LG

28 24 JetBlue

40 25 GEICO

Based on the same set brand list for 2016 versus 2015. Products are not included in the overall brand ratings.

ABOUT THE BUSINESS JOURNALS

34

For more than three decades, American City Business Journals has been the nation’s largest

publisher of local business news and information in print and online, deploying more than 600

journalists across 43 major U.S. cities. ACBJ serves audiences valuable news and data

anytime and anywhere they seek it.

Research:

Jessie Shaw

212-500-0611

jessieshaw@bizjournals.com

Local Advertising:

Alex Orfinger, EVP

703-258-0888

aorfinger@bizjournals.com

Mike Olivieri, EVP

704-973-1005

molivieri@bizjournals.com

National Advertising:

Ryan Whittington, SVP

704-973-1839

rwhittington@bizjournals.com