SMB MARKET PREDICTIONS:

DYNAMIC & RESOURCEFUL IN 2016

#1: SMB market growth and optimism will hold steady in 2016, resulting in another solid year for the market.

2

78%

56%

32%35%

52%

65%

77%75% 75%

77% 76%73% 73%

81%79%

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

Business Optimism/Confidence

Positive Outlook About Future Business Prospects

Source: The Business Journals SMB Insights (Base: Businesses with 5-499 employees); 3%-4% difference between years is statistically significant.“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?” (2014-2015); E = predicted estimate/preliminary data from SMB Insights 2016

According to our data, small and mid-sized business owners’ confidence in the success of their own companies surpassed pre-recession levels for the first time last year. In 2016, their outlook continues to hold steady, suggesting it will be another strong year.

#2: The much talked about “skills shortage” will not impact SMBs in 2016.

65% 66%

71%

59%

48%44%

46% 47%

43%

51%

49% 50%E

42%

52%50%

54%

69%64% 65%

68%

61%

56%

44% 44%E

5.5% 5.1% 4.6% 4.6% 5.8%9.3% 9.6% 8.9% 8.1% 6.6% 5.5% 5.0%

Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16

Very Concerned:

Finding & Keeping

Good Employees

Very Concerned:

U.S. Economy

U.S. Unemployment

Rate

Before the recession with its heightened unemployment rates, SMB businesses were highly concerned about finding skilled talent. Seventy-one percent (71%) agreed that they were ‘very concerned’ about finding and keeping good employees. With the recession, the U.S. economy took center stage, unemployment rose, and skilled employees were much easier to find. Given current declining unemployment rates and a more stable economy, one might expect the concern about finding appropriate talentto increase as a concern. Nonetheless, our data indicates that SMB owners have yet to be affected.

Sources: The Business Journals SMB Insights (Base: Businesses with 5-499 employees); 3%-4% difference between years is statistically significant.“What are the issues that you’re most concerned about related to running a business?;” Bureau of Labor Statistics; E = predicted estimate/preliminary data from SMB Insights 2016

Business Concerns

3

#3. Cloud computing will be SMBs top technology upgrade.

Used Past Year for Business

Source: The Business Journals SMB Insights (Base: Businesses with 5-499 Employees); 3%-4% difference between years is statistically significant.“Which of the following products or services have you used in the past year for your business?” “How likely is your company to add a cloud-based solution in the next year?”; 2016E represents preliminary data from SMB Insights 2016

9%

49%46%E

25%

75%

77%E

5%

34%

39%E

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E

Tablets

SmartPhones

Cloud-computing

24%28%

12%

15%

12%

15%

2014 2015

58%

48%

Likelihood of Adding a

Cloud-Based Solution in the

Next Year

As usage of mobile computing devices (smartphones and tablets) has increased, so has the use of cloud-based solutions (i.e., theability to access data, files and computer programs wirelessly from any device). Given that one-third of SMBs are already cloud users, and over half (58%) plan to add/expand their cloud usage, we believe that cloud-based services are the tech expansion event in 2016. We expect usage to climb in 2016 to nearly 40%.

January of:

Extremely

Very

Somewhat

4

#4. SMBs will continue to leverage traditional media while adopting new media channels – it’s additive.

When asked which media vehicles they plan to use more of over the next several years, SMB owners are bullish on a mix of bothtraditional and contemporary media. Email marketing leads with social media not far behind. Interesting, however, is how they plan to increase their usage of traditional channels. Trade shows, print advertising, direct mail and local advertising are on par with more contemporary media vehicles.

5

31%

19%

24%

18%21%

19% 18%16%

13% 13%

9% 9% 9%5% 7% 4% 3%

37%

28% 28%25% 25%

22% 21%18%

13% 13%11% 11% 10%

8%5% 4% 3%

2015 2016E

Source: The Business Journals SMB Insights (Base: Businesses with 5-499 employees); 3%-4% difference between years is statistically significant.2016E represents preliminary data from SMB Insights 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

1.21.6

2.3

3.3

4.9M

0.81.2

1.9

2.6

3.5M

0.91.1

1.51.9

2.4M

1997 2002 2007 2012 2016(projected)

Hispanic-Owned African-American Owned Asian-Owned

Number of Minority-Owned

Businesses (In Millions)

Minority-Owned Share of All U.S.

Businesses

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: 2016 projected using 2012 vs. 2007 growth rates; Minority-Owned Businesses are Hispanic-owned, African American-Owned, and Asian-Owned.The Business Journals SMB Insights 2015 (Base: Businesses with 5-499 Employees)

#5. Minority-owned businesses – a hot spot of the SMB market, will speed closer toward a majority stake in the business market.

Our latest data indicates that minority-owned businesses generate significantly higher sales growth than non-minority owned businesses. Further, the latest CENSUS data reports that the number of minority-owned businesses increased by 38.8% between 2007 and 2012, while the number of total U.S. businesses increased only by 2%. Minority businesses are projected to represent42% of all businesses by 2016, well on their way to holding a majority position in the business marketplace by 2018.

6

Minority-Owned SMBs Non Minority-Owned SMBs

Sales growth 11%+ 44% 34%

Minority-Owned, 14%

Minority-Owned, 42%

1997 2016(projected)

#6. 2016 will redefine work-life balance into ‘work-life blend.’

7

46%

61%59%

62%

73% 74%

50%

37%35%E

25%

75% 77%E

20%

30%

40%

50%

60%

70%

80%

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

80%

2007 2009 2011 2013 2015 2016E

Fewer than half (46%) of SMB owners felt that Wi-Fi was critical to daily business back in 2007. Today that number has jumped to73%. Along with the importance of Wi-Fi has come increased smartphone usage – which is now practically universal among SMBs. These mobile technologies have provided a surprising benefit: SMB owners today feel less concerned about the demands being made on their time. Wi-Fi and smartphones reduce not only SMBs time pressure, but the separation between work and home.

We are labeling this phenomenon ‘work-life blend.’ For better or for worse, there is increasingly less separation between work/home, and between work/no-work.

January of:

Source: The Business Journals SMB Insights (Base: Businesses with 5-499 employees); 3%-4% difference between years is statistically significant.“How important are wireless services and applications in your day-to-day business operations?” “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?”; 2016E represents preliminary data from SMB Insights 2016

% Who Find Wi-Fi Critical to Business

Very Concerned about

Demands on Your Time

Use SmartPhone

for Business

8

#7. SMB owners will participate in the skyrocketing use of mobile payments, both as merchants and end users.

23%

33%35%

2014 2015 2016E

Used Mobile Payment Devices

Past Year for Business

“In lieu of of paper, I often use my

SmartPhone for boarding passes, tickets,

other payments and receipts”% Agree Completely/Mostly

34%

51%

2013 2016E

Sources: 1eMarketer, Mobile Payments will Triple in the U.S. in 2016, October 26, 2015; The Business Journals SMB Insights (Base: Businesses with 5-499 employees); 3%-4% difference between years is statistically significant. E – Estimated preliminary data from SMB Insights 2016; “Which of the following products or services have you used in the past year for your business?” “How much do you agree or disagree with each of the following statements about technology?”

With mobile payment transactions predicted to reach $27 billion in 20161, a three-fold increase over the $8.7B valuation forecast in 2015, it is not surprising to see a rise in the number of SMB owners using mobile payment devices for their businesses. Theseincreased usage rates will continue to rise in 2016. Importantly, SMB owners are not only using mobile payment devices for theirbusinesses, but for their personal use as well.

#8. Fueled by women-owned businesses, social media will continue rapid growth.

Women-owned businesses are a major movement in the SMB marketplace, exhibiting double-digit growth (+27%) according to the latest CENSUS data. This pivotal segment, which is projected to account for 47% of U.S. businesses in 2016, is becoming increasingly influential. One area where women lead is in the successful implementation of social media. Not only did they adopt it more quickly than their male peers, but they are using it to generate revenue. Given women-owned business growth and men’s as of yet untapped, upside potential, we’re predicting ongoing social network growth for business in 2016.

9

SOCIAL MEDIA USAGE

28%

54%

79%82% 83%

21%

35% 36%

17%

26%28%

0

0.1

0.2

0.3

0.4

0.5

0.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2008 2010 2012 2015 2016E

Currently Use

Generate Revenue from Social Media

Used Social Media Advertising Past Year

27%

50%

75% 76% 77%

18%

23%26%

14%17% 18%

0

0.1

0.2

0.3

0.4

0.5

0.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2008 2010 2012 2015 2016E

Currently Use

Generate Revenue from Social Media

Used Social Media Advertising Past Year

WOMEN-OWNED

BUSINESSES MEN-OWNED

BUSINESSES

Sources: 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. 2016 projected using 2012 vs. 2007 growth rates; The Business Journals SMB Insights (Base: Businesses with 5-499 Employees); 3%-4% difference between years is statistically significant. E – Estimated preliminary data from SMB Insights 2016; “Which of the following Social Networks do you or your company currently use?” “Has your company generated revenue directly from Social Media?” “Which of the following marketing and advertising vehicles has your company used in the past 12 months?”

#9. The online shopping surge is not solely a consumer trait. SMB owners’ online business shopping will climb in 2016.

Our data indicates that this trend is not relegated to consumer purchases alone. There has also been a substantial increase in business owners’ preference for shopping online versus in-store for their businesses. Preliminary 2016 data indicates a +27% increase versus 2014.

10

Source: The Business Journals SMB Insights (Base: Businesses with 5-499 employees); 3%-4% difference between years is statistically significant.E – Estimated preliminary data from SMB Insights 2016; “How much do you agree or disagree with each of the following statements about technology?”

44%

51%56%

2014 2015 2016E

“I prefer shopping online versus in-store

shopping for my business”% Agree Completely/Mostly

Square

GoogleDropbox.com

Salesforce.com

McAfee

Microsoft

Panasonic Toughbook

Samsung

Apple

Performance(Leadership & Familiarity)

Th

e J

uic

e(D

iffe

ren

tiatio

n,

Re

leva

nc

e &

Cu

sto

me

r S

erv

ice

)

Source: The Business Journals SMB Insights (Base: Businesses with 5-499 Employees); Percentiles: Based on the top 2 box attribute agreement, the brand’s relative ranking among all 246 brand scores on a 0–100 scale 11

#10. Technology brands will continue to be the darlings of SMBs, including Dropbox, Square and Samsung.

The Business Journals’ SMB Insights study asks SMB owners to rate a host of brands that they use for business. Tracking and projecting off of this rating performance over the past three years, we believe there will be a number of winning technology brands in 2016. These include Square, Dropbox.com and Samsung, along with long-time winners Apple, Microsoft and Google. The surprises might include the continued strong performance of Salesforce.com, a historically enterprise-level solution, Panasonic Toughbook and McAfee.

2013 2015

Research:Jessie Shaw212-500-0611jessieshaw@bizjournals.com

12

National Advertising:Ryan Whittington, SVP704-973-1839rwhittington@bizjournals.com

About The Business Journals: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.

Local Advertising:Alex Orfinger, EVP703-258-0888aorfinger@bizjournals.com

Mike Olivieri, EVP704-973-1005molivieri@bizjournals.com

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