1. 1 Alberta Business Beat Volume 10, June 2015

2. 2 Background and Methodology

3. 3 Business & Agriculture Background ATB Financial commissioned NRG Research Group to conduct a survey of 300 randomly selected small- to medium-sized businesses in Alberta each quarter, beginning in Q1 2013. The purpose of the study is to gain an understanding of the challenges faced by small- to medium-sized businesses in Alberta, and to track confidence in the business climate in Alberta.

4. 4 Business & Agriculture Research Objectives Measure business owners and managers’ perceptions of what the business climate will be like six months from now; Understand how SMEs are managing various aspects of their operations through the recent economic downturn in Alberta. What changes have they made, or do they anticipate making to their staffing and human resources, operations, or cash flow? What changes do they think are the most important in managing through the downturn, and what advice would they give to another business to help them avoid the effects of a similar downturn?; Are Albertan SMEs involved with the Calgary Stampede, and if so, are they changing their plans this year due to the economic downturn; and, Profile the firmographics as well as respondent demographics for small- to medium-sized businesses in Alberta.

5. 5 Business & Agriculture Methodology Alberta SMEs Qualifying Businesses <500 employees, <$20 million annual revenues, must be financial decision makers or influencers Excluded agriculture, government, financial institutions, media, market research, PR, advertising and communications sectors Excluded agriculture, government, financial institutions, media, market research, PR, advertising and communications sectors Field dates: May 28 – June 12, 2015 Telephone Telephone Approximately 3,000 businesses contacts made and 300 completed the survey Approximately 3,000 businesses contacts made and 300 completed the survey Margin of error is +/- 5.8% Margin of error is +/- 5.8% Alberta SMEs

6. 6 Business & Agriculture The ATB Business Index declined slightly from last quarter, possibly due to labour shortage concerns in the wake of recent changes to the Temporary Foreign Workers (TFW) program Alberta SMEs seek advice from a variety of sources. At the top of their list: accountants/bookkeepers and other business owners/business mentors. Although 33% of SMEs believe that the TFW program takes jobs away from Albertans, 72% agree the program is necessary to combat labour shortages in Alberta 1 2 3 Key Insights TO BE UPDATED BY ATB

7. 7 The ATB Business Beat Index

8. 8 Business & Agriculture Mixed emotions about the future Alberta Economy 54% will be better off or the same Your Company 74% will be better off or the same “How do you think… will be six months from now?” (±) Change from last quarter -9 +19 Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

9. 9 Business & Agriculture The ATB Business Beat Index Source: ATB Financial, Survey on Alberta SMEs 2013-15. Index (0-100) ATB Business Beat Index Less optimistic about future performance More optimistic about future performance Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014; Q1 2015 =March 2015; Q2 2015 = June 2015

10. 10 Business & Agriculture The ATB Business Beat Index - Energy More optimistic about future performance Less optimistic about future performance Index (0-100) ATB Business Beat Index Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014; Q1 2015 =March 2015; Q2 2015 = June 2015 Source: ATB Financial, Survey on Alberta SMEs 2013-15.

11. 11 Business & Agriculture The ATB Business Beat Index – Retail More optimistic about future performance Less optimistic about future performance Index (0-100) ATB Business Beat Index Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014; Q1 2015 =March 2015; Q2 2015 = June 2015 Source: ATB Financial, Survey on Alberta SMEs 2013-15.

12. 12 Business & Agriculture The ATB Business Beat Index - Construction More optimistic about future performance Less optimistic about future performance Index (0-100) ATB Business Beat Index Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014; Q1 2015 =March 2015; Q2 2015 = June 2015 Source: ATB Financial, Survey on Alberta SMEs 2013-15.

13. 13 Managing through an economic downturn

14. 14 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Don’t Anticipate Staffing/HR Changes “Can you let me know if your business has already made the change, if you anticipate having to make the change, or if you do not expect to have to make this change?”

15. 15 Business & Agriculture Staffing/HR Changes Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

16. 16 Business & Agriculture Staffing/HR Changes Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

17. 17 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Invest in training or development of existing staff

18. 18 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Introduce a freeze to wages or bonuses

19. 19 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Reduce employees’ regular or overtime work hours

20. 20 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Conduct layoffs

21. 21 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Increase the number of employees

22. 22 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Encourage employees to take unpaid leave or vacation

23. 23 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Compensate employees through commission instead of salary

24. 24 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Replace permanent employees with contractors

25. 25 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Staffing/HR: Introduce wage rollbacks

26. 26 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Don’t Anticipate Operations Changes “Can you let me know if your business has already made the change, if you anticipate having to make the change, or if you do not expect to have to make this change?”

27. 27 Business & Agriculture Operations Changes Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

28. 28 Business & Agriculture Operations Changes Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

29. 29 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Change business processes to increase efficiency or productivity

30. 30 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Postpone plans to purchase new equipment

31. 31 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Reduce pricing in response to supplier requests or demands

32. 32 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Postpone plans to expand

33. 33 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Reduce business-related travel

34. 34 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Reduce inventory

35. 35 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Invest in equipment to automate a process and reduce salary cost

36. 36 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Operations: Reduce business scope either geographically or in product or service offerings

37. 37 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Don’t Anticipate Cash Flow Mgmt Changes “Can you let me know if your business has already made the change, if you anticipate having to make the change, or if you do not expect to have to make this change?”

38. 38 Business & Agriculture Cash Flow Changes Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

39. 39 Business & Agriculture Cash Flow Changes Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300.

40. 40 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Cut down on discretionary spending

41. 41 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Take on new contracts

42. 42 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Invest personal resources

43. 43 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Change the terms you offer your clients for paying invoices

44. 44 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Consolidate debt

45. 45 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Negotiate a new loan

46. 46 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Change the way you pay your suppliers

47. 47 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Extend the term on existing loans

48. 48 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Cash Flow: Postpone principle payments on existing loans

49. 49 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n=300. “I’d like you to think about the most important change that your business has had to make to manage through the economic downturn. What was it?” The most important change made by SMEs to manage through economic downturn

50. 50 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n=300. “If you had to give one piece of advice to another business owner to help them prepare their business for an economic downturn, what would it be?” Advice to prepare for an economic downturn

51. 51 The Calgary Stampede

52. 52 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. “Do you or your company typically participate in the Calgary Stampede or events surrounding the Stampede?” Participation in Stampede

53. 53 Business & Agriculture Source: ATB Financial, Survey on Alberta SMEs, June 2015, n= 204, those who do not participate. “What would you say is the main reason that you or your company do not typically participate in events surrounding the Calgary Stampede?” Main reason for not participating in Stampede

54. 54 Business & Agriculture “Does your company typically attend business events hosted by other businesses at the Calgary Stampede?” Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 26, those who attend business events Attend business events hosted by other businesses “As a result of the recent economic downturn, has your company had to change its plans to attend business events hosted by other businesses at the Calgary Stampede?” n = 48, those who participate

55. 55 Business & Agriculture “Does your company typically host business events for clients or other businesses at the Calgary Stampede?” Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 15, those who host business events. Host business events for clients or other businesses “As a result of the recent economic downturn, has your company had to change its plans to host business events for clients or other businesses at the Calgary Stampede?” n = 48, those who participate

56. 56 Business & Agriculture “Does your company typically host events for your employees at the Calgary Stampede?” Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 16, those who host events for employees. Host events for employees “As a result of the recent economic downturn, has your company had to change its plans to host events for your employees at the Calgary Stampede?” n = 48, those who participate

57. 57 APPENDIX: Firmographics & Respondent Demographics

58. 58 Business & Agriculture About half of Alberta SMEs earn revenues in excess of $1,000,000 Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Number of Employees Annual Revenues 2014

59. 59 Business & Agriculture Business Firmographics Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. $1MM+ 10% Borrowing Needs # of Years in Operation MEAN 21 years

60. 60 Business & Agriculture Business Firmographics Industry Franchise Industry (n = 25) Retail 10 Automotive 4 Food Services 3 Energy/ Oil & Gas Services 2 Financial Services/ Insurance 2 Health 2 Non-profit 1 Other 2 8% of interviewed SMEs are franchises Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300, responses mentioned by 4% or more are shown..

61. 61 Business & Agriculture Business Firmographics Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Does your business have a store front? Business Firmographics Business Life Stage Phase

62. 62 Business & Agriculture Respondent Demographics Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300, responses mentioned by 3% or more are shown. 36% 55+ Title/ Role Age

63. 63 Business & Agriculture Respondent Demographics Source: ATB Financial, Survey on Alberta SMEs, June 2015, n = 300. Role in Financial Decisions Gender

64. 64 Judy Duncan Managing Director Marketing, B&Ag (403) 974-6884 JDuncan@atb.com Cody Tousignant Senior Research Manager Customer Insights (403) 731-3507 CTousignant@atb.com

65. 65 Business & Agriculture “PLANS FOR CYCLES. HAVE A CUSHION AND KEEP YOUR DEBT LOW. KEEP YOUR DEBT RATIO LOW.“ General Manager or Office Manager, Food Processing/Distribution, 16 years in business, 1-4 employees, $500,000 to less than $1 million in revenues. “ALWAYS MANAGE YOUR BUSINESS AS IF IT WAS AN ECONOMIC DOWNTURN.“ General Manager or Office Manager, Energy or Oil and Gas, 10 years in business, 1-4 employees, $250,000 to less than $500,000 in revenues. “REDUCE YOUR DEBT, BECAUSE THESE GUYS GO AND BUY ALL THE TOYS AND THEN SOMETHING LIKE THIS HAPPENS. IF YOU CANT AFFORD IT, DON'T BUY IT.“ Owner/Operator, Construction, 50 years in business, 1-4 employees. “HAVE YOUR FINANCIALS IN ORDER AND JUST TO BE A GOOD PLANNER. HAVE A PLAN FOR EVERYTHING. PREPARE FOR THE UNEXPECTED BECAUSE YOU NEVER KNOW WHEN IT'S COMING.” Owner/Operator, Retail, 53 years in business, 1-4 employees, $250,000 to less than $500,000 in revenues. ““If you had to give one piece of advice to another business owner to help them prepare their business for an economic downturn, what would it be?” ”

66. 66 Business & Agriculture “STAFFING, IT'S JUST THAT FOR US IT'S HARD TO GET STAFF WHERE WE'RE LOCATED. THE BIGGEST CHANGE IS JUST INVESTING MORE IN HR, MORE TIME AND EFFORT IN FINDING AND MAINTAINING GOOD STAFF.“ General Manager or Office Manager, Food Processing/Distribution, 36 years in business, 20-49 employees, $1 million to less than $3 million in revenues. “INVESTMENT IN TRAINING AND NEW FACILITIES AND EQUIPMENT. THE PERCEIVED SLOWDOWN IN BUSINESS AND THE FUNDAMENTAL CHANGE THAT IS TAKING PLACE IN THE WAY BUSINESS IS DONE. THE PEOPLE WHO SURVIVE ARE THE ONES WHO RESPECT IT AND PLAN ACCORDINGLY.“ CEO or President, Education, 88 years in business, 5-19 employees, $1 million to less than $3 million in revenues. “LAY OFFS. IT'S BEEN THE MOST DRAMATIC CHANGE. WE HAVE NEVER LAID OFF ANYONE PREVIOUSLY IN THE FIFTEEN YEARS I HAVE BEEN HERE.” General Manager or Office Manager, Energy or Oil and Gas, 18 years in business, 5-19 employees. Changes to Staffing/HR

67. 67 Business & Agriculture “BEING MORE EFFICIENT IN OPERATIONS, WASTED TRAVEL, AND STUFF LIKE THAT. IF YOU ARE LESS EFFICIENT WITH THE MONEY YOU ARE SPENDING THEN YOUR UPFRONT COSTS ARE MORE.“ Owner/Operator, Forestry, 14 years in business, 1-4 employees, Less than $250,000 in revenues. “WITH US THIS YEAR LESS IS MORE, WE'RE NOT DOING AS MUCH SMALL WORK WE'RE DOING BIGGER WORK. IF WE FOCUS ON WHAT WE MAKE MORE, WE FOCUS ON WHAT WORK MAKES THE MOST MONEY.“ Owner/Operator, Construction, 12 years in business, 1-4 employees, $250,000 to less than $500,000 in revenues. “PRODUCTIVITY IMPROVEMENT, OUR BASELINE COSTS ARE SET SO THE ONLY WAY WE CAN REDUCE OUR OVERALL COST IS TO DO THINGS FASTER AND MORE EFFICIENT.” CEO or President, Construction, 43 years in business, 50-99 employees, $15 million to less than $20 million in revenues. Changes to Operations

68. 68 Business & Agriculture “RE-ADJUSTING LOAN RATES DOWN. WE HAVE BETTER INTEREST RATES AVAILABLE TO US. WE HAVE BEEN RENEGOTIATING THE LOANS. IT REDUCES OUR DEBT SERVICE. AND ALLOWS FOR MORE CASH FLOW TO GO TO THE BOTTOM LINE.“ Owner/Operator, Real Estate, 41 years in business, 1-4 employees, $1 million to less than $3 million in revenues. “I HAD TO NOT PAY MYSELF A WAGE FOR A WHILE BECAUSE IT WAS THE ONLY THING I COULD DO TO MAINTAIN EVERYTHING ELSE.” Owner/Operator, Accommodation/Food Services/Tourism/Hospitality/Restaurant, 2 years in business, 1-4 employees. “HAS BEEN THE CASH FLOW. MOST OF OUR CUSTOMERS ARE EXTENDING THEIR TERMS, THEY ARE CHANGING THEM FROM 30-45 DAYS, TO 60-90 DAY TERMS. DECREASE IN PROFITABILITY. WE HAVE DECREASED OUR MARGINS.” CEO or President, Energy or Oil and Gas, 17 years in business, 1-4 employees, $3 million to less than $5 million in revenues. Changes to Cash Flow Management “JUST USING PERSONAL FINANCES TO KEEP THE COMPANY GOING.” Owner/Operator, Construction, 8 years in business, 1-4 employees, $250,000 to less than $500,000 in revenues.

69. 69 Business & Agriculture “KEEP ON TOP OF RECEIVABLES AND DO NOT CARRY A LOT OF OVERHEAD. JUST MAKE SURE THAT FINANCES ARE IN GOOD STANDING AND BE PREPARED TO MAKE TOUGH DECISIONS.“ Bookkeeper, Automotive, Less than 1 year in business, 1-4 employees, Less than $250,000 in revenues. “TRY TO OPERATE WITH AS A LITTLE DEBT AS POSSIBLE. PAY PREMIUM DOLLAR FOR PREMIUM STAFF.“ General Manager or Office Manager, Construction, 10 years in business, 20-49 employees, $1 million to less than $3 million in revenues. DIVERSIFY BECAUSE APPARENTLY HERE IN ALBERTA WE HAVE TOO MUCH DEPENDENCE ON THE OIL INDUSTRY.“ Accountant, Government Services, 60 years in business, 200-499 employees, $20 million or more in revenues. “AS A BUSINESS OWNER STAY WELL CONNECTED TO YOUR CLIENTELE. THEY ARE YOUR CORE AND WILL BE THE ONES TO CARRY YOU THROUGH THE BAD TIMES.” Senior Manager or Manager, Non-profit, 79 years in business, 1-4 employees, $250,000 to less than $500,000 in revenues. ““If you had to give one piece of advice to another business owner to help them prepare their business for an economic downturn, what would it be?” ”