The Millennial Small Business Owner: 2011

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1 2015 U.S. Bank Small Annual The Millennial Small Owner September 15, 2015 This information is not intended to be a forecast of future events or guarantee of future results. It is not intended to serve as a recommendation or solicitation for the purchase or sale of any particular product or service. It does not constitute advice and is provided without regard to any particular objective or financial situation. Credit products are subject to normal credit approval. Other conditions may apply. Deposit products offered by U.S. Bank Association. Member FDIC.

2 Introduction The Millennial Small Owner Study captures the attitudes, perceptions and outlook of Millennial small business owners across U.S. Bank s 25 state footprint The survey was conducted via an online sample in the first quarter of 2015 consisting of 200 Millennial small business owners with less than $10 million in annual revenue A baseline sample of 1,000 small business owners is used to represent a national benchmark 2

3 Demographics Millennial Years in 1-2 years 12% 20% 3-4 years 12% 20% 5-9 years 14% 16% 10 or more years 61% 45% Number of Employees Sole proprietors 22% 26% 2-4 employees 23% 20% 5-9 employees 10% 10% employees 13% 11% employees 10% 11% 100 or more employees 22% 23% Annual Revenue Less than $100,000 39% 40% $100,000-$499,000 27% 28% $500,000-$999,000 9% 8% $1.0-$4.9 million 14% 11% $5.0 million or more 11% 12% * Multiple responses allowed. Other includes American Indian and Native Hawaiian or Pacific Islander. Percentages net of refusals to answer and blank responses; datasets not totaling 100% are due to rounding. 3 Millennial Location Suburban 45% 45% Urban 32% 35% Rural 23% 20% Age years 2% 14% years 24% 87% 35 years and older 73% 0% Gender Female 51% 65% Male 49% 35% Race* White 89% 83% Asian 6% 11% Hispanic 4% 9% African American 3% 4% Other 3% 4% Millennial Type of Personal Services 23% 18% Hospitality 11% 17% Other Services 15% 14% Sales 10% 13% Financial Services 10% 10% Large Trades 9% 8% Computer Technology 5% 6% Agricultural/Farming 3% 4% Consulting 8% 4% Marketing 4% 4% Small Trades 3% 3% Military Service No Military Service 89% 97% Military Veterans 11% 3% The portrait of the Millennial owner in our study lends us to speculate that the face of small business is changing, potentially becoming more female and ethnically diverse than their predecessors.

4 Millennial owners are more upbeat about the economy > What is the current state of the U.S. economy? Recession Recovery Expansion Unsure 18% 57% 10% 15% 12% 66% 8% 15% Nearly two-thirds of Millennial owners think the U.S. economy is currently in a recovery 4

5 Millennial owned businesses are financially stronger > How would you describe the financial health of your business? Poor Fair Strong* 20% 76% 15% 84% are more likely to describe the financial health of their business as strong* * Represents answers of Good, Very Good or Excellent. 5

6 Millennial businesses are growing sales faster > How has your business revenue changed compared to this time last year? Lower About the Same Higher 20% 52% 28% 12% 50% 38% More are reporting higher revenue in the last year 6

7 More Millennial owners are expecting to add staff this year > How do you expect your staff to change over the next 12 months? Decrease Remain the Same Increase 6% 69% 25% 4% 62% 35% Over one-third of Millennial owners expect to add staff in the next 12 months 7

8 are expecting even more growth in 2016 > What do you expect your business revenue to be at this time next year? Lower About the Same Higher 9% 52% 39% 5% 33% 63% The majority of are expecting revenue to be higher next year 8

9 Competition is the top business challenge for > What is the single most significant challenge facing their business today? Top Economic Uncertainty 17% 14% Competition From Large es 16% 18% Government Regulations/Red Tape 13% 12% Costs 12% 11% Poor Sales 10% 14% Taxes 10% 13% Cost of Labor 9% 10% 9

10 Cost of living/inflation is the most important national issue for > What national issue are you most concerned about? Top /Medicare 12% 11% Jobs/Unemployment 11% 15% Security 11% 7% Education 11% 15% Cost of Living/Inflation 10% 18% Federal Budget Deficit/Debt 9% 5% Taxes 8% 8% 10

11 are feeling better about the Affordable Care Act > What do you think the long-term impact of the Affordable Care Act will be on your small business? Negative Neutral/Unsure Positive 47% 28% 25% 39% 39% 22% Fewer think the long-term impact of healthcare legislation will be negative 11

12 Mobile and social media are an established part of the Millennial offering Do you use social media to make connections, find talent and market your business? Have you integrated mobile technology into your business? 67% 75% 78% 84% 12

13 Millennial businesses are more likely to target Millennial customers > Are you actively attempting to attract and engage millennial customers? Yes No 48% 60% 13

14 One-third of Millennial owners are having difficulty securing Millennial customers > Are you facing challenges attracting and engaging millennial customers? Yes No 38% 33% 14

15 are more focused on establishing themselves financially > Do you feel moving up the income ladder is more important today than before the recession? Yes No 54% 72% 15

16 Banks are appealing more to the needs of Millennial customers > How has your opinion of your primary bank changed over the past year? Decreased Remained the Same Increased 10% 74% 16% 7% 68% 25% One-quarter of Millennial owners have increased their opinion of their bank in the last year 16

17 Personalization and transparency among top expectations of > What are the top 5 most important things you expect from your business bank? Top 5 Expectations 1. Knows me and my business 2. Deals in a transparent, straight-forward manner 3. Provide quality responses to requests 4. Offers services that help me to efficiently manage my financial transactions 5. Adjusts to meet my individual needs 17