Preparing for the year ahead: Considerations for small- and mid-sized business owners in 2018

A promising sign for the local economy is the bullish growth outlook among many small- and mid-sized businesses. In a recent survey by Bank of America, nearly 62 percent of small-business owners in the greater Chicago area indicated they plan to grow over the next five years, compared to 51 percent nationwide.

This optimism makes sense when you consider that almost two-thirds of local small business owners estimated their 2017 revenue would exceed 2016. More anecdotally, I've found similar optimism among many Chicago-based mid-sized business owners I worked with in 2017.

So what should small- and mid-sized business owners in Chicagoland keep in mind as they look to grow in 2018? Let's take a look:

Invest in talent

As the local job market has tightened, area small- and mid-sized businesses are more focused on hiring and retaining strong talent. Our survey found Chicago small business owners are increasingly using strategies such as merit-based raises, flexible work options and employee development to retain strong employees. In addition, 27 percent of local small business owners plan to hire new employees in the next 12 months (vs. 16 percent nationwide).

Healthcare is a key issue for small- and mid-sized businesses as well as employees. For businesses, these benefits are an important cost consideration; for employees, they are a significant differentiator. Rising health care expenses and the imminent Cadillac Tax in 2020 have put pressure on employers to explore high-deductible health plans.

At the same time, employees are now shouldering more health care costs. Providing tools and resources to help employees understand the true benefits of their health savings and investment options is an important strategy for businesses.

Plan for capital

We've found increasing demand for capital from local small- and mid-sized businesses. Our survey reveals 13 percent of Chicago small business owners plan to apply for a loan in 2018 (vs. 8 percent nationwide). But getting the capital you need requires smart planning. Lenders are more likely to provide a loan to businesses that have been in operation and profitable for at least two years. To get a loan approved, you will usually need:

• A strong, detailed business plan - including a solid budget supported by financial projections

• The purpose of the loan (for example, purchasing inventory or refinancing debt)

• Past financial statements and your debt-to-equity ratio (your firm's liabilities shouldn't exceed 4 times the amount of your equity)

• Business and personal credit histories (the credit score for the business carries a little more weight)

• Your personal equity investment (small business owners should have put in at least 20 percent of the total amount)

• Personal guarantees from all principal owners (think about what assets you can put up as collateral)

• Personal background information on all business principals

Prepare for cyber fraud

If you are a fast-growing business using digital tools, you may be susceptible to cyber fraud. Today, the vast majority of businesses - even smaller ones - rely on digital tools: our survey indicates 81 percent of Chicago small businesses used at least one tool such as digital banking.

When developing a defense, it's important to remember that a combination of human and tech factors are necessary and that fraud can be initiated internally or externally.

All employees must be aware of processes, and communicate clearly that payments will never be requested outside the normal controls.

Businesses also need to implement systems that do not physically permit payments to be made without proper authorization.

Finally, it's important to remember that everyone has a role in minimizing risk and increasing transparency over activities - regardless of whether those individuals are employed by the company, bank or technology vendor.

• Jim Holmes is senior vice president, small business at Bank of America.