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Why More Entrepreneurs than ever before Will Open Small Businesses in 2014

Common misconception says that small businesses–which account for the majority of businesses in the U.S.–make bad customers. Their small budgets don’t warrant the energy required for sales, keeping track of them takes too much work, and their inability to compete with big competitors often forces them to close. However, in the face of obliteration by an economic downturn and inaccessible capital, small businesses in America have thrived into the 21st century. What’s changed, and how can we foster our ever growing small business economy?

In 2005, 37 Signals started building tools for what they called the Fortune Five Million–a growing group of small businesses that comprise the majority of the American economy. 37 Signals predicted that the most innovative software designed in the following ten years would come from small teams, be self-funded companies, and would be created for the side-business market.

In 2005, SaaS was sweeping its predecessor, software, off the podium. The economy was performing well, and the series of events that unfolded in the following decade would expand 37 Signals’ prediction into a nationwide, industry-transcendent trend in American business.

business sizeTweet This Graphic

Throughout the past few decades, large technology enterprises have ignored the tadpoles in their marketing nets because they had bigger fish to find. Today, we can access more information about small businesses than we could just five years ago. The dawn of the worldwide web and social media networks has given more small businesses a venue to promote their information to the world, and businesses like Radius have built technology that can analyze it to provide valuable insights.

Growing a big business by enabling small business isn’t as hard as it used to be, and it’s only getting easier. A number of factors contributes to today’s surge in small business growth.

Amongst the outlook for businesses in 2014, four major trends stand out:

Increase in Technology Resources Available to Small Businesses

According to Small Business Labs, a growing body of research shows a performance gap between the small businesses that successfully use technology and those that don’t. Luckily for the small businesses that don’t, a number of technology products that were previously too complex and too expensive for small businesses have been developed to offer the savvy small businesses that adopt them significant competitive advantages.

For example, Act-On Software offers marketing automation services specifically to small businesses. Act-On narrowed the gap between obscure startup in a massive and growing space to industry leader in less than three years–an impressive feat not because of the soft economic conditions in which it occurred, but also for a company whose revenue comes entirely from small businesses.

“We’re seeing a huge and sustained demand for our cloud-based marketing automation solution from small and mid-sized businesses…across all major industries,” said Raghu Raghavan, founder and CEO of Act-On, when the company announced a $16M series D funding round in the fall of 2012.

In the customer-service segment, market leader Zendesk has built a high volume portfolio of small business customers with pricing plans designed to attract customers with tight budgets. Rather than offering solutions solely for small businesses, Zendesk is one of an increasing number of business-to-business technology providers that builds products for big and small business.

“The ability to gather data continues to be revolutionized–especially for small businesses who might even just a few years ago not have been able to afford the tools and technology to gather and analyze data. This will give small businesses the ability to move away from ‘gut feelings’ about what’s right and move to measurements, KPIs and quantifiable data so everyone is working with one version of the truth. Either through capturing and reviewing their own data or purchasing data resources from cloud-based providers like eVestment, at no other time in history has so much information been available so readily, so quickly and so affordably.” – Jim Minnick, CEO, eVestment

According to BIA Kelsey SMB data report, roughly 45% of SMBs plans to add cloud-based services to their marketing efforts by August, 2014. Tweet this.

The Growth of the Local Movement

Increasing desire for made in my neighborhood-county-region-country products and services is sweeping nearly every industry across the U.S.

Rex Hammock, Founder of smallbusiness.com and author of 10 Bold Small Business Predictions for 2014, explains how the local advantage works:

It’s easy to shop for a bike at a wonderful store like REI, which I think runs its stores with impressive attention to the local needs of its customers. However, the people who own the smaller bike shops in town are the ones who cover the bases, ranging from hardcore road bikers to the urban-commuters, like me. And while it’s hard to “shop local” for a bicycle that is assembled from parts made primarily in Japan or Europe, it’s easy to have one assembled locally and cared for locally. Unlike food where the emphasis is on actually growing the food locally, the “shop local” movement can be more about curating products for a local customer–understanding the needs, etc.

Increase in device connectivity and movement of local information to the web makes it easier for small businesses to find new customers and keep loyal ones. Word of mouth marketing, a tactic that can take years to properly implement, happens online in instants. Real-time data allow local retailers to maximize advertising budgets with precision targeting. The crowdsourcing trend has expanded beyond Kickstarter to bring capital to small business owners quickly and easily. Payment technology allows small businesses to accept and process credit card and online payments with ease. Consumers have greater access to small businesses than ever before.

Mom and pop shops that adopt new technology are able to ward off competition from retail giants like Walmart and Target much more effectively than they could five years ago. The trend of going local is growing, and entrepreneurs are taking advantage of it.

“The growth of a community is similar to the growth of a tree. When you nurture it, it grows, and branches grow off other branches and slowly the tree becomes larger. Eventually, the tree grows large enough to produce seeds that grow new trees. The American business economy is the forest. If every tree can grow on it’s own, the forest grows abundantly.” – Monte Tareski

Millennials Escape Corporate America

With the sting of the 2008 recession a fresh reminder in their post-grad unemployment rates–which hovered over 16% in 2013, nearly twice the national unemployment rate,  more of the workforce’s youngest members reject the careers of their forebears to launch their own businesses. Millennials have been dubbed the entrepreneur generation, and according to a 2013 oDesk survey, 72% of millennial freelancers with steady jobs would prefer to be self-employed. A Young Invincibles poll found that 54% of young Americans want to start their own businesses within 5 years, or already have.

The newest members of the U.S. workforce aren’t flocking to big corporations; they’re adding small businesses to the corporate landscape in droves, and they will need very different resources than large enterprises do.

The Amazon Effect

In 2014, “Amazon” has become code for “large, innovative online retail,” and its effect has swept every commerce industry.

Since its inception, Amazon has threatened (and in many cases completely disseminated) market dominance for large brick and mortar retail chains. However, as Amazon eliminates large retailers from the market, many local retailers are seeing a surge in business.

The book industry–the first market Amazon disrupted–saw the closure of Borders and the steady decrease in book sales at Barnes & Noble as the online giants pushed them out, but has seen a recent resurgence in local retail thanks in part to freedom from the suffocating major brick and mortar retailers.

Small businesses offer consumers an in-store experience that online retailers can’t match, and while the full story of the Amazon effect has only just begun to unfold, its role in the small business landscape in the next twelve months will oversee a renaissance in local retail.

Selling to small businesses used to be difficult and often futile. Most businesses wanted a piece of the Fortune 500 pie because it was a lot richer than the dispersed and volatile small business market. However, as more entrepreneurs open businesses, more companies build technology for them, and more consumers express interest in aligning with them, the Fortune Five Million will continue to grow into a lucrative and attractive marketplace.

 

  • Guest

    According to me new trend is Greater corporate use of cloud computing services it will drag down revenue growth for information technology hardware and software suppliers.

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