NASE News


A Look at Small Businesses

Friday, May 26, 2017
Usually, when people see the word “business,” they think in terms of the behemoths of industry such as Google, Amazon, Exxon, Tesla, Facebook, and so forth. However, small businesses have a huge impact on the U.S. economy. Indeed, small businesses—meaning firm size is fewer than 500 employees—account for over 99% of employer firms operating in the U.S. Furthermore, 48% of U.S. employees work for small businesses. Yet, those statistics are just the tip of the iceberg:

- Small businesses are the top job creation organizations, having produced 65% of the net new jobs since 1995.
- Bank loans for small businesses totaled $600 billion in 2015.
- Also in 2015, there was a 38% increase in small business minority ownership.
- California, Texas, Florida, and New York have the highest number of small businesses.
- Small businesses are on the rise in the post-recession economy.

With this in mind, we at The National Association for the Self-Employed (NASE) believe that small businesses and the small business owner deserve wide recognition for their consistent contribution to the well-being of the U.S. economy. Additionally, we understand the pain points and challenges of starting a business and growing a business. For this reason, we’ve focused on how technology can help boost small business growth and overall performance.

Small Business Challenges
Does size matter when it comes to growing, starting, and building a business? The short answer is, it can. This answer further depends on both state and Federal regulations required for the various business classification types. Sole proprietorships, partnerships, corporations, LLCs and franchises all have different taxation structures, varying tax liabilities, and industry regulatory adherence. Add to this the fact that small businesses function on tighter budgets, and building a small business, family business or a micro business can seem to be a daunting task.

The statistics regarding small business failure bear the truth of specific challenges you face as a small business owner: 96% of small businesses fail within 10 years. The cause of this is sourced in several factors:

- Poor long and short term planning: All businesses require analysis of measurable goals in both the near future (months from now) and the distance future (a five-year plan). This includes financial considerations such as access to capital, strategic marketing, proper positioning of your brand such as physical location—if you’re a brick and mortar—and website design.

- Lack of proper leadership: Great leadership includes learning from mistakes, making the right decisions at the right time, and knowing when to ask for help (as well as from whom).

- Need for savvy management skills: Management and leadership are interconnected. In the small business ecosystem, leadership also has many managerial duties. As such, leaders and managers must learn to listen, have clear objectives and communicate those objectives on a regular basis, and avoid micro-managing (in certain cases this style might be required—but it’s an often outdated and overused management technique).

- Scaling the business too quickly: Knowing when and how to scale your business can be tricky. Scale too soon, and you might not have the resources to meet the demand—or the demand might not be present just yet. On the other hand, if your consumer base is signaling a greater demand for your product or service, and there is a time lag in your scaling to meet that need, then another competitor is likely to come along and acquire your market share.

However, given the increase in technological innovation, and combined with the fact that many technology companies are also small or micro-business start-ups, many of the digital tools on the market today are specifically designed to help small businesses increase their productivity while managing the big data influx that comes with scaling.

A Brief on Big Data
Big data is the new buzzword of the early 21st century. But, what is it? And, is it still applicable to the small business entrepreneur?

Just about every device we own is connected to the internet. Phones. New cars. Video game consoles. Televisions. And this is increasing at a fast pace. For example, Google and Amazon have produced voiced controlled devices known as “smart speakers” that can help you make to do lists, give you an instant weather and traffic report, and even adjust your home’s thermostat setting. This is achieved through an internet connection. The internet is the largest source of data collection that humankind has ever created. Everything you do via the internet creates data. In fact, every day, we create 2.5 quintillion bytes of data—and that number is only getting larger.

Building a business in the digital era means your customers are constantly sending information either to you or about you. This is either direct via visits to your website and emails (or phone calls) to customer service, or indirectly—think: Twitter, Facebook, and Instagram mentions or hashtags. All of this is data that can be used as possible metrics for strategic planning for decision making and attaining a competitive advantage in the marketplace. You’ll need to stay organized, have a way to gather the data, all the while managing your employees or other team members.

Productivity, Data, and Your Small Business
We’ve already established that small business entrepreneurs have a huge impact on the U.S. economy. And we’ve discussed several of the pain points regarding starting and building a business. How can productivity tools, specifically, solve the pain points associated with starting and building a small business?

1. Website analytics
Google analytics is a well-known website analysis tool that will give you data regarding the who, what, where, and when of your customers. Whether you operate a small business, micro business, or a family business, you will benefit from the insight gathered by understanding how to use this technology. For example, Google has a Lifetime Value Reporting Tool that allows you to determine which customers have accessed your site either through paid advertisements, or email marketing campaigns. Consequently, this will help you allocate the right resources to target the right customers at the right time while answering the question “should we scale, and if so, in what area can we be successful in doing so?”

2. Productivity and communication tools
Plan your work and work your plan may or may not be a familiar adage. However, it is important for managing your workload. Small business owners must have more flexibility when it comes to moving between the spheres of leadership and daily management. Therefore, online productivity and communication tools such as Slack, Basecamp, Dropbox, Google Drive, and Smartsheet (to name just a few) are prime ways to keep track of team projects with to do lists, instant communication channels, accelerated feedback on important documents, and file sharing. The added upside to using online tools is that all information can be collected into one place, thus reducing the time required to dig through endless email threads for important files or messages from team members.

3. Freelancers can be more cost effective than employees
The digital landscape is now home to millions of freelancers world-wide. Micro businesses, in particular, have a small, targeted workforce. However, even the smallest of businesses require websites, a marketing plan, a business plan, content writers, and graphic designers to keep operations running smoothly while engaging new and loyal customers. Hiring new employees isn’t always financially feasible. Such is the reason that freelancer platforms such as Upwork, Toptal, and LinkedIn Profinder are growing in popularity. On each of those sites, you can search for freelancers who will work for you as an independent contractor on a temporary basis. When the job is completed, the contract is closed. No lengthy human resources hiring (or firing) process—however, if the freelancer’s work is to your liking, you can extend the contracts and offer them work on an ongoing basis. Keep in mind that clear communication is still a major factor in project success, regardless of whether you hire a freelancer or an employee.

Certainly, there are hundreds of additional tools available for your business. What we’ve covered here are just a few of the more well-known platforms that will help you gather data, collaborate on the data with key team members, and make well-informed decisions about the long and short term insights which impact sustained business growth. Your business is an important part of the success of the U.S. economy, and we at NASE, want to help you succeed. 
 

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