People’s outlook towards starting a small business seems to be on a high. Now even Millennials and Generation Zers are trying to get into the action. There are many reasons for this and there are many implications as well. This is why, in this article, we will discuss small business trends and outlooks in America. We will also include highlights, examples, and some actionable insights as we go along.
Technology has allowed people to conjure up myriad small business ideas. These span from eCommerce to providing business services like SaaS and consultancy. However, it’s not just the “what” when it comes to small business opportunities. It is also about “who” and “why.”
35% of current and aspiring small business owners are within the age range of 50-59. Also, 73% are males and 25% are females. As for what drives them, 26% state that the motivation they have to go into business is that they feel ready to be their own boss while 23% wanted to pursue their passion. More: 73% express that they are very happy with their current state as business owners, and 78% report that their businesses are profitable.
Source: Guidant Financial
Additionally, 52% of aspiring and current small business owners in the United States are very confident about the political climate today. Even Millennials are joining the fray, proving that higher education isn’t really a requirement to be a small business owner. The outlook today is very bright.
Nevertheless, there are trends that may affect the way you run your small business. Here are ten of them that are likely to bring the biggest effect.
As mentioned, the usual outlook to put up small businesses today is bright. However, it’s probably in your best interest to temper down over-enthusiasm with some noteworthy figures: only about a third of establishments survive 10 years or longer. Also, only about half of establishments survive five years or longer.
If you’ve gathered enough for a blissful retirement beforehand, they shouldn’t bother you. Mind also that it was at a low at 45.4% for establishments that started in 2006. However, for those that started in 2011, this number reached 51%.
Moreover, there were about 414,000 firms in 2015 that are less than 1 year old (startups). But the year also saw the closure of 396,000 firms.
In other words, the outlook may be bright but that doesn’t really reflect the way things are. There are barriers and challenges to starting small businesses that aspiring owners and current owners need to consider. Thus, this should balance our bright outlook with actual industry facts.
For example, Millennials may be inclined to own their own small businesses. However, the rate of self-employment among individuals aged 15 to 34 have been slowly declining since 1990. Does this show that feasibility is different than optimism? It can and it shows that we can still curb undue enthusiasm.
There are additional problems facing small businesses. The top problem for small businesses today is the lack of capital or cash flow. In fact, a significant 33% of small businesses reported this problem. Furthermore, 15% report that they have problems regarding marketing and advertising while 13% report problems with time management, recruiting & employee retention, and doing administrative work. Even so, only 10% of small businesses outsource bookkeeping, 17% outsource accounting to a CPA, and only 15% outsource their payroll.
One of the biggest challenges of small businesses is the lack of necessary specialized skills. There are actually more business owners with more education under their belt. However, a significant 33% of small business owners only received education at the high school level.
This shows that firstly, a higher education degree is not really needed to be a small business owner. Secondly, many business owners may lack specialized skills because of their lack of further education. Thus, business processes are being outsourced and many operational aspects become pain points.
Of course, technology can help small business owners bridge their skills gap. For example, small businesses could simply invest in marketing automation tools if they have problems with their marketing and advertising operations.
Beyond that, we can say the same thing for accounting and HR. These can surely be augmented with available technology nowadays, foremost of which is the availability of a number of SaaS solutions.
This is important for “nonemployer” firms which made up about 80% of all small businesses in the country. Nonemployer firms are those that have no paid employees which means the owner is the only source of labor. Thus, if you are such, you better canvass technology that can help you smoothen the execution of your business processes.
The bright side is that many startups today are looking at new business survival rates. From 2016 to 2017, for example, four out of five establishments survived after one year of operations. Also, America witnessed an average of 78.6% one-year survival rate of small businesses from 2005 to 2017.
Furthermore, there have been modest percentage changes in the number of high-tech small business firms in various industries. For one, there has been a 12.3 increase in percentage points of small firms in software publishing. We have also witnessed a 6.3 rise in small firms within the pharmaceutical and medicine manufacturing industry plus 4.1 and 4.0 increases in scientific research & development, and computer systems design respectively.
This indicates that high-tech industries are quite welcoming to small businesses provided they provide value. Remember that 99.9% of all firms are small businesses and 99.7% of the firms with paid employees. They are, in a sense, the backbone of the country’s economy. However, choosing which industry or market to enter takes wisdom, intuition, and data-driven decision making. It is a really hard question to answer for aspiring entrepreneurs.
Today, top small business industries are business services at 11%, food & restaurant at 11%, and health, beauty, and fitness at 10%. These are followed by general retail at 7% and home services at 6%. What this shows is that there is room for additional small business ventures. It need not be high-tech even though business services can be truly high tech. But this can also mean good old manufacturing businesses like providing screws and parts to big companies. Just ask the good folks at John Deere.
There is more room for small businesses to thrive. To make it far, they need to provide value that adds either to the bottom line of large businesses or increase the quality of life of end-users. There will always be room for innovations that small and hungry firms are capable of putting on the table. It doesn’t matter if you have technological offerings like that of JotForm’s or more straightforward parts manufacturing like in the video above, there is always a bright side or chance for small businesses to succeed.
Aspiring small business owners just need to temper their enthusiasm by actually doing their homework before jumping in the fray. Even though a vast majority of small business owners at 78% have reported their businesses to be profitable, a six percent increase from last year, 37% of these businesses are well-established organizations with experienced owners and have existed for more than a decade.
What is trending in small business? For this question, you’d probably get eCommerce as the answer. And which online marketplace is the best out there? Well, the right answer for you maybe Amazon. Sure, Facebook has its own marketplace. Also, eBay has been around for so long. However, if you want to just sell your wares and continue to do what you do without running into dealing with storage, packing, shipping, and pesky returns, Jeff Bezos may just be your man. Yes, Amazon FBA—fulfillment by Amazon—may just be your answer.
Today, businesses flock to include Amazon FBA in their business models. Also, some resort to just have FBA as the main avenue of business. Around 54% of units sold worldwide by marketplace sellers are accounted for by Amazon in Q2 of 2019. Furthermore, this trend is likely to continue as experts predict that more sellers are going to be on Amazon in the next five years. Today, about 54% of brands are already on the eCommerce site. This is expected to balloon to 74% of brands in the stated time period.
There are three main ways you can sell at Amazon. Firstly, you can be a 1st-party seller (1p)t. In this setup, you produce the goods and sell wholesale to Amazon. The eCommerce giant makes purchases from you, handles your storage, shipment, fulfillment, and returns. Every product ASIN (Amazon Standard Identification Number) of yours will have a display stating “Ships from and sold by Amazon.com.” There are advantages to this like getting bulk orders from a trusted retail giant. However, there are also disadvantages as your margins will be quite lower as you sell at wholesale prices. Furthermore, Amazon chooses the price points. You don’t have control over it. This is the price you pay for being a highly credible brand associated with Amazon.
Secondly, you can opt to be a 3rd-party seller (3p) and just sell your products on it. You just treat it as another sales channel like any brick-and-mortar shop you have or just another online marketplace. You keep control of your inventory and shipping should you choose. Thus, you can continue shipping from your warehouse or just choose a third-party service. However, you can also tap Amazon FBA and fulfill orders through it. Thus, you can concentrate on production and marketing. This is the advantage of FBA. On the other hand, you have to maintain a good seller score to continue to sell.
Thirdly, you can also choose to be a hybrid seller. You can register some of your products for a 1st-party arrangement while having others for a 3rd-party seller relationship. This is a good mixed strategy and may hedge for losses in each relationship type. However, one must be really on top of everything by exercising due diligence and ownership with all the business processes.
In 2018, it was reported that 57.3 million workers in the United States have engaged in independent work one way or another in the past 12 months. Freelancers make up 36% of the overall workers in the country since 2014. They participate in temporary employment relationships somewhat sporadically to either support their income or to get away from the “9-5” life. They get to feel that they are their own boss. Also, they can work with passion projects. Moreover, technology has enabled gig-work to be the new normal for many people.
US Decacorns—companies valued at more $10 billion—that support gig-work include Uber, WeWork, Airbnb, and Stripe. These companies more or less support temporary freelancing jobs through marketplaces and payment management. Also, there are global Decacorns that do just that too like China’s DiDi. This shows that both global and US economies value gig-work as they value gig-work marketplaces and support services. Thus, this is a signal that there is an opportunity out there for firms that offer gig-work management and support. Can you offer such things? Maybe you have something that you can offer in this brewing market.
Moreover, it is obvious that this trend has a ton of implications. However, we’ll just discuss a few that affect small businesses directly.
The greatest advantage, arguably, for having marketplaces for contractors is that it fosters healthy competition. It is a good old free-market tenet where superior goods and services get selected over inferior ones. If you subscribe to this view like those who do the valuations for Decacorn companies, then it is time to monitor the gig economy. Why? If it continues and grows, there may be things that will get phased out.
Firstly, you may consider to phase out some employment setups for your small business. Maybe, just maybe, you can do away with a couple of desk spaces and completely outsource jobs to online marketplaces. Well, like many companies, you can save resources and time by outsourcing expertise and equipment. Maybe, there are contractors out there that can do better work for less time and for less pay than your fulltime staff.
This is highly applicable for organizations with in-house advertising teams and creatives. Imagine an advertising creative working for the same company for a good five years. That person will only have a limited job experience compared to creatives that take on different work. The latter, in good probability, may have more chances of thinking out of the box. Thus, you may want to opt for gig-based creatives than having an in-house team.
Second, you should consider your very products and services vis-a-vis the substitutes that can be found from gig-work marketplaces. If you do installations or deliveries, you may as well be on online marketplaces for gig-workers. They may have already cut some of your shares and maybe you can earn some back and then some by being on popular platforms. You don’t want to win a Darwin award and get phased out from the evolutionary movement of markets.
Gig workers see a gig as an entry to another gig. If they perform well, they get to perform another time. In theory, they have more to lose when they don’t care enough about the quality of their services and the relationships that they have with clients. On the other hand, many companies take a single sales for granted. Many take single customers for granted from time to time. Gig workers can’t afford to do this. They just can’t if they want to earn enough and get the next gig.
There is a fundamental difference between the two mentalities of having a job and being self-employed. And there may be a fundamental difference between your employed workers and gig workers. The latter, most likely, have greater motivations to be competitive. They even may more likely to get training. Therefore, they may offer better services than your average worker and may even put more time. Thus, you better beware.
Remote work, like the gig economy, is on the rise. Moreover, many gig workers do remote work. Thus, both are pretty much interconnected but they are not necessarily one and the same. There are good reasons to believe that remote workers are more motivated than those tied to a desk for a 9-5 job. One survey found that most remote workers have invested in creating dedicated spaces to work in. Also, 67% of remote workers want further training. Again, this is not to get out of working in an office like many office workers. This is to be better at work.
Moreover, this year has witnessed a great acceptance for remote work with 66% of companies allowing remote work. Additionally, 16% of companies have their employees work remotely fulltime. As we move towards a more digital economy, we can expect these numbers to grow even further. How does this affect small businesses? Here are a few points to ponder.
Overhead costs can run companies to the ground. There are just things that the costs you can’t very much control. Typical costs include electricity for AC, the wear-and-tear of office equipment, and papers. Yes, they are all part of running an organization. However, you can minimize these costs using different methods. One way is to implement a remote working day scheme for your employees. In this way, you can save on electricity, paper, and reduce the wear-and-tear of your office equipment.
Of course, this is not for everybody. Restaurant owners couldn’t possibly do this for their wait staff or line cooks. However, design companies, digital marketing agencies, and tech companies can. It’s mostly knowledge workers and today, many of us are in the knowledge economy. Thus, if your organization has knowledge workers, you should consider letting them work remotely.
Furthermore, you would also save time. Employees don’t have to commute to work. There is no reason to be late. You don’t even have to get up your desk and go to another floor to talk to an employee. You can do this digitally, privately, and securely using enterprise social networking software.
Additionally, if your employees’ jobs are on a per hour basis like consulting or design work, you can use a time tracking software to help with billing and productivity.
If you haven’t done remote work before, imagine this scenario for yourself. First, you get to keep the same job that you have with the same pay and benefits. However, you work in the comfort of your own home, wear whatever clothes you want, and, maybe, even work in bed. Enticing isn’t it? Well, that goes the same thing for your employees.
Many who actually do remote work feel that they are being trusted by their company. This intuitively increases employee motivation. Also, companies like British Telecom, Dow Chemical, and Best Buy among others have already found that teleworkers are more productive by 35% to 40%. It doesn’t really help to breathe down on knowledge workers’ necks. Sometimes, this can be the case when employees are being required to be present in the office even though they can do their work efficiently anywhere with an internet connection.
The American Psychological Association has found that employees can enhance their motivation, grow, and reduce stress when they have more control over their work. The 9-5 grind and just sitting down for almost 8 hours is just not healthy. Remote work can help reduce attrition and improve their physical and mental health as well.
Furthermore, remote work can also lessen the chances of employees switching jobs as 14% of Americans have switched jobs because of commute time. Also, recruiting and hiring new employees can add to your costs. Thus, maybe its time for you to consider allowing your employees to work at home or wherever they feel they can do their job best from time to time.
Many times, small businesses compete with larger ones. They need all the tools they can get. Furthermore, they are also in competition with each other. Many times, the competition is so cut-throat when they operate in close proximity. They battle for prime position geographically and even in local search engine results. This is why many small businesses are leveraging digital technologies.
Deloitte in 2018 was commissioned by Google to do a report on small business and technology. They found that 38% of small businesses believe that digital tools will allow them to increase their sales and revenue. 31% believe that digital tools can help them promote brand awareness. Furthermore, 30% believe that they can access new customers and connect with customers 24/7. However, 80 percent of US small businesses aren’t leveraging advanced digital tools like analytics.
This data point though is likely to get lower as time goes by. Pressures from competitors and other market forces are likely to drive small businesses to up their game when it comes to technology adoption. However, there are still many that feel that digital tools are not relevant to their businesses. Of companies that are least digital engaged, 40% believe that digital tools are not relevant to their operations. Also, 38% think that they are not effective for their business. If you are not part of those numbers, maybe you are in a good position. You have a key competitive advantage over them.
Using digital tools doesn’t only improve productivity but it can also save you costs such as papers, ink, and physical travel. You can even automate business processes and manage employees working remotely. Furthermore, there are operation-specific tools such as marketing platforms for small businesses. With tools like these, you can ditch your traditional spreadsheets for reporting. They generate reports automatically and in a highly visual manner.
With them, you can keep everything in one place and access data even on the go. However, there are many challenges for technology adoption for small businesses. One of which is the price point. 41% of small businesses cite expense as the reason for not investing in more digital tools. Also, small businesses often spread their employees thinly in the sense that each person may do different types of work. Many are overworked already. Thus, when new technologies and workflows are being implemented, their work is going to get disrupted. And this is why 19 percent of small businesses feel that the hassle of implementing new tech is just now worth it.
The challenges are somewhat just based on bad perceptions about what digital tools can do. Thus, if you believe that your company can benefit from using new technologies, you should try to change the perceptions of the people in your company. Also, if you need more convincing yourself, you should research more on how digital tools can help your business.
Beyond that, there are free ones that you can try.
Digital natives and hopefuls are quite enthusiastic about going cashless in the future. Sure, this is understandable as digital pay options abound. Also, people find it very convenient to use them and this may be more sanitary. Moreover, businesses can save money by not hiring extra staff like cashiers. Thanks to services like PayPal and apps like Google Pay and Apple Pay, we can process payments easier, more accurately, and securely. Thus, many think that the end of cash will be in the near future. Countries such as China, Sweden, Denmark, and the United Kingdom are touted to be the first ones to win the cashless race.
Yes, the present tells us that cash is being used less. It also induces us to think that cash may go away entirely. However, this is really not the case especially with US cities fighting against cashless business establishments. Many feel that going cashless is discriminatory to people of color and the disenfranchised. Well, without going much into the political and ideological details, this is somewhat true in a weak sense but not necessarily to poor people or people of color. It is discriminatory to customers who have good money but have privacy and security concerns when it comes to digital tools. Thus, cities are thinking of banning cash-free establishments. Philadelphia beat them to the punch.
So, what can we take from this situation? Cash payments will still be around as there is really no point for business driving away sales. However, we can expect that there will be less cash being used in the future. Thus, small businesses should consider being highly flexible when it comes to payment options. Therefore, choosing the right payment gateway platform is the first step in dealing with this trend. Moreover, be sure that your chosen tool is comprehensive and accepts transactions from popular digital payment options.
Elon Musk quoted a friend who stated that “Trying to build a company and have it succeed is like eating glass and staring into the abyss.” It isn’t as easy as many may think. Also, it takes grit and determination to go through birthing pains. However, many have the pain tolerance for launching startups. Here’s Elon Musk’s advice to Millennials who wish to be like him:
Millennials are people born from 1981 to 1996. These are the 23 to 38 year-olds of today. It is really a diverse group where some in their mid-30s are already executives. On the other hand, others are still in their early twenties trying to find themselves and find their places in the world. However, many Millennials or Generation Y, as others call them, have high hopes for starting a business.
The top motivation for Millennials to enter into business is to be their own boss. The second is to pursue their own passion. Others go into it because an opportunity came their way and they’re dissatisfied with corporate America. On the other hand, others found their way into business because they got laid off their jobs or their jobs got outsourced. Also, the top 5 small business industries for Millennials are:
Surprisingly for some, 80% of Millennial small business owners report that their current business is profitable. This is contrary to the opinions of people out there that Millennials don’t have the grit like earlier generations do; that they are somewhat babied. However, frailty and the lack of grit is not just a generational thing. It’s a human thing that cuts across generations. There are simply people who don’t have the tolerance for risk and the chops to succeed in business regardless of what year they are born.
Millennials, we can say, are mostly digital natives. They have likely lived their early childhood with ancient gaming consoles and have had their first mobile phones when they were in grade school or high school. They adapt to technology fast and are arguably in the best stage in life for learning and making something of themselves. Thus, going against these younger business owners will be pretty hard as they are natives to this day and age.
Firstly, this generation has changed the way we work virtually in every facet. Take customer service, for example, Millennials demand quick responses from businesses via different channels, especially social media. Failing to do so would result in a backlash from not only their friends and associates but also with total strangers that have had the same issue with them. They have kept businesses on their toes in this regard. The same thing can be said with the proliferation of different advocacies calling for better business practices.
Secondly, they understand these concerns and as they build their own businesses, they are more likely to incorporate these values. This means many would have “earth-friendly” marketing messages and selling points. Most Millennial small business owners would also understand the benefits of digital marketing as they themselves are willing participants (or victims) of it.
They have changed how businesses are being run and they’d likely run their businesses in ways that mimic their preferences as customers. This means they are likely to be more attuned to the social climate and thus have better intuition than earlier generations.
Just like Millennials, Generation Zers are digital natives who demand quick responses and support from businesses. Also, they tend to engage in social advocacies just like Millennials even if it’s just to the extent of posting and creating content. Obviously, even if this doesn’t significantly deliver social change, this obviously changes the perception of peers when it comes to certain issues. Also, this obviously applies to brands. Yes, Generation Zers can totally make or break you. Thus, a good deal of care and respect should be given to their preferences should you want your business to succeed.
This is not just applicable to marketing or external business facets but also with internal business processes. Generation Zers are people between 1995 and 2015. The oldest ones are now about 24. These are people who are already working and are starting in their careers. Some may even be employed in your business. Thus, understanding how to work with people from this generation will not only help you sell to customers but also help you in running your day-to-day operations in the future.
One of the first things that you should consider is that Generation Zers prefer to have a personal relationship with brands. A good part, if not most of their relationships are constantly mediated by digital channels. They are almost online all the time. Thus, it is really a good time to optimize your digital touchpoints today as a year or two more could be too late. In five to ten years from now, Generation Zers will become your customers and employees. Therefore, going digital will be a big contributor to your success.
Also, many Gen Zers just like Millennials would like to think of themselves as being socially conscious. They want their jobs to have some sort of mission. They are value-driven and many believe that their generation will have a positive impact on the world. It is easy to discredit things outright as wishful thinking but if you look back to the 60s and 70s, the same spirit abounded. And, to deny that advocacy movements back then did not impact small businesses would be a total falsity. It affected industries. They changed how brands market their products and treat employees.
Of course, some Gen Zer preferences like pet-friendly workplaces, being friends with bosses, and those sorts of things are not necessarily the norm nowadays. However, businesses should consider being flexible for such things. Sure, we don’t really know the quirks and developments of what this generation now is becoming. It’s just enough that we follow this trend as they will surely be a part of the business world in the years to come.
With the influx of Millennials and Gen Zers in both the workplace and markets, a good buzz is coming about for human-centered design (HCD) and UX. Put simply, human-centered design (HCD) is putting the user first. It is advocating for the users by designing products, services, and experiences that provide value for them. This doesn’t just stop at the user experience (UX) on the digital level. It covers everything from digital touchpoints to brick-and-mortar interactions. This is a strong trend as to where business processes will be converging soon.
Again, for practical purposes, Millennials and Gen Zers expect brands to be helpful and quick with their responses. Furthermore, they expect brands to create positive change for society as a whole. Thus, when you design user experiences across channels these should cater to these preferences. These should be created for all brand offerings and touchpoints. Therefore, investing in HCD and UX will help you preempt larger trends. Moreover, this will also help you with your operations now.
HCD helps businesses improve performance such as reduce the number of user errors, increase ease of use, and increase the ease of learning about products, services, and the brand itself. This bridges the gap between you and customers.
Human-centered design (HCD) is a design approach that takes into consideration that users are first. They are who you create value for. Of course, this has to be profitable. HCD can be done through three phases: Hear, Create, and Deliver.
The HCD methodology employs rapid prototyping and testing as you go. This helps you be attuned to your customers and gather actionable insights as quickly as possible. Thus, you can change your design as you go to fit customer preferences and provide them value. Also, this is just a general look at the HCD approach. There are many resources out there for you to learn more about it. Furthermore, there is an increased demand for this job.
Furthermore, don’t worry if you are not specifically trained to be a UX professional. You can still become quite proficient at it given the right practice and training. UX professionals don’t have a degree in a specific field. Major areas where UX designers have degrees in are English, computer science, communication, psychology, and design. It is an endeavor focused on continuous learning. Thus, anyone can really learn this approach.
Influencer marketing is like celebrity endorsement prevalent in the age of mass media. Instead of just gunning for movie stars or musical artists, marketers place their products on social media channels and other digital touchpoints like podcasts of influential people in their given realm. A modern example of which are MMA fighters who are active on social media. Health and fitness brands pile up to sponsor outspoken personalities and those with fun content to help them get their products out to their target segment. Another would be marketers tying their product up with musicians to create popular how-to videos.
This approach is quite easy to do as everyone is really easy to reach nowadays. Almost everyone has a Twitter handle or a Facebook account. Furthermore, brands do really have to go with high-profile celebrities. They can target micro-influencers or personalities who have a strong following that’s within the range of a thousand to a million.
What’s great about micro-influencers is that their social media channels are very active. Their followers and peers (who might also be influencers) engage more with their content rather than just view them and leave “likes.” Furthermore, they are not really as expensive to do business compared to more traditional celebrities. As such, you need to get on this wave sooner rather than later before competitors get to the top micro-influencers of your target segments. For this, you’d do well with a good social media monitoring tool to determine micro-influencers and influencers.
Trends come and go from time to time. Also, this can be said to the same thing about small business ideas and small business opportunities. Their timeliness is dependent on the wider market forces and movement. Sometimes when you are a small business owner you don’t really get to see these market forces at play. We tend to just stick to what we ordinarily see in our own localities. However, it is best to keep up with the goings-on around us. There might be stronger forces that will disrupt how we do things.
For example, the rise of heavy social media use and voice search had affected local search engine optimization. Before, all a small business owner has to do is to just have a working website showcasing its products, competencies, history, and a contact form that goes straight to email. Now, this is not enough as more customers prefer to contact businesses via social media or even text. They want quicker response rates and they can be mighty vocal too of having a bad experience with your brand.
Thus, business owners need to be more conscious of their digital touchpoints. And nothing can help you better here than digital tools designed to gather, analyze, and automate processes that otherwise will take much of your time. Also, with the current ongoing slow decline of mass media, small businesses should be savvier with the use of influencers such as podcasters and the likes. So, it is really best to ask “What is trending in small business?” from time to time and deal with trends accordingly. This is the only way to come up with ideas and find opportunities in highly saturated markets.
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