The small businesses landscape in the United States has experienced many changes during the past few decades.
Thanks to advancements in technology it has become easier for people to create and run businesses without insurmountable operating expenses. This has led to small business growth nationwide and changes in the way in which businesses operate. Below is a discussion of the small business landscape that includes key statistics, facts and trends that small business owners should anticipate in the coming year.
Small Businesses in America: Not So Small After All
Current statistics suggest that small businesses are major players in the U.S. economy. Over 50% of the current working population in the United States works in a small business setting, as cited by Forbes.
These individuals work for the 28 million small businesses that are currently in operation, 22 million of which are nonemployer businesses (source). Employer-based businesses make up more than 75% of all businesses currently operating in the U.S.
Also, more than half of the aforementioned businesses are operated out of people’s homes. These small business statistics suggest that mom and pops, start-ups and home-based businesses account for a significant portion of the commerce that takes place in the U.S.
Pattern of Growth
It appears that the growth of small businesses will continue to progress in 2014 as SMBs have generated more than 65% of the new jobs created in the U.S. since 1996.
This growth is occurring at an impressive rate as more than 540,000 new businesses are being started each month. This trend favors small business growth as more employee businesses shut down than start up each month. On the other hand, nonemployer businesses have seen steady growth in recent years as 2011 saw the number of nonemployer businesses grow by 2%.
Mobile Commerce is Exploding
In order to facilitate growth, it is expected that small businesses will exhibit certain trends in the way they operate in 2014. One trend that can’t be ignored by businesses both big and small is the growth of mobile commerce. People are purchasing items via mobile devices at a rate that continues to trend upward.
This past holiday season exemplified this trend as the top 20 retailers reported an increase of more than 55% in the number of online sales conducted via mobile devices.
Sales statistics revealed that 69 percent of tablet users and 45 percent of smartphone users made mobile purchases this past holiday season. These statistics suggest that mobile commerce is too large of an opportunity for small businesses to ignore in 2014.
Social Media: The Next Big Thing?
Social media has become a critical tool for businesses as the average U.S. consumer spends 15 hours per week on social media, as cited by AT&T.
Small business owners will be drawn to these social channels as they seek to access their target markets in the digital space. Expect social media to continue to develop into an integral marketing strategy for small businesses.
Working from Home
Thanks to the growth of the internet and web technology, working from home is becoming increasingly common in the United States. This means that many small business owners are hosting their operations from the comfort of their own homes rather than taking on the additional costs associated with physical business locations.
Currently more than 16 million people work from home in the United States, a figure that is expected to continue growing in 2014. Social collaboration tools and communication apps present an opportunity to conduct business from home, generating predictions that suggest the number of people working from home in the U.S. will increase by 64% in the next four years.
The trend toward working from home and the popularity of nonemployee business means that online outsourcing is becoming more common.
It is anticipated that 1.3 billion people will work virtually by the year 2015. This means that there will be a large pool of available home-based laborers for businesses that look to avoid health care costs and large salaries. Contract and pay-as you go arrangements are viable options for small businesses.
The ever-increasing number of start-ups that are created each month will need funding in 2014. This demand outweighs the capabilities of credit institutions to support new business. It is for this reason that crowdfunding services are becoming increasingly popular with small business owners. These services make it possible for small businesses to access potential contributors for their business endeavors.
In 2013 more than $2.7 billion was raised through crowdfunding campaigns in the U.S. This is a statistic that is expected to rise in 2014 as crowdfunding services become more specialized and small businesses begin to recognize their potential.
The weight that small businesses carry in the U.S. economy has continued to grow in recent years. These previous trends and improving technologies suggest that small businesses will continue to adapt and grow in 2014.
Micro Business Power
While researching these statistics I stumbled across a comment that wanted to focus on the connotation of ‘small business’ because 400 employees was considered ‘small’ in their field. This led me to an article focusing on micro-businesses which entails 1-4 employees.
From 2004 to 2010, U.S. micro-businesses (1 to 4 employees) created a net of 5.5 million jobs; large businesses (those with greater than 500 employees) lost 1.8 million jobs during the same period (source).
This information comes from the California Association for Micro Enterprise Opportunity (microbiz.org), with a clear focus on empowering micro-businesses and spreading awareness about how strong they are. This reminded me of the ant analogy. Ants are super strong for their size. If ants were as large as humans we’d be doomed!
According to the Association for Enterprise Opportunity, micro businesses generate $2.4 trillion in receipts and account for 17% of GDP and employ more than 31 million people. The key takeaway from this article is that with high quality education, micro-businesses could grow and flourish much faster than medium and large businesses. This idea is simply a hypothetical scalability scenario – if 100,000 micro businesses can add 1 job every month for a year as a result of proper education/direction, the result is 12 million new job opportunities in just one year. Of course this is all hypothetical, but the potential is much greater and realistic for micro-businesses because of how quick they can move compared to larger businesses.
Putting it all Together
We’ve covered some very exciting small businesses statistics and trends, along with the power potential of micro businesses.
To illustrate everything for the perspective of a micro-business or small business owner, let’s look at life-cycles and goals:
For this example, we’re going to check out the small business Country Lane Furniture, a family-owned biz that makes Amish and Mennonite furniture:
1) Let’s travel back in time to the beginning. It’s 1989 and this is a micro-business.
2) Years go by, crafting and perfecting custom made furniture for a hyper-local area.
3) This is an exciting time to grow in as technology and the Internet make businesses easy to discover, locate, connect with, and share.
4) The family grows, children get older and pick up necessary skills, they work hard, and they evolve into a small biz.
5) A web presence is established to maximize revenue, social media profiles are created and maintained, and Google Places verified.
6) We’ve arrived back at the present. This business is keeping up to date with social media, internet marketing, and branding trends. They’re educated and hard-working, setting an example for micro and small businesses alike.
This is what seems like the ideal path for a micro biz to transform into a small biz. But is there a faster way to evolve? That’s the big question.
Can We Move Faster?
Startups, another form of micro-biz, are the ‘bleeding edge’ of this transformation path.
We’ve been hearing about startups for the past seven or eight years and they’re now a daily occurrence: “New Social Media Monitoring App Sets The Stage for Website CRO Performance” etc…
But the ease of entry and creation has been inflating the ‘death’ rate of small businesses because startups fall under that classification.
And here’s the kicker – the realization I had when thinking about technology-based micro biz versus brick and mortar:
- Most web or mobile applications are businesses based on fads, lasting 1-4 years on average.
- A custom made table lasts for generations.
The current model is saturated with churn-and-burn tech startups neglecting the value of investing time and resources to create products that last.
This is a fundamental reason for skewed small business statistics, along with connotations. Do you consider a business small if they have 200 employees or make $X? Do you consider a business small if they have 3 employees but make millions?
What do you think is one of the most vital statistics, trends, and/or facts for small businesses in 2014 & beyond?