Small businesses will spend over $50 billion on local media in 2015, accounting for one of every three dollars spent in local advertising. As the U.S. economy crawls out of the recession, small businesses owners are investing more in marketing but remain wary about a still-hobbled recovery and a quickly changing local consumer
Street Fight recently caught up with Molly Day, vice president of public affairs for the National Small Business Association, to talk about small business owners’ still-mixed relationship with the tech industry, what they are looking for in marketing products and whether small merchants are better off today than a decade ago.
Help us understand some of the psychographic and demographic shifts that are happening in the small business community. Some argue that small business owners are getting younger as the older generation retires. Are you seeing this?
What we are seeing across the board is a definite drop-off in entrepreneurship in new small businesses. While I think there’s definitely newer and younger businesses coming into the market as the baby boomer generation ages and is stepping out of the business, I don’t think it’s at a rate that we’ve seen previously. That’s just based on firm births and deaths over the last five to 10 years.
Small businesses have generally had a mixed relationship with the technology industry. Given your research, how has that relationship evolved over the past 10 years. What’s driving their criticisms around Yelp, Facebook and others?
I think it’s two-fold. A lot of business owners look to those [companies] as tools to help get the word out and help expand their customer base. And today, the majority of small business owners — even ones that are a little bit older and not always as technologically savvy — are overwhelmingly on LinkedIn, more and more on Facebook, and more and more on Twitter.
When it comes to Yelp, there is a love-hate relationship. The negative review process, and [paying companies to try to have those reviews suppressed,] is an area where there’s certainly a reasonable level of distrust among those kind of platforms. Business owners are learning that being engaged is really the best way to do it and if you get a negative review on Yelp to respond back to that person. I think they are learning that if you are going to get involved in these online tools and social media you have to really commit to it. You have to be all in or not at all.
How have small businesses evolved as buyers of technology and marketing tools?
When we ask small business owners what kind of growth opportunities they predict in the next year, the answers over the last seven years have been pretty conservative. Obviously things have picked up in the last two, and consistently ranked among the top is to expand marketing, ecommerce and Internet solutions and reach out to new customers.
It’s one of those areas they’re putting money into because it’s cost effective: you certainly need to put money into it, but maybe not as much as hiring another person to handle marketing they way they used to 20 years ago. Business owners are very in tune to that. That comes along with being in tune to cyber security issues and the fact that so many small businesses are being hit with cybersecurity hacks and phishing scams and they are very concerned about it. So yes, they want to get engaged on this new platform, but also know they need to be very aware of what the risks are to them and their business.
Apart from a lower price, what do small business owners want from technology? Is it an easier way to run their business; more customers; a better way to interact with their existing ones?
Obviously bottom line is always important. I think second is responsiveness and that’s a really key thing for small businesses because they often don’t have people who take care of HR, then somebody else for taxes and then somebody else for accounting. It’s all on that person. They want systems that are responsive, and quick and efficient that don’t take a lot of their time. As far as what’s driving them to get more engaged, yes, I think reaching out to more customers is certainly the biggest driver in that.
Do you believe that technology, and the Internet, has made small businesses more or less competitive with large brands than they were a decade ago?
Technology has probably been SMBs a little bit more competitive, but it’s also made them a bit more vulnerable. Again, when you are the primary HR, CEO, accountant — all that — it’s up to you to make sure your systems are protected. That’s kind of a mental drain for a lot of small business owners.
So while the Internet has made it much easier to compete with larger companies both nationally and on a global market, they are a lot more opened up to various cyber threats. The costs associated with these hacks and amount of time people spend on it is astronomical — it’s really quite shocking. So on the one hand yes, it’s definitely improved things [for small businesses,] opening them up to be more competitive with larger companies. But I think they are more vulnerable than a larger company that has a whole team of IT people to make sure everything is secure, whereas with a small business it’s just on the owner typically.
What are the biggest threats that you see to the growth of the small business market in the US today?
What our members tell us is that they are most concerned with economic insecurity. There’s this looming fear based on the Great Recession that [the economy] could go that way again. That’s biggest fear and I think honestly some of it is driven by policy makers — whether it’s by debt ceiling showdowns, the government shut down or whatever topic du jour there is that they’re fighting over. There is just a lack of confidence in our elected officials and I think that is driving some of that economic security.
We are also seeing some parallels between a market drop off in new startups, with the fact that tax complexity keeps growing and growing and growing. Tax laws are passed with a series of sunsets. So you get a tax break for two years then it goes away, but wait we are going to pass it retroactively but you only have two weeks to make a decision about a $25,000 purchase and mountains of regulations with paperwork. I think people are really trying to balance that opportunity cost and the more hurdles and more difficult we make it for people to run a business the fewer startups we are going to see.
What do you expect to see as key trends among small businesses over the next 12-24 months?
We are going to continue seeing more and more small businesses looking at expanding their social media interaction. Right now it hovers around half of the small businesses actively engaged in social media and we will continue to see that increase. Plus, a growing focus on marketing to younger generations in an effort to not only expand the current customer base, but also grow the continuity of that base.
We’re also expecting more alternative financing options . With new regulations from SEC that ease investment opportunities for small firms, as well as the growing field of alternative financing, I think this much-needed field will continue to grow. Despite the improved economy, more small-business owners today (31 percent) say they can’t access adequate financing than six months ago.
Liz Taurasi is a contributor to Street Fight.