Businesses with less than 20 workers made up 89.8 percent of the American workforce according to 2010 census data. With 51.6% of SME’s calling home their office, the economic blanket of tomorrow will undoubtedly be sewn by microenterprises. Statistics don’t lie, but they fail to incorporate the numerous failing startups and smaller companies washed away by corporations hungrier for success.
A close friend, who went from a laborer in the 1980’s into part owner of a family owned drilling company, told me business had slowed down nearly to a halt as 2016 began. Not surprised, I chuckled at him because drilling contracts will slightly tail off during the winter months anyway.
He fired back stoically, “No. We’re slow because it’s Election Year.”
Small businesses may notice an uneasy feeling as the 2016 Election, which really picks up during February’s highly touted Iowa Caucus, will crown a new Free World leader. Only two things are known as the Obama administration prepares to exit their comfy Pennsylvania Avenue residence: the next president won’t be Obama, and small businesses will still have the unwavering desire to dethrone their larger business counterparts as the preferred source for both employment, and customer happiness – regardless what administration enters next.
Death by marketing budget
I’ve contemplated for years why consumers prefer buying a “heart attack in a bag” (McDonalds) over their local greasy spoon, who may also provide the same five-alarm chili guaranteed to send you straight to the porcelain throne but affords the opportunity for consumers to circulate locally earned dollars back into the local economy.
The answer resides in branding, although having a nearly limitless advertising budget doesn’t hurt.
Children seem to know about the power of Playland before they’re born. Today’s parents, back in the day, knew a trip to McDonald’s was more of a reward for behaving – although the costs of goods sold were significantly stronger versus the national wage back then, too, so it was often an easily accessible dinner option. Nonetheless, McDonald’s built an empire based off word of mouth, (which is the only effective local marketing tool in a small local business’ arsenal) and a good, cheap meal. From there, television advertising and billboards took off.
We can logically deduce that small businesses are slowly being driven out by larger companies that can market quicker, longer and stronger. Product efficacy means nothing when presenting this fact – just ask the numerous general stores forced to closed because Wal-Mart moved to their sleepy town. Of course, the same problem of product efficacy applies to cable television provider Comcast – they’ll charge what they want, regardless if we call to question if HBO is really worth a $ 14.99 price tag or why PPV fights are $ 99.00 when Rousey knocks people out in what amounts to be $ .03 cents worth of viewing. They’re able to do this, and not even Netflix can stop them.
How SMEs can survive: Local marketing optimized on a globally accessible scale. Video testimonials (where applicable). Leverage social platforms’ localization features (page creation, primarily).
Cutting costs without cutting corners
There are southern restaurants that have one location – and one recipe worth driving 2,000 miles for. Why would anyone be compelled to drive that far for biscuits and gravy? Is traversing halfway across America to visit that one cobbler worth your time, given the investment in fixing your shoes would be minuscule? The answer to both is simple – when you don’t cut corners to achieve profitability, your service or product will turn into one that consumers can’t live without.
Larger companies nearly have to cut corners since there are multiple locations in need of the same stock to fulfill customer need. Instead of good ‘ole southern gravy made by hand, packets are dumped into a predetermined about of water, heated, and then served to the masses. By cutting corners, corporations can drive down costs, drive profits north, then expand.
We can analogize packaged gravy into the way today’s ‘bundle and go’ world has evolved. Rarely do we take the time to enjoy those intricacies that are made by hand anymore – we’d prefer to heat and serve everything, which has been the Achilles heel of all small businesses since the advent of digitality – or the reason for their survival, depending on which aspect you disseminate.
Cost cutting is the evil twin of corner cutting. Larger corporations have long mastered the art of slashing prices on materials and services by outsourcing overseas where they can spend less and get more without giving their domestic consumers the benefit of a reach-around. Small businesses will never fully master cost cutting since they’re known for their community-minded presence that doesn’t necessarily demand lower costs since the quality is insurmountable, although improving supply chain operations may be possible within small manufacturing operations in America.
How SME’s can survive: With regard to cost-cutting, learn to delegate smaller tasks to yourself that you’d otherwise delegate to some long-distance firm – this could be accounting (QuickBooks is learnable within a weekend), menu creation (you’d be surprised what a cheap laminator and Microsoft Word can do), signage (for $ 150, I bet a woodworker would step forward); you get the gist.
As to corner cutting, small businesses have withstood the test of time, and forever will. One suggestion, however, would be to keep family secrets secretive, perhaps sharing only with the kinfolk expected to take the helm in the future. Your secrets are why we keep driving for miles to get that special rhubarb pie.
Paying it forward?
From a philanthropic standpoint, the allure of a giving corporation sure makes it easier to spend money with them. Should consumers use philanthropy as the sole basis for making purchasing decisions? No. That would be like basing one’s choice of religion solely off that religion’s eschatology.
Corporate giving could be seen as ‘smoke and mirrors’. Perhaps viewed as cleanup efforts for its internal flaws. Nonetheless, consumers are enthralled by companies that give back. Smaller enterprises can give back, too, but it’s a mere radar blip compared to what larger companies consistently offer to small communities worldwide.
Charitable work, albeit monetary or physical labor, is one core value that small businesses should really be more cognizant of. Profitability is undoubtedly any business owner’s ultimate prize, but if SME’s consistently take all and give none, an unsustainable model should be expected sooner than later. Or at least people will want you to pony up more.
How SME’s can survive: Don’t be afraid to step outside your normal business playbook and call an audible for the sake of community betterment. Plant some trees, start a community garden in the back of your business, offer warm refreshments to homeless individuals, give some drifter a day’s work in exchange for pay. It’s the small things that ripple the furthest.
The state of small business, 2016
On a national scale, SME’s created 2,175,253 new positions in 2012 alone according to a lengthy SBA report. Of those 2.1 million newly added jobs, 18% of those came from small businesses with 19 or fewer on their payroll. Because one of the strongest national economic indicators is the activity of SME’s (hiring, firing, closing doors), I bring you another startling fact: As of 2013, 630,357 businesses formed, and 79.5 percent survived through Q4 of 2014 – an amicable 11.8% increase in sustainability from SBA statistics taken in the period between 2010-2012.
Small businesses are finding ways to stay afloat, which keeps both local and regional economies out of the red. Although 20.5% of 2013 startups didn’t have the proper roadmap for success, we’re seeing an uptick in the shelf life of SME’s, which is a massive victory we can apply toward the future of global commerce.
In order to join the growing army of successful small businesses, and in order to survive in an otherwise large business dominant world, don’t be afraid to stay small. Design, implement, sustain and share on a local level instead of trying to tackle larger problems corporations aren’t even equipped to handle. Keep services specialized, put your heart into every pie you bake and make sure your community knows you exist before the world does. Because it’s local consumers who offer the best chance at small business sustainability.
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