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SMALL BUSINESS TRENDS brings you daily updates on trends that influence the global small business market.
Anita Campbell, Editor
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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Sunday, November 30, 2003
Stock Options and Small Business
The Small Business Survival Council claims that proposed rules requiring stock options to be treated as an expense would hurt small business.

Commenting on proposed accounting standards in the United States and at the international level, the Council's Chairman, Karen Kerrigan, writes:
    "...small businesses may end up paying the price for this controversial 'reform' enacted to clean up the actions of a few bad players. Stock options are used by businesses to attract and retain talented employees. They're an important tool for many small firms, particularly in the high-tech sector.


    Mandated expensing makes little accounting sense; will not give investors accurate or reliable information; would incorporate flawed models for valuating options; and will destroy broad-based plans, according to those who say there's a better way to financially capture stock option activity."
This article was originally printed in the American City Business Journals. For more information, read the full text of the article which appears on the Small Business Survival Council's website.
Saturday, November 29, 2003
Silicon Valley Expansion Cycle
Silicon Valley is starting to party again.

Signs of growth, investment, spending and success in Silicon Valley are starting to pick up again, according to an article in the December 8, 2003 edition of Forbes magazine.

Workers are job-hopping, PR firm billings are increasing, banking business is up, venture money is flowing, and -- oh -- tech companies are throwing parties once again.

But unlike the late 1990's, this time around it is not likely to be a huge run-up. "It's not a bubble but more like a carbonated beverage with lots of little bubbles," says Jonathan Feiber of Mohr, Davidow Ventures.

Friday, November 28, 2003
Microsoft says Linux No Good for Small Business
At a recent conference in Australia, a Microsoft executive charged that Linux software does not address the needs of small business as well as Microsoft's products, due to the inherent lack of integration.

While addressing a small and mid-market solutions team at a conference on November 25, Microsoft small business sales VP Steve Guggenheimer stated:
    "People sometimes talk about Linux in the small business space, but you'll never get so many pieces together on one server with Linux. Obviously, to integrate so many pieces together on the same server will cost a lot of money and won't serve your business needs."
He went on to say that with Microsoft, customers could buy a package of applications already integrated to perform necessary functions, but with Linux they would have to mix and match "three, four or even five" applications to do the same job.

Furthermore, customers buying multiple different applications to use on Linux would then probably have a lot of extra integration work to ensure that the applications worked together. By comparison, the Microsoft Small Business Server 2003 is an easy-to-use, already integrated package.

Guggenheimer later that day in an interview stated that small business people were business people rather than technical types, and the total cost of choosing Linux was for them likely to be high.

While all the Linux and "open source" devotees out there will disagree, the words of the Microsoft executive ring true for the small business market. The fact remains that most small businesses expect their information technology to work for them quickly and seamlessly.

Outside of businesses in the IT industry, most small businesses do not have the time, money or expertise to integrate multiple applications that are pieced together from various sources and make them "talk" to one another. Small businesses want software that is simple to install and run, and that integrates easily with other software packages.
Thursday, November 27, 2003
Internet Plays Key Role in Real Estate Industry
The Internet increasingly plays a key role in the real estate sales industry, and this trend is expected to grow.

According to a recent article by real estate professional John Mudd, more and more homebuyers are using the Internet in some portion of their buying process, either to locate property for sale or to educate themselves.

By the same token, real estate professionals are leveraging the Internet to locate and educate potential buyers.

He writes on Blogcritics.org:

    ...Internet homebuyers are quickly becoming the majority of homebuyers.

    Most Internet homebuyers still work with a Realtor, and they do rely on their services and expertise when it comes to area information, property information and closing services, plus relocation services, but they also seek quite a bit of information on their own, whether or not they're working with a Realtor.

    ***According to the "Internet Versus Traditional Buyers Survey," traditional homebuyers decreased from 72 to 55 percent from 2000 to 2003, while Internet homebuyers increased from 28 to 45 percent, and still appears to be growing.

    What does this mean for the real estate industry as a whole?

    Well, it means that instead of cold calling to get listings, real estate professionals of the future are going to get most of their business from Google positioning and other electronic communications, other than SPAM, which is likely to become more regulated in the near future.
Smart real estate professionals, brokerages and other small and midsize businesses in the real estate industry will try to understand this trend and take advantage of it.

Wednesday, November 26, 2003
Entrepreneur's Board of Directors Guide
Check out the extremely detailed guide to help entrepreneurs set up a Board of Directors. It is available online at the Telecommunications Development Fund, a venture capital firm for companies in the telecommunications industry. (The guide applies to a corporation in any line of business, and not just to telecomm firms.)

This guide is quite practical. It is designed for small businesses that are setting up a Board for the first time. It assumes the entrepreneur has no experience with a Board of Directors, and covers:

    1. Why have a Board?
    2. How do I "control" my Board?
    3. Who should be on my Board?
    4. How do I recruit members of the Board?
    5. How does the Board operate?
    6. How much should I pay directors?
    7. Should I have directors' and officers' (D & O) insurance?
    8. How do I change the composition of the Board as my business grows?
    9. Should I have an advisory board?
    10. How do I avoid disaster?
It even includes helpful how-to's such as: criteria for selecting directors, a sample board meeting agenda, and a primer on the basics of taking corporate minutes.

VC firms can seem forbidding to entrepreneurs, and not very mentor-like. Most have not done much to train entrepreneurs, certainly not in any formal way. Could this be an example of a nascent trend by VCs to mentor and educate entrepreneurs?

Tuesday, November 25, 2003
More Women Starting Businesses
A recent poll by the National Association for the Self-Employed shows that more women are starting their own businesses.

Startups by women grew by double digits annually from 2000-2003. This represents a significant increase in growth since the 1990s. The number of women-owned startups out numbered men-owned startups by almost 2-to-1 in 2003.

Lifestyle appears to be driving more women to become entrepreneurs. Women want greater independence and balanced lives, including more time with family. Many are opting to set up shop at home. Technology advancements and accepted workplace norms that enable people to work virtually anywhere are encouraging this trend.

Other nuggets from the survey:

    - More women than men report that their businesses are part-time. One in five women work part-time -- double the percentage reported by men.
    - Women report self-employed income that is significantly lower than men's, partially because of the part-time nature of their enterprises. Average income for women surveyed is $38,640 versus $54,260 for men.
    - Yet, women are more committed to sticking with their startups than men, even if more attractive opportunities came along. Over 26% of the women surveyed would not consider closing their businesses even if a desirable job appeared. Only 17 percent of men said they would remain so committed.

Now, this survey may be news to some. But I'll bet most of the women out there aren't in the least surprised. These results are completely consistent with the anecdotal experiences of women.

Monday, November 24, 2003
Microsoft Investing Billions in Small Business Software
According to the Reuters news agency, Microsoft is planning to invest $10 Billion (US) over the next five years to develop software for the small and medium-sized business market. That includes $2 Billion (US) invested in this market space this year.

Microsoft's SMB strategy chief said that Microsoft is taking a long term view for the market that includes 40 Million businesses worldwide. It expects its investments to turn profitable in 2005.

Microsoft's definition of the companies it will concentrate on are those with 2,000 to 5,000 employees, and maybe up to 8,000.

Of course, those are not exactly companies most would define as "small."

Sunday, November 23, 2003
Sellathon to Help eBay Sellers With Visitor Stats
Small businesses selling on eBay now have a promising new tool to track visitor behavior on their auctions.

SmallBusinessComputing.com had the following report about this latest breakthrough for eBay merchants:
    A company called Sellathon recently launched a product called ViewTracker, and they say on their Web site that ViewTracker "tells you ... in real-time ... exactly how each auction visitor found you, what words they searched for, what categories they browsed, how they sorted their search results... even where they live."
Up to now sellers have not been able to get in-depth visitor data on their auctions. Sellathon's solution should give eBay merchants the kind of detailed market intelligence they need to increase sales and improve results.

Right now Sellathon is offering a 30-day free trial. Early reviews of the product are very positive.

Saturday, November 22, 2003
Small Businesess Leading Tech Recovery
Tech spending is up 7.5% this year. And surprise -- it's not the huge corporations leading the way. Small and midsize companies are leading this upswing. That's the word from a recent USA Today article.

The article quotes research firm Precursor, stating that small and midsize firms will account for about 45% of tech spending this year. And, midsize firms, those with 100 to 1,000 workers, are spending eight times faster on tech than are big corporations.

With statistics like these, is it any wonder that every high tech company wants to get at the small and midsize business (SMB) market? Trouble is, many technology companies are still figuring out how to scale down their large-company solutions to suit the needs of smaller businesses. The tech providers who've succeeded in tailoring solutions specifically for SMBs will have the advantage.

Friday, November 21, 2003
The Hottest Businesses for 2004 -- Part #2
The following is Part #2 of the list of the hottest new U. S. business opportunities for 2004, as contained in Entrepreneur Magazine. Part #1 of the Entrepreneur list was published yesterday (see the post prior to this one):

    Online Matchmaking -- Americans are willing to pay for connections, social or professional. The online dating industry is forecasted at $1.14 Billion (US) in 2003. However, plain vanilla online dating sites are no longer enough. Finding a fresh niche is key. Sites like Friendster.com, linking together friends (who may or may not date) and sites like EntreMate.com, which connect up business partners, are seeing some of the hottest growth.
    Children's Enrichment Programs -- Call it kids' extracurricular activities...on steroids. Offering activities and lessons to children is now a billion-dollar industry. Dance, martial arts, foreign languages, organized sports and chess are just some of the programs available, and all adding up to opportunity.
    Organic Foods -- Consumers are turning to organic foods in greater numbers than ever before. Grocers are clearing space on their shelves for organics. "If you want to go organic, creativity is key. Are you addressing an unmet need, are you bringing something new to the category, or are you just another substitute for what [stores are] already carrying?"
    Home Automation -- Formerly just for the wealthy, there is now a market for home automation among ordinary homeowners. Home security systems, home entertainment, lighting and window coverings are the main services. The big name electronics manufacturers dominate the manufacture of home automation systems. The entrepreneurial opportunity is in installing and maintaining the systems.
    Specialty Exercise Aftermarket -- Yoga, Pilates, meditation. They offer huge market potential. "Yoga-inspired foods, gear aimed at men, instructors who work inside schools and large corporations, and franchising are just a few largely untapped markets."
    Home Improvement -- According to the National Association of the Remodeling Industry (NARI), Americans spent $163 Billion (US) on remodeling in 2002. (Yes, that's right, Billion with a B.) In such a large industry, there are plenty of opportunities in niche areas including: contracting, interior design, interior arranging (designing new spaces with items a client already owns), making homes more accessible to seniors, and environmentally-sound remodeling.
    Women's Fitness Centers -- Women's fitness is a booming trend. Opportunities include exercise spas, nutrition, personal training, workout reminders, progress tracking, clothing and equipment.
    eBay -- eBay, the most profitable of the eCommerce behemoths. Need we say more? Hot sales areas of eBay include home and garden, clothing and accessories, vehicles and parts, and consumer electronics.
    Medical Supply -- With "the number of seniors expected to grow to 70 million by 2030, according to the U.S. Administration on Aging, the medical supplies and equipment industry will continue to grow." The home health care segment in particular is growing steadily.

Thursday, November 20, 2003
The Hottest Businesses for 2004 -- Part #1
Entrepreneur Magazine has issued a list of the hottest new U. S. business opportunities for 2004. Because the list is so lengthy (18 entries), we will use two separate posts to cover the opportunities.

Part #1 of the Entrepreneur list includes:

    Online Learning -- a $6.6 Billion (US) industry expected to grow to $23.7 Billion (US) by 2006, according to research firm IDC. The hottest segment of this industry? Blended learning...which simply means online learning combined at times with instructor training, video training and other methods.
    Mobile Gaming -- No, we're not talking about playing blackjack while riding in a limo. Mobile gaming means playing games using a mobile phone. "Eighty percent of all mobile phone users in the United States and Europe will play online games using wireless devices by 2005, according to technology research firm Datamonitor. That's more than 200 million people. Creating and distributing games is where the opportunity is in this fledgling market."
    VoIP -- "Homes and businesses around the world are leaving their regular phone service behind to make their calls for a fraction of the price over the Net. *** While large enterprises will likely be slow to adopt VoIP, consumers and small business will be on the forefront."
    Tech Security -- Security is a fast growing area of technology. "One of the biggest computer stories of the past few years is the rise of technology security. It's a wide-open area that encompasses everything from biometric thumbprint scanners to VPNs to consulting to firewalls to virus protection and beyond."
    Spas -- One in 5 Americans visited a spa in the past year. As the spa business grows, it is diversifying into specific niches. Some spas target certain age groups, or males or females only. Spas can be medical oriented or family oriented. And the niche focus will continue as the industry grows and develops.
    Upscale Pet Services -- Americans love their pets. So much so, that they will spend $31 Billion (US) on their pets in 2003. Luxury services for pets - such as day cruises and pet spas - are a growth industry.
    Wireless -- "While on the surface the wireless arena appears to be dominated by jumbo-size enterprises, a lot of the innovation and nuts-and-bolts work is provided by growing businesses and start-ups." Wireless hot spots is an area getting a lot of attention right now. But other areas that are promising are: prepaid wireless services, location-based technologies like e911, and wireless home networking.
    Outsourcing -- We hear so much about the threat of offshore outsourcing, that we can forget how much opportunity is to be had in outsourcing. Among these opportunities: there is room for smaller enterprises that help companies figure out what to outsource and how to manage their off-shore projects.
    Senior Care -- As the population ages, products and services for seniors are a hot area, as are services to help children caring for aging parents. Personal fitness trainers for seniors, in-home care, senior day-care, personalized moving services -- the list goes on.

Wednesday, November 19, 2003
SBA: Size Matters
The U. S. Small Business Administration increased the size definition for small businesses in the facilities support services industry. The limit on the size of business that can be called "small" used to be $6 million (US) in average annual receipts -- now it is $30 million (US).

The new size standard became effective November 14, 2003. It lets more companies qualify for SBA assistance and compete as a small business for federal contracts.

The SBA concluded that raising the size limit for the facilities support services industry was appropriate. The higher size limit reflects the size of federal contracts and allows these businesses to grow to a size where they can effectively compete.

NOTE: Size standards are established separately for industry groups as defined by the North American Industry Classification System (NAICS codes). The announced change does not affect any industries other than facilities support services.
Tuesday, November 18, 2003
Are You Working Your Networks?
From unknown author to overnight bestseller -- all due to the power of networks. How else to explain why certain ideas, messages and products spread?

Social networks are a source of power in business. Author Malcolm Gladwell, in his book The Tipping Point: How Little Things Can Make a Big Difference, says that networking is often how things really get done in business.

"People who want to be effective leaders need to take this dimension of social power seriously," Gladwell says. "As the complexity of the tasks confronting an organization grows ... the importance of these sorts of informal social networks also grows."

He points to two types of people who often wield great influence as a result of their social "network" power: connectors and mavens.

Connectors are individuals who know a lot of people and draw on those connections to get things done. They're people who know how to work their personal networks of friends and contacts to accomplish significant feats, even though they do not hold high-level positions themselves.

Mavens are individuals who gather large amounts of useful information on certain topics and enjoy sharing it with others. Their willingness to share their expertise without necessarily trying to profit from it gives mavens great credibility among listeners, who are often inclined to act on their advice.

Read more at the Center for Creative Leadership website.
Never Sacrifice The Gross Profit Margin -- Ever
Do you know what your gross profit margin is? If you don't, spend a few minutes on this post because it will be worth your while.

Inc.com has a great interactive tool for any business -- no matter what size. It's an online calculator, and it helps a business executive determine whether or not to make a large expenditure. It does so by looking at a key metric: gross profit margin.

The calculator was created by Norm Brodsky, renowned startup expert. "Brodsky says that many people starting their own business don't pay enough attention to, or clearly understand, the importance of determining gross profit and gross profit margin. Profit margins determine a company's ability to absorb increases in overhead. Brodsky can't say it loud enough: the most important goal for any business is keep the gross profit margin stable--never sacrifice the gross profit margin--ever."

The calculator evaluates a proposed expense and determines how much in new sales your business would need in order to keep the same profit margin after making the expenditure. That's a key way to look at any expenditure, tying it back to sales. Ask yourself: how many new sales would your company have to make?

The Internet is a powerful resource for small businesses and entrepreneurial enterprises, providing priceless help for growing a business. Inc.com's calculator is a prime example. Check it out -- it's fast, fun and interesting.
Monday, November 17, 2003
Weekly SMB Market Roundup
The week ending November 14, 2003 saw the following new service and product introductions targeted toward small and mid-sized businesses (SMBs):

    - Intuit released updates to its QuickBooks financial accounting software and its QuickBase information management software. The new releases include versions of QuickBooks designed specifically for certain industries--retail, professional services, manufacturing and wholesaling. The Intuit products are the epitome of products designed with small businesses in mind. The products are best-suited to companies with fewer than 250 employees. More.
    - Z-Firm LLC announced the introduction of ShipRush version 3 for Windows. ShipRush offers integrated shipping functionality, enabling small and mid-size businesses to process UPS shipments without leaving programs like QuickBooks, Peachtree, ACT! or GoldMine. More.
    - GiftCertificates.com announced upgrades to its website and order processing to better address the needs of small businesses providing corporate gifts and employee incentives. More.
    - National City Bank launched yet another of its small business super blitzes, this time in Chicago. The super blitzes involve visits to hundreds of small businesses by teams of National City Bank executives and bankers. The purpose is to listen to the needs of small business and get the word out about National City's products and services designed for small businesses. More.

Sunday, November 16, 2003
The Market Wasn't Ready
I received an email about my November 14th post about micropayments. The message suggested that I'd really blown it back in 1999 by not jumping on the micropayments business then.

I beg to differ. (Actually, I'm not really begging -- I AM differing.)

Ever heard the phrase "the market wasn't ready for it"? Sometimes a new offering is simply way ahead of its time. It may be a great idea, but unless there is sufficient market demand, it won't get off the ground as a business.

That's what happened with micropayments the first time around during the dot-com boomdays. There just wasn't enough demand or need for micropayment services to purchase content. How could there be, when everyone expected Internet content to be free back then, and few were willing to pay? Without the market need, the services never took off.

Indeed, they still may fizzle. Micropayments are barely beyond the experimental stage, even in late 2003. The two services in my post, Peppercoin and Bitpass, appear to be in beta test. And the numbers of micropayment transactions that I cited are truly small numbers. Only time will tell.

But if I were to bet, I would bet in favor of micropayments taking off. Why? In part because of the MAJOR shift toward paid download services for music. Nothing against you comics lovers, but selling comics is not enough to make a business out of micropayments. For micropayments to take off, they have to be driven by sufficient financial incentive.

Low-priced downloads of music just may be that incentive. For an example of the relationship between music downloads and micropayments, see the press release announcing that American Empire Records plans to launch the new single by Sanity online at a price of 99 cents (US) using the Paystone micropayments solution.
Saturday, November 15, 2003
It Pays to Target Your Marketing to SMBs
It turns out that small- and mid-sized businesses are loyal to brands with which they've had a good experience. This comes from a study commissioned by City Business Journals Network and administered by Kadence Business Research.

The study showed that 87 percent of both small- and mid-sized business owners develop a long term relationship with suppliers once they've had a positive experience with them. And, small and mid-sized businesses form lasting relationships in particular with those that tailor marketing programs toward their businesses.

The top brands among small businesses are: UPS, Kinko's, Intel, FedEx and Dell.

Among mid-sized businesses the top brands are: FedEx, UPS, Cisco Systems, American Express and Southwest Airlines.

"These brands do an excellent job of keeping their fingers on the pulse of small- and mid-sized business needs," says Ed Baker, publisher of Atlanta Business Chronicle and chief marketing officer for the City Business Journals Network.
Friday, November 14, 2003
Micropayments an Up-and-Coming Trend
Keep your eye on micropayments. They're a growing trend in eCommerce.

Micropayments are small payments made for online purchases valued at $2 (US) or less. These small payments are charged for items such as mobile phone ringtones, digital music, games, recipes, comics and stickers. Mostly they're for impulse purchases, and often -- but not always -- made by teenagers.

For really small payments, merchants can't realistically accept credit cards. The processing fees tend to gobble up any profit margin. Furthermore, teenagers making these small purchases often don't have credit cards. Hence, the need for new methods of transmitting small payments.

The concept of micropayments has been around for at least five years. When I was in charge of eCommerce for a NYSE company back in 1999, an employee brought me a business plan seeking to develop a new business centered around micropayments. Micropayments did not fit in with the company's strategic direction, and so we declined to move forward with it. But at the time I thought the concept held promise and believed that eventually some company somewhere would make a go of it. And it is beginning to look that way -- only five years later.

What's spurring on micropayments is the rise in digital content sales, especially music downloads. "The music industry has recently forged new ground and proven the viability of the micropayments model. Now it is up to other online merchants to find new ways to package their existing content and to develop new, innovative content to grow this market," said Robert Kiburz, president and CEO of Peppercoin, a micropayments provider.

According to a survey performed by Ipsos for Peppercoin, more than 4 million Americans purchased digital content for less than $2 in the past year. Now, in overall numbers, that's a drop in the bucket compared to the billions spent online for all purchases. But the demand for micropayments is sure to grow as digital music sales grow. With music sites like iTunes charging 99 cents (US) for a tune, and Rhapsody charging as little as 79 cents (US), retailers have to save every penny they can on credit card fees.

Another micropayment provider is Bitpass. The Bitpass site even includes a list of merchants who accept Bitpass micropayments. There you can find places to spend your shekels on things like: Geeks in Love comics, iStockphoto.com photographs, and even Guy Kawasaki's speeches.

Micropayments could open up new opportunities for smaller merchants to sell small items of content at a profit. Look for more from us on this subject as this trend develops.
Thursday, November 13, 2003
Goodbye CDs?
Walmart.com is launching its own digital music download service. When the world's largest retailer gets involved, you know music download services are a good business prospect.

Walmart.com will be in a partnership with a company that recently bought Liquid Audio's digital music business. The new service will contain 200,000 tracks to start, and could launch as early as next week.

According to a report by Media Post, "Jupiter Research estimates $35 million in legally downloaded music will be sold this year. That's small right now compared to the $12 billion music industry, but digital music is climbing the charts with a bullet."
Wednesday, November 12, 2003
Music Download Services Hot
Even as you read this online journal, we are undergoing a major shift in the U.S. music industry. The industry appears to be successfully moving toward a new model--one of distributing music over the Internet via for-fee download services like iTunes.

The new legal download services are becoming one of the hottest new media market opportunities.

Two important signs point this way:

First, it looks like the U.S. music companies are wising up--finally. They are catching on to the fact that distributing music via Internet download is a better strategy than crashing dorm rooms and hauling sophomores into court. They are beginning to cooperate with businesses that want to distribute music electronically, working out reasonable licensing deals that allow the online businesses to keep fees low for consumers, yet still be profitable. Moreover, just this week Penn State University announced a deal with Napster to enable students to legally download music--the first such deal with a university.

Second, the download sites seem to be catching on with U.S. consumers. The sites are showing promising sales numbers. A week ago Apple reported that its iTunes music site sold 1,500,000 songs in a one week period. Add to that the 300,000 songs that Napster sold during its first week after re-opening as a for-fee download site. Then you have other paid-download sites, like RealNetwork's Rhapsody, where songs are just 79 cents (US) and you can even sign up for a free 14-day trial. BestBuy, which markets the Rhapsody service, has also started to market another download service, from FullAudio. Sales of 1,800,000+ songs in one week is enough to make a dent in the 30 Million customers each month frequenting the offshore "free" filesharing sites, such as KaZaa, Grokster and Morpheus. These are early days, and the new for-fee download services haven't hit their strides yet, so expect their sales numbers to keep growing.

(In Europe, on the other hand, the legitimate download sites have yet to catch on. In large part this is due to the inability of those sites to negotiate licensing arrangements at price points low enough to allow them to offer consumers the songs at reasonable fees. See the Wall Street Journal article if you are a subscriber.)

What does the shift to paid download sites mean for smaller artists and smaller record labels? Ultimately this will be a positive step. According to McKinsey & Co., music artists and record companies ultimately should be OK: "Despite the frazzled state of the music moguls, history is on the side of content creators and owners. Each new format and market for media products, from the phonograph to the Walkman to the VCR to the DVD, has resulted in the creation of increasing value for intellectual property." Expect the new download sites to level the playing field, especially for artists not represented by the five major music labels. Smaller artists who couldn't reach consumers because they didn't have the large labels behind them to pay for marketing just may have greater access to consumers than ever before.
Tuesday, November 11, 2003
Microsoft's 2003 Outlook Program Gets Mixed Reviews
Reports are mixed about the newly released Microsoft Office Small Business Edition 2003. Not that anyone's saying it's bad, mind you. Just that there may not be much reason for small businesses to upgrade to the new version.

Walter Mossberg in the Wall Street Journal says it is "pretty much a yawner" for small businesses.

C-Net gives it a middle-of-the-road review. Acknowledging that the new version of Outlook does a better job filtering spam and organizing email messages, C-Net nonetheless identifies "few changes ... for small-business users."

However, at least one reviewer gives the Outlook portion of Office high marks, going so far as to say it will become an essential tool for small business.

According to Steve Strauss in USA Today, Outlook's new Business Contact Manager feature is the gem in the Office 2003 suite, Small Business Edition. It allows a small businessperson to manage existing customers and contacts, as well as prospects. It solves "real-life small business problems and scenarios" and gives small businesses the power to manage their businesses much as larger businesses do, especially when it comes to customer contacts and sales prospect activity.
Monday, November 10, 2003
Intellectual Property More Valuable to Business
A major trend affecting business is the trend toward the "intellectualization" of property. Simply put, the majority of a business's assets used to be tangible (real estate, equipment). But over the past 25 years that has all changed. Now the majority of a business's value is in intangible property (know-how, patents, systems, "goodwill").

This trend is enormously significant and affects businesses of all sizes--small, medium, large, and jumbo.

In fact, it is at the heart of why manufacturing jobs are declining worldwide and will continue to decline. Why? Because as more of a manufacturing company's critical differentiating value resides in its intellectual property (sometimes referred to in shorthand as "technology"), the company becomes more efficient and productive. In short, it can produce more, with fewer people.

The most recent edition of the Small Business Advocate newsletter made this very point:
    "Here are three examples of how the marketplace has been affected by the journey of intellectual property.

    1. In a report by Kenneth Crosin, titled, "Management of IP Assets," he states that in 1978, 80% of a corporation's assets were tangible, such as buildings, equipment, etc., while the rest was in the form of intangible intellectual assets, like patents, systems, and documentation. But as cogs have given way to computers, and motors have been replaced by megabytes, Crosin reports that by 1997, the relative value of tangible and intangible assets had essentially reversed, with 73% of corporate assets being in the form of intellectual property.

    How does this shift manifest in the marketplace? In two ways: increases in productivity, and a redefining of how we work and do business.

    2. During a recent speech by the plant manager of a green field paper plant, he was asked how many of his employees used technology in the direct performance of their jobs. Answer: 100%. When he was asked how many employees he needed for his new plant, his answer was, half as many as the new plant he had managed 10 years previously. The difference? Technology.

    3. This manager's experience matches up with the results of a 2003 Alliance Capital Management, LP report, which indicated that in the 20 largest world economies, from 1995 to 2002, manufacturing jobs declined by more than 22 million, or 11%. And here's some news: America wasn't the biggest loser.

    Even though it's true that China is the recipient of the migration of many of the world's manufacturing jobs, even this capitalism rookie saw a 15% decline in its manufacturing sector. The reason? Increased productivity due to technology - even in China."

Saturday, November 08, 2003
China's SMEs Growing in Importance
Behold the power of the small and medium sized business!

China, one of the last remaining bastions of communism, is holding a forum to discuss development trends for its small and medium enterprises (SMEs). "As China's small- and medium-sized enterprise (SME) sector plays an increasingly important role in the national economy, a forum on innovation and development will be held in Beijing from Nov. 20 to 30."
Friday, November 07, 2003
Motorcycle Industry Offers Opportunity for Smaller Enterprises
The global motorcycle industry grew 7.1% during 2002, and is expected to grow over 40% by 2007. This market continues to present a promising environment for smaller enterprises and entrepreneurs. Aside from the major bike manufacturers, the market supports a myriad of small and midsize players, including motorcycle dealers, manufacturers/retailers of aftermarket add-ons, custom builders who create small numbers of highly individualized bikes, apparel manufacturers/retailers--the list goes on.

The largest motorcycle market in the world is China, with sales of over 12 million vehicles in 2002. In China, motorcycles are used for transportation. China has been a profitable market for the major motorcycle manufacturers - chiefly Japanese firms such as Honda, Kawasaki and Yamaha. However, smaller, locally owned producers are taking an increasing share of the market with knock-offs of Japanese designed motorcycles.

In the West, especially the United States, motorcycles are primarily leisure items. Toys. Nobody buys a Harley because they need transportation--it's all about lifestyle in the United States. The most successful motorcycle and powersports dealerships in the United States create an experience for consumers. They know they are selling dreams, not transportation. And, of course, there is a booming market for aftermarket add-ons to customize motorcycles so the owners can make personalized statements about who they are, riding their cool bikes.

Automotive Business Review offers more motorcycle industry stats (report fee required).

A prime example of an entrepreneur in this industry is my friend and colleague Lee Parks, who has written a book on motorcycle racing, Total Control and designed his own line of great racing gloves.
Businesses Main Users of U.S. Postal Service
According to a report by the Presidential Commission on the U.S. Postal Service, as reported by the Small Business Survival Committee:
    "As individual households rely more and more on the Internet for a wider array of their communications, the nation’s Postal Service—by default—is becoming primarily a medium for the transmission of business correspondence. All tallied, bill presentment and payment, commercial correspondence and advertising combine to generate 93% of total U.S. First-Class Mail volume today."
What does that mean? Businesses, including small and midsize businesses, are the ones paying for the Postal Service's inefficiency and inability to control costs.
Starting a Business Not Expensive
America is still the land of opportunity for entrepreneurs, where a business can be started for a modest startup investment. That's according to a study released today by the U. S. Small Business Administration's Office of Advocacy.

"Not all new ventures require large infusions of capital," said Dr. Chad Moutray, the Office of Advocacy’s Chief Economist. "Everyday ordinary Americans strike out on their own to grab their piece of the American Dream. It doesn't take a lot of savings to participate in the ownership society, just a good idea and lots of hard work and perseverance," he said.

In the study of 800 nascent entrepreneurs, modest startup costs were projected for most new ventures. Solo entrepreneurs expect median startup costs of $6,000, while the median cost expected by team ventures is $20,000.

More than 80 percent of the entrepreneurs studied expected to cover their startup costs without bank loans. The most prevalent source of startup funding was personal credit cards and help from spouses/family/friends.

Read the full study.
Thursday, November 06, 2003
Entrepreneur Survey
Ernst & Young has issued a survey of its Entrepreneur of the Year finalists, profiling the best practices of these highly successful entrepreneurs. Some of the highlights:

    - The majority (65%) compete based upon being the high quality provider. Only 15% differentiate their companies based on lowest cost.
    - Over 70% of revenue comes from existing customers, with only 30% coming from new customers. Penetration of existing customers is key.
    - Banks (34%) and family/friends/self (32%) are the primary sources of funding for these successful entrepreneurs. Only 8% are funded by venture capital.
    - 85% have a written business plan covering 1-to-3 years.
The best practices survey is insightful reading. Download it here.

Tip of the hat to colleague Don Iannone over at Economic Development Futures for putting me on to this useful study.
Wednesday, November 05, 2003
Business Success Runs in the Family
Individuals with experience working in a family-owned business are much more likely to be successful in their own businesses.

A recent study by two university professors, Dr. Robert Fairlie and Dr. Alicia Robb, indicates that simply having a relative who owned a business was not the key factor--the entrepreneur had to actually work in the business. "The main effect...appears to be through the informal learning or apprenticeship type training that occurs in working at a family business and not from simply having a self-employed family member."

In fact, experience working for a family member's business turns out to have a greater impact on success than other, non-family managerial experience. The authors theorize that individuals working in a family business acquire important general business acumen. That acumen is more important than industry knowledge or technical skills.

Bankers and venture capitalists take note: a factor to consider in gauging the potential success of an entrepreneur appears to be work experience in a family-owned business. You might want to include this as one of many screening factors.

Also, this finding suggests the importance of mentorships, apprenticeships and work experience in entrepreneur assistance.

Read the study here.
Tuesday, November 04, 2003
It's Baaack! Napster
Rumors of its death were greatly exaggerated. Napster last week arose out of the ashes of bankruptcy, and was re-launched as a fee-based service. In just one day it once again became one of the most trafficked sites for downloading music files, behind only Kazaa and MP3.

Napster has a new corporate owner, Roxio, Inc. (NASDAQ: ROXI), a provider of digital media software. Once an outlaw and the icon for bucking the major music labels, Napster now has gone legit. According to the Napster site: "Napster has extensive content agreements with the five major record labels, as well as hundreds of independents. Napster delivers access to the largest catalog of online music, with more than 500,000 tracks spanning all genres from Eminem to Miles Davis."

This suggests a new era of music download sites may be dawning. Perhaps it is true--people just might pay to download music if the fees are reasonable and the selection broad. We'll write more about this phenomena, especially the impact on smaller artists and smaller record labels, as trends develop.
Monday, November 03, 2003
Offshore Manufacturing Benefits Large Businesses and Consumers, Hurts SMBs
When manufacturing jobs go offshore, who benefits? Large American businesses and American consumers, that's who. But not small and medium-sized businesses.

That's according to a thoughtful article by Jon Markham. He dares to brave protectionist backlash and speak openly about a sensitive subject.

He points out that it is large American corporations like Motorola and Ford -- and consumers of their products -- who enjoy the benefits of cheap offshore labor, through lower manufacturing costs and lower consumer prices. "American, Japanese and other foreign companies with manufacturing operations in China account for nearly half of the goods being exported by China into the world market. *** It's not much of an exaggeration to suggest that the largest Chinese company in the world is Wal-Mart, which makes its popular house-brand goods there."

Chicago economist David Hale observes: "the major complaints from corporate America on China are coming from small or medium-sized companies that don't have the capital to invest in China or penetrate its market. ...if Beijing were to simply improve market access for small companies there would be fewer trade protectionist demands."

Clearly, SMB manufacturers without access to cheap labor in China and other places may find themselves at an increasing cost structure disadvantage compared to their larger counterparts. This will continue to be a thorny problem for SMBs.

Read more at MSN Money.

Read David Hale's article about China's current economic status (if you subscribe to Foreign Affairs).
Sunday, November 02, 2003
Weekly SMB Market Roundup
The week ending October 31, 2003 saw fewer high-tech product and service introductions targeted toward SMBs than the previous week. Yet there was still a push to capture SMB market dollars in the United States, Europe and Asia. Some of the highlights:
    - BellSouth introduces a packaged communications solution that includes a migration path to voiceover Internet protocol (VoIP). The number-three local phone company (behind Verizon and SBC Communications) is targeting small and midsize business (SMB) customers with as few as 12 users. More.
    - IBM launches its latest packages of software and services for small and medium-sized businesses, including a bundle for suppliers looking to synchronize product information with retailers through the UCCnet registry. IBM's Express portfolio bundles, which total more than 40, target businesses with between 100 and 1,000 employees. According to a Gartner spokesperson, "IBM's experience in the SMB market...is another strength....They have worked through some of the challenges of reducing cost and offering solutions with a value proposition attractive to small and midsize enterprises, which is very different than large enterprises." More.
    - While this next one isn't exactly a case of big business chasing small business, it is still worth noting: Linux followed up Microsoft's launch last week of its Office 2003 with its own series of new launches. Red Hat releases Enterprise Linux 3, which improves its performance when running apps with multiple threads operating at once. SuSE releases a new 64-bit operating system for PCs, and a new version of its Openexchange server with enhanced support for Outlook 2003. More.
    - Panda Software launches BusinesSecure, which includes a new antivirus solution providing protection specifically targeting networks of small and medium enterprises (SMEs). More.
    - VIA NET.WORKS, a provider of business communication solutions to small and medium-sized enterprises (SMEs) in Europe and the United States, launches Internet Protocol-based Virtual Private Network (IP VPN) solutions designed to meet the networking needs of SMEs across Europe. More.

SMBs Urged to Vote for Tax Relief and Less Regulation
On Tuesday, November 4th, American voters will (hopefully) exercise their right to vote.

The Small Business Survival Council, a lobbying group for small business in the United States, encourages voters to keep small businesses in mind when they go to the polls. "...entrepreneurs create 60 to 80 percent of net new jobs in the U.S. each year and... are responsible for the bulk of innovation. A vibrant entrepreneurial sector is crucial to a healthy economy."

What, in the Council's opinion, demonstrates support for small business? "A real pro-small business agenda means tax relief and broad-based incentives for small business, and less regulation."

Whether you agree with its views or not, the Small Business Survival Council appears to be gaining in visibility and becoming more of a force in shaping opinion concerning small businesses in the United States. For instance, it publishes an annual Index ranking each of the 50 states on how friendly they are to small businesses. California governor-elect Schwarzenegger cited the Council's State Index on the campaign trail to demonstrate how California's tax and regulatory structures are negative for the state's small businesses.
Saturday, November 01, 2003
Social-Networking Web Sites Hot
The hottest thing in Internet start-ups these days is social-networking Web sites. Sites like Friendster.com, Ryze.com, Emode.com and Meetup.com are seeing rapid growth.

So rapid, that some venture capitalists are likening the phenomena to last century's Internet run-up, with comments like "Does it feel like 1999 again?" Translation: some VCs are jumping on board and investing with the same kind of abandon they had for now-defunct sites like Pets.com. Others are steering clear, dubbing the environment as "bubblesque."

Many of the sites are based on free services designed to get individuals to network with one another. One person signs up, and then gets others to sign up, who bring in others, etc. It's viral marketing at its best.

There's no doubt that the sites are very popular right now, especially with young professionals. Whether a sustainable business model can be built is another issue. According to a spokesperson with Forrester Research:

    "The social networks are great as long as they are small." But "in order to have a business model, that requires scale, typically. Those two things are inherently in contradiction. It's a fundamental challenge."
Read more if you are a Wall Street Journal subscriber.

The unfortunate truth is that most of these sites will not survive in their current forms. There are plenty of businesses making money on the Internet. But Web sites based primarily on providing FREE services typically don't have long-lived business models. They are going to have to adapt--very quickly--into cash-generating machines that bring in more than they spend if they expect to survive and thrive. Hopefully that's the lesson we learned from the last Internet bubble.
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