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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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Friday, April 30, 2004
Broadband Use Rises to New Highs
Fifty-five percent of all adult American Internet users (34% of all adult Americans) have access to a high-speed, broadband connection either at home or on the job, according to a report from the Pew Internet & American Life Project. Those numbers translate into 68 million adult Americans logging on via broadband.

Forty-eight million (39% of adult users) have broadband at home. That is an increase of 60% in the twelve months ending February 29.

Pew attributes much of this increase to, "A surge in subscription to DSL high-speed Internet connections, which has more than doubled since March 2003." The report cites impatience with dial-up connections as playing a larger role in making the home-adoption decision than price of service.

Those with broadband access make greater use of the Internet. A February 2004 tracking survey from Pew identified 18 different Internet activities. The average broadband user has tried nine of those activities and will do four of them on a typical day. Dial-up users have tried seven and engage in three on average. On any given day, 69% of broadband users go online as compared to 51% of dial-up users.

Broadband users are far more likely to log on using a wireless device. On the average day, 11% of broadband users go online with a wireless device as opposed to 3% of dial-up users.

Home networks are more popular with broadband users. One-third of all broadband users have networks at home. Only 6% of dial-up users do.

Read the full report.

This dramatic broadband growth emphasizes the need for businesses to stake out their Internet space. With so many turning to the Web to find information and for other purposes, it behooves companies wanting to deliver a marketing message to take the Internet into their plans at an increasing higher level, especially as greater access speed drives time spent on the Internet to new highs.
Entrepreneurs Make Money Last Longer
According to a quarterly MoneyTree Survey for the first quarter of 2004, average time between venture capital rounds for late-stage companies increased to 15.7 months compared to 11.9 months for the same period in 2002. Expansion-stage companies extended their average funding interval to 15.5 months. Two years ago it stood at 12.2 months.

Early-stage companies seemed to buck the trend. Their average time between rounds fell to 11.9 months from an earlier 12.4. However, this was a 4% decrease compared to the 31% increase for late-stage and 27% increase for expansion-stage companies.

What a change from the glory -- or should we say gory -- days of the dotcom boom, when startups would brag about their incendiary burn rate.

Venture capital investments in the first quarter of 2004 totaled $4.6 billion. This was below the $5.2 billion in Q4 of 2003 but above the $4.2 billion invested in Q1 of that year. Over the past seven quarters venture capital investments have fluctuated between $4.2 and $5.2 billion.

Highlights of the Venture Capital Report, put together by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association, can be found on the MoneyTree site.

This report tells us that venture capital is flowing at a steady rate. While we'd all like to see it on a steady increase, the good news is that it's not dropping. More apparent good news seems to lie in the fact that, in general, startups are making their investments last longer. However hidden in that fact is a question the report leaves unanswered. Are they making investments go further because they're being smarter with money, or are they having to stretch dollars at the expense of progress because additional funding isn't available?
Wednesday, April 28, 2004
More on the Entrepreneurial Economy
Chad Moutray, of the U.S. Small Business Administration Office of Advocacy, says [paraphrasing]: America has a very low cost of entry to start a business. That's why the U.S. is an entrepreneurial country. Also, America's universities need to focus on entrepreneurs... because half of the population works for small businesses, yet education focuses on large businesses.

Via George Nemeth, of Brewed Fresh Daily, who blogged the recent Creating Enterprise conference.
Tuesday, April 27, 2004
Internet Increases Demand for Niche Stuff
Virginia Postrel takes a look at how the Internet increases the sales of niche products in her latest article in the New York Times:

' "When I first started doing work on how the Internet is affecting commerce, like a lot of people, I was really excited by this nearly perfect market," said Erik Brynjolfsson of the Sloan School of Management at Massachusetts Institute of Technology.

His early research found that prices on the Internet were 6 percent to 16 percent lower than prices off-line.

But when he thought about how people actually shop online, and what they find valuable, he realized that low prices are not the big story. Selection is. The Internet offers variety that is simply impossible in traditional stores.

When I wanted a contemporary light fixture in copper, I used Google to find a specialty retailer that had one I liked. I recently did the same thing to find a particular brand of Velcro-sealed envelope that I use for receipts when I travel. I regularly turn to Amazon.com and Alibris for books I cannot find in local bookstores or even libraries.

Online shoppers are not just buying the same stuff for less money. They are buying different stuff. And they are much more likely to be getting exactly what they want than are off-line shoppers. Wal-Mart has low prices, but Walmart.com carries six times as many items as the largest Wal-Mart store, the article says. "Amazon's slogan is world's biggest selection, not world's cheapest prices," said Professor Brynjolfsson, who has done pioneering research on information technology and productivity.

All this variety could be overwhelming. But consumers do not have to sort through item by item. Online shopping includes tools like search engines and customer review sites, or Amazon's many referral services.

You are not only more likely to find what you are looking for online. You are more likely to discover something you like that you did not already know about, Professor Brynjolfsson said. Partly through links and referrals, the Internet increases sales of obscure products. In 1997 and 1998, in the early days of Internet commerce, The MIT Press reported 12 percent annual increases in sales of backlist books, thanks to Internet retailers.

"In effect, the emergence of online retailers places a specialty store and a personalized shopping assistant at every shopper's desk," write Professor Brynjolfsson, Yu Hu, and Michael D. Smith in a November 2003 article in Management Science. "This improves the welfare of these consumers by allowing them to locate and buy specialty products they otherwise would not have purchased due to high transaction costs or low product awareness." '

And it's not just the behemoths like Wal-Mart and Amazon that are profiting. Just think about how many small businesses are thriving by selling niche products and services through the Internet. Without the Internet as a marketing and distribution channel, many of those same small businesses would not even be in business. They wouldn't make sufficient sales of unusual or niche products in their local markets through traditional retail.
Visit Carnival of the Capitalists
This week's Carnival of the Capitalists is posted over at Venturepreneur, an entrepreneurial blog.

Check it out for links to a showcase of great articles on business topics.

For those of you who are new to Carnival of the Capitalists, it is a traveling cyber-event that appears each week at a new weblog. Visit here for background information on Carnival of the Capitalists.
Monday, April 26, 2004
Not Your Father's Farmer
The more I learn about modern-day farming, the more impressed I am with the business of farming. Like other businesses, farming is becoming more productive and efficient through technology.

Consider this picture: A small business owner attends a seminar put on by experts. At the seminar, the business owner learns about computer databases, PDAs to gather information in the field, and RFID to track inventory.

Now, you might have thought the business owner is in retail or manufacturing. But -- no -- the business is a cattle farm.

Over at the RFID Weblog I've posted a short article illustrating some of the technology and business considerations that small farmers today have to deal with. I had no idea....
Sunday, April 25, 2004
PowerBlog Review: Blog For Business

Editor's note: This is the twelfth in our popular weekly series of PowerBlog Reviews of other weblogs...

Blog for Business is a blog by Barbara Payne. Her blog's tagline is "Find your true voice...and grow your business."

And that's really what Blog for Business is all about: letting your true voice ring through in a business weblog.

You see, Barbara is a really good freelance writer. Really. I'm not exaggerating. That's her trade name and her domain name.

She says that a weblog can be used to grow your business, no matter what that business may be. To be successful at it, she says you have to "speak" in your true voice. By doing so, you let your unique skills and capabilities come out for clients, customers and business partners to hear.

Barbara herself has a special way of writing about business subjects and letting her personality come through. And since Barbara's forte is corporate communications, who better than she to show the rest of us to how to communicate in business?

Rather than talking about blogging per se, Barbara demonstrates how to use a blog to show off what you, the businessperson, can do with a blog.

One of the most valuable aspects of a business blog, Barbara says, is that it provides time for us to reflect:

"Blogs are places where we can stop and reflect. Filter out. Slow down. See a different side of an issue. Get the benefit of someone else's thinking, but in a personal way, not just as another place we have to absorb more information.

It's certainly not a new idea that reading enriches our lives. But blogs are a way we can incorporate reading without having to change what we're doing (sitting at the computer) and still enjoy some of the pleasure of conversation (most blogs allow comments if you have the time and the urge). And it's that personal touch that makes blogs different from all the other data we must take in."
Barbara goes on to add: "...[A]s we become more and more overloaded with electronic data, information, input, etc., the more visible and audible will be the voice of the individual. The true voice calls out from the mass of information to serve as our filter, our editor for what to pay attention to."

Blog for Business has been live on the Web since November 2003. Barbara blogs from the Midwest USA in Cleveland, Ohio.

The Power: The Power of the Blog For Business weblog is in the way it teaches each of us to find our personal voice. Blog For Business is not about adopting a scripted formula for a blog. Rather it teaches the need to personalize -- to develop and leverage a unique style all your own.
Small Business Trends "Comments"
My partner, Dave, and I have just added "comments" and "trackback" features to Small Business Trends.

We feel that reader comments will make the site a richer resource for everyone. The same goes for trackback, which lets anyone see at a glance the articles that refer to our posts.

Up to now we hadn't turned on comments because we were concerned about spam. We are still concerned, but we think the benefits outweigh the negatives. So, comment away!
The Hollow Corporation
When brand is everything, when a company makes nothing and outsources everything -- what kind of business is that?

A successful business, according to an article in the UK publication, The Times.

It's also a template for the modern business model of the 21st century. In Europe and the U.K. such a business is known as a "hollow corporation." In the U.S. and elsewhere it is often known as a "virtual business."

During much of the 20th century, the typical business model was that of a vertically integrated business, i.e., one which sold what it made. That model has been shifting.

Quoting Kjell Nordstrom, co-author of Karaoke Capitalism, the Times reports:
" 'The boundary of the firm -- the definition of what is inside or outside the company -- has always moved back and forth,' said Nordstrom. 'What is happening now is that the boundaries are moving more quickly; and they are moving in a particular direction, with companies shifting more and more activities out of the corporation.'

The result is that companies, both large and small, are performing ever fewer of their traditional functions and becoming 'hollow'."
Driving this trend toward hollow or virtual businesses are the usual suspects that you've read about here before at Small Business Trends: globalization and technology. International, cross-border trade has become easier due to lessening of trade tariffs and technology that brings the world closer.

Component tasks can be performed anywhere in the world. People in diverse parts of the globe working on common technology platforms provided by Microsoft and Google can now share work product seamlessly. They can communicate easily and cheaply across long distances due to undersea fiber optic cables. Through technology, distance between workers is no longer the limitation it was once.

As the Times article points out, this development is nothing new in the United States, where the concept of the Free Agent Nation has been growing for years. In a revealing bit of socialistic sentiment, the article notes with some surprise that the number of self-employed in the United States exceeds those employed by the public sector. Of course, those who adhere to capitalism would say that ratio is exactly as it should be.
Friday, April 23, 2004
Tech Recovery and SMBs
The most recent issue of the Kiplinger Letter (subscription required) predicts we are in a tech recovery that will last for years. It will be marked by steady growth, instead of the booms and busts of the past decade.

The largest software providers -- Microsoft, IBM, Oracle, SAP -- will be aggressively wooing small and midsize businesses (SMBs), Kiplinger predicts.

Here's a news flash! The future is here. Microsoft, IBM, Oracle and SAP already are wooing small and midsize businesses. The same goes for just about every other IT provider on the planet, including the most recent provider to announce an SMB initiative, Cisco.

And is it any wonder? The small business market is very attractive, accounting for 31% of total IT expenditures in the United States.

Thursday, April 22, 2004
Internet Search for Small Businesses
The Search Engine Journal suggests that the typical small business is finding it more expensive to get listed in the search engines. Google still offers free listings. But the second most important search engine, Yahoo, requires paid inclusion for commercial websites:
"...[T]he typical small business owner may not see a great deal of promise in these developments, just radically higher costs. Finding a balance between intelligent online advertising options and intergalactic online advertising costs will be a challenge for small business owners in the coming years."

At the same time, there are more options than ever in the world of Internet search. Local search is hot. Froogle offers another selling option for products. Pay-per-click ads offer highly targeted, budgetable options. What this all means is that search engine marketing will command an increasing share of marketing budgets in the future.
Wednesday, April 21, 2004
More on U.K. Small Businesses
From the FSB survey of small businesses in the United Kingdom, three notable trends stand out:
  • The owners are mature, with two thirds (66%) over the age of 45.

  • A growing proportion of U.K. business owners are women, although women-owned firms are still in the minority.

  • Home based businesses are becoming a significiant trend among U.K. small businesses. One fourth of firms surveyed are home-based businesses.

Tuesday, April 20, 2004
Booming Second-Hand Clothing Business
Sales of second-hand clothing from western countries are booming in the former Soviet state of Belarus. In the past five years, sales of used clothing have increased four and a half times, now accounting for 10% of all Belarus clothing sales. Small Belarus entrepreneurs have popped up selling the western cast-offs:

"We wear second-hand all our lives," said Alexander, a trader at the "field of wonders" market. "In the kindergarten we share common bed linen, then you wear your older brother's clothes and in prisons and armies even underwear is shared. So what's the difference if you wear your brother's clothes or your neighbour's or some Irish guy's?"
Government and trade officials have pleaded with the populace to buy domestic clothing only, but so far no one seems to be listening. Apparently the Belarus clothing is poor quality and the population has low spending power.

Of course, none of this should come as a surprise to anyone in the West who surfs eBay. Sales of second-hand clothing in developing nations support a global daisy chain of entrepreneurs. For instance, I know several U.S. entrepreneurs and moonlighters who scour the garage sales and flea markets snapping up used blue jeans, polo shirts, and other clothes. They then turn around and auction them off on eBay. Right now on eBay there are over 87,000 pairs of blue jeans for sale. I wonder how many of them will end up in Belarus, being re-sold by a Belarusian small businessman?
Monday, April 19, 2004
U.K. Small Businesses Optimistic
Yesterday I noted that small businesses in the United States were feeling optimistic and hiring was up. Well, it seems that small businesses in the U.K. are feeling much the same.

Tomorrow, the largest study of small businesses ever undertaken in the U.K. will be released. An advance press report says that the U.K.'s small business sector is healthy, confident and benefiting from a growing economy. The study shows 43% of small businesses have increased employment since 2002, while only 16% report employment declined.

The study was conducted of over 18,000 small businesses by the Federation of Small Businesses, which says it is the U.K.'s leading association for small businesses.

I am looking forward to reading more details about the study.
Sunday, April 18, 2004
PowerBlog Review: World is Green

Editor's note: This is the eleventh in our popular weekly series of PowerBlog Reviews of other weblogs...

World is Green is "Suhit Anantula's Blog on Rural India." As you might expect, Suhit resides in India -- Mumbai, to be exact. That's the city we used to know as Bombay. Mumbai is the economic hub of India, located on the west coast of that large country.

World is Green has been live on the Web since December 2003. Yet, Suhit has a lot of experience in the blogosphere.

Prior to World is Green, Suhit published a couple of other blogs.

Perhaps more significantly, Suhit was inspired by another Indian blogger, Rajesh Jain, whose blog is www.emergic.org. Indeed, Suhit has managed what many people secretly or not so secretly aspire to -- he got a job through blogging.

Suhit now works with Rajesh Jain at Deeshaa Ventures. And he is doing what he loves, and using World is Green to carry forward his life's work and passion.

World is Green uses the term "green" as a metaphor for all that is good in the future of rural India. Suhit says of the term "green":

    "It stands for growth, prosperity and also sustainability. It stands for nature and good things. So in many ways my professional and personal life of working in developing rural India matches with Green."
Through Suhit's blog you come to understand the conditions and challenges facing India's 600 million rural residents, of which over 200 million are farmers. This is a blog with a social conscience and a mission.

The mission is aligned with the mission of Suhit's employer, Deeshaa Ventures: it seeks to transform the rural Indian economy and thereby contribute to India's economic development.

World is Green covers a variety of topics, all centered around various aspects of living or working in rural India.

One of the things I like best about World is Green is the way it makes me think about things that are outside of my current experience. The picture that Suhit draws for us of rural India is a world in which millions of workers are eking out a living often at a subsistence level. This is a world in which a US$100 microloan can make the difference between hopelessness and finding a way out of poverty.

World is Green also has great insights into marketing, technology and even banking for rural India. There is even an inspirational quote of the day feature. Of course, just to keep us on our toes, the quotes are from unconventional sources. For instance, a recent quote consisted of the lyrics to a John Mellencamp song.

The Power: The Power of the World is Green weblog is in its strong sense of mission and its commitment to changing India. Suhit Anantula's passion for his work comes through in every posting. He is changing the world one post at a time. Meanwhile, the blog is also entertaining and enlightening.
Small Businesses Are Hiring
Small businesses in the United States are feeling quite optimistic these days. That's translating into more hiring by small businesses.

The National Federation of Independent Businesses (NFIB) reports that small businesses added 0.4 workers on average during March alone. And another survey, this one by Challenger, Gray & Christmas, reports that small business hiring was up 25% during the first three months of 2004.

Jobs figures for small businesses are especially important indicators. That's because small businesses are responsible for roughly three-quarters of all net new job growth in the United States, according to the Small Business Administration.
Saturday, April 17, 2004
Dry Cleaning Industry Feeling Pressed
The first dry cleaner was started by an entrepreneur:

    "A Frenchman, Jolly Belin, accidentally spilled some kerosene on a stained garment and discovered that the kerosene removed the stain. This led to a series of experiments to refine the process, and in the 1840's, Belin opened the first dry cleaning establishment in Paris."
That is still true today. In the U.S. there are 30,000 dry cleaning establishments, with 85% being small mom-and-pop establishments. The average firm employs 5 people and generates US$200,000 in sales.

But changing consumer, environmental and market trends are making it harder to be a dry cleaner.

Consumers are using less dry cleaning today due to the casual dress trend in the workplace, increasing use of home dry-cleaning kits, and changing fabric trends and care labels.

Stricter environmental laws regulate the use of perc, a carcinogenic substance in dry cleaning solvents. That in turn has led to higher hazardous waste disposal costs, expensive changes of equipment to new cleaning methods, and loss of leases by landlords concerned about environmental issues.

And finally, increases in minimum wages and intensified competition have taken their toll.

Despite all these issues, the dry cleaning industry is expected to grow at a modest 4% annually over the next several years, according to Integra Information.

Successful dry cleaners are dynamic and taking the industry issues in stride. They are making a number of changes to compete successfully.

First, they are migrating toward environmentally friendly methods of cleaning, eliminating the use of perc.

Second, and most importantly, they have gotten much better at customer service. The best ones have even become innovative. My local dry cleaner is a good case in point:
  • They are going to the customer. My local dry cleaner sent a person door-to-door in my neighborhood to sign up customers for free pick-up and delivery service. And when I haven't been in for a while, my dry cleaner calls and says "we notice you haven't been in for a while--would you like us to send out a truck to pick up your dry cleaning?" Of course, the call reminds me that I have a few items needing cleaning.

  • My dry cleaner has a loyalty card program. After 20 purchases of $15 or more, I get $20 in free dry cleaning. It's a significant benefit that makes the card worthwhile, and keeps me coming back.

  • The staff is well-trained and uses technology appropriately. If I forget my cleaning receipt, they look it up for me in the computer system -- willingly and with a smile.

  • They offer special services such as off-season storage and alterations.

My dry cleaner is NOT the least expensive. In fact, they are at least 15% higher than other nearby cleaners. But I keep going back because the service is better and I like the way they are being innovative to make things more convenient for me. That's everything in a service industry.
Friday, April 16, 2004
A Business Friendly Europe
Loic, a Frenchman, has started a very interesting discussion about creating a business friendly Europe. It gives critical insight for American readers. Loic says that Europe does not currently have enough entrepreneurs, and he calls for change:
"The entrepreneurs who are successful in the US are often considered as heroes. In Europe, most of them hide themselves because success is not something you can show to the same extent, because many people around them start to become jealous.

The image of European entrepreneurs must change. They are creative, they take risks, they create jobs, they put their life and family at risk to start their businesses.

Europe needs more entrepreneurs."
His theme has been picked up and expanded by other European entrepreneurs.

Victor Ruiz, from Spain, expands further with the Spanish view of entrepreneurs (his weblog is in Spanish, so I am translating his words into English):
"In Spain, the desired job is that of the civil servant: a job for life, without much risk. According to the monthly CIS surveys, one of the greater problems perceived by our [Spanish] society is unemployment....

The rates of unemployment in the U.S.A. are very low, and it is customary to move around and change jobs periodically. The Americans do not think that they will have a job forever and they always aspire to more, or at least to something different. American workers are dynamic. Due to the Spanish labor situation, I am convinced that the perception in this country is also changing in that sense, although the current situation is perceived as a bad one.

And due to our culture, the current situation really is a bad one: our way of life pushes to us to independence, to marry and to buy a house. In order to buy a house, aside from guarantees, the banks ask for a stable position. Without a stable position, there is no house, there is no family and there is no independence. In other countries the need to buy a house is not as great, and therefore mobility comes more easily.

Europe must change its thinking, not only about entrepreneurs, but about jobs."
Torsten, from Germany, makes this observation about German entrepreneurship:
"I fully agree with Loic, I think the key for more entrepreneurial activity in Europe is to raise the image of entrepreneurship and to build a society that rewards taking risks. For me this is the biggest difference between US and Europe. People in Europe have to deal with a much smaller risk exposure as they grow up. This is true for positive as well as negative sides of risks. Once people start a job the notion to change and start on your own is more limited. *** Another difference you learn from US is that many people you meet count business as a kind of hobby. Ask German or French folks and if you hear business or even economics you'll be a lucky one."

Sometimes you can best see your own country through others' eyes. These views from France, Spain and Germany about entrepreneurship are very enlightening. At a time when Big Media seems to report only that the world hates and reviles the U.S., these articles suggest that the U.S. may be doing a few things right. :)

Yet, even in the U.S. we have millions of Americans who do not wish to be entrepreneurs -- ever! They prefer a steady job over starting or running their own business. That will always be true for some people, no matter where they are located.

Indeed, a strong business ecosystem needs businesses of all sizes, especially large ones that support the existence of small businesses through (a) purchasing the products and services of small businesses, and (b) employing affluent employees who also purchase from small businesses. That means some significant part of the population must consist of employees working at those large businesses. So, there is a place and need for every type, in every country.

Wednesday, April 14, 2004
WiFi Hotspots for Small Businesses
Boingo and Linksys have banded together to provide Hot Spot in a Box for small businesses. The solution lets small businesses provide commercial WiFi to patrons on their premises.

It is targeted specifically for small businesses such as coffee shops, restaurants, doctor's offices, gas stations, independent hotels, retail outlets, and office lobbies.

What I find interesting is the business model for this product. The small business sets up the hotspot, and then individual patrons must sign up and pay for the WiFi access. The small business gets paid a fee each time someone signs up for WiFi access.

Boingo claims that its product enables small businesses to compete with national chains that offer WiFi hotspots.

My colleagues who spend a lot of time in the coffeehouses are skeptical. They say the annoyance of being confronted with a "pay" screen when you try to access the hotspot, undoes all the positive goodwill of providing the hot spot in the first place -- and may even anger patrons.
Tuesday, April 13, 2004
Crouching Tiger: VCs in Asia
I see that Red Herring has launched a new column to follow the rising levels of venture capital in Asia.

The United States has traditionally dominated the world in venture capital investment levels. As the 2003 Global Entrepreneurship Monitor reports (at page 76):
    "Companies that have changed the global economy such as Intel, Microsoft, Apple, Dell, Genentech, FedEx, Cisco, Netscape, Google, ebay, and amazon.com were backed by venture capital in the United States. Is it any wonder that almost every developed country and many developing nations are striving to emulate the success of the United States venture capital backed industries?"
But the U.S.'s dominance is gradually lessening. In 1999 the U.S. made 84% of the world's venture capital investments. By 2002 that share had dropped to 70%. Most of the non-U.S. venture capital came from Canada, Europe, Israel and Japan.

Today, in 2004, VCs are emerging in developing markets in Asia. China is hot, with India following right behind it.
Monday, April 12, 2004
Health is Big Business for Entrepreneurs
Venture capital investments in the U.S. rose slightly during the fourth quarter of 2003, although they are still nowhere near the highs of the Dot Com bubble. Instead, investment levels seem to be evening out at pre-bubble levels.

By far the biggest category of investment (27%) was in life sciences (biosciences and medical devices). Software came next.

Health, i.e. life sciences, is big business for entrepreneurs and small companies, it seems.
Sunday, April 11, 2004
The New Entrepreneurial Economy
The American economy is becoming more entrepreneurial. The ranks of small businesses, entrepreneurs and self-employed indviduals are growing at a fast clip.

Interestingly, this issue has become a hot political potato during this election year. Debate is swirling around the government's "Payroll" numbers and the "Household" numbers. Some are suggesting that the Payroll jobs numbers are understated because they do not reflect the large numbers of self-employed and entrepreneurs. People who are far more schooled in economics than I are debating the issue, so I won't attempt to argue the numbers.

But, setting aside economic theory and election year politics, it seems pretty clear from where I sit that the American business landscape is more entrepreneurial, as this commentator notes:

"Every one of us...knows that our economy is changing. More and more, it is being driven by small business and entrepreneurial activity. The nature of employment is changing dramatically as well, spawned by a huge shift toward self-employment, contracting, and consulting.

Contracting is an interesting phenomenon in employment. As firms responded to the recession by restructuring, they frequently replaced employees with contract workers -- often the same people doing the same job, just not on the official payroll. Or these highly trained workers took other work, again not as employees but as consultants.

For example, my brother was laid off two years ago from Reuters. He now "works" for Disney as a consultant with better wages and better terms. He gets a check from Disney; it's just not a paycheck. The significance of this is that this phenomenon is increasing dramatically...."
Why is this happening? I think there is no single reason you can point to, but a combination of factors:
  • Large corporations want to be leaner and meaner, and so they are outsourcing functions rather than staffing them in-house. The rising cost of benefits, especially health insurance, is part of what's driving this trend. Other factors include the difficulty and expense of terminating employees in our litigious society, and the lack of flexibility to reduce costs during lean times. And then there is the increasing complexity of business, requiring pockets of expertise that would be difficult or inefficient to staff internally.

  • It's easier than ever to start your own company. Just about anyone who can afford the filing fee can become the CEO of their own limited liability company, thanks to the Internet. You can check whether a company name is available online, download the LLC forms, spend a few minutes filling them out, mail them in with a check and -- voila! You own a company. Blogger Bill Hobbs has been tracking the increase in LLC filings by state, and the numbers show record LLC filings in most states during 2003.

  • An aging baby-boomer population is finding itself better situated to be self-employed or business owners. We could call the new millennium "the age of the consultant." As our population ages, many are at a stage in their lives when they value being their own bosses more than regular paychecks. And they have the financial wherewithal to become business owners rather than employees.

  • Even small businesses are outsourcing. Think a one-person business is too small to outsource? Not so -- many small businesses are "virtual companies." Nearly every entrepreneur and small business that I know (and I know dozens) outsources something -- usually to another small business, consultant or entrepreneur. My own business is no exception. Last year my company outsourced to more than 11 small businesses/consultants. You can even find advice on how to outsource if you are a very small business.

The American business landscape is changing. It's very much related to this concept of the business ecosystem: businesses that rely on a network of partners, suppliers, consultants, and others. Email me your comments if you'd like to weigh in: anita@anitacampbell.com.
PowerBlog Review: Red Wheelbarrow

Editor's note: This is the tenth in our popular weekly series of PowerBlog Reviews of other weblogs...

The tagline of Red Wheelbarrow says "So much depends on the details." And that's a pretty good description of Red Wheelbarrow's approach to blogging. This weblog is all about small details that make all the difference on an issue.

The blog is published by Jerry Ritcey, originally from Nova Scotia, Canada and now from Cleveland, USA. Jerry describes himself as a "Canadian-expat-trombonist-turned-tech transplanted to Northern Ohio."

Jerry says he is a bit of a news junkie, and likes to find out the motivations and deeper thoughts behind news stories. He started to blog because he found himself going to blogs to get most of his news from them. He believes that looking in depth at issues has moved from the realm of big media, to amateurs on the Internet.

Red Wheelbarrow covers a wide variety of subjects, including politics, art and, oh yes, business. On business topics in particular Jerry brings a common-sense approach that I find especially refreshing and insightful. For instance, I know he thinks overly-broad U.S. patents are a bad thing (shakedowns he calls them). And I know that as a customer he feels frustrated with outsourcing ("can I get someone to live my life via an outsourcing contract?" he wonders). Yet he avoids sounding politically polarized on any issue.

As a fellow blogger says about Jerry: "He's almost single-handedly threatening to subvert our lazy generalizations about geeks not being literate and well-rounded."

One of the things I like best about Red Wheelbarrow is that while it does not shy away from covering politics, it manages to do so without reverting to being 100% left or right. There's a balance that's refreshing in this day of polarized media.

Here's an example of Jerry's well-rounded, thoughtful approach, where he says in one post:

"After I moved here I still thought I might move back to Canada eventually. Then came September 11th. I think I'll stay here, to show support for the individuality, liberty, and freedom that many Americans don't even realise that their nation embodies for many of us.
Red Wheelbarrow has been on the web since August 2003.

The Power: The Power of the Red Wheelbarrow weblog is in its insightful, balanced freshness. Jerry Ritcey takes a topic reported on elsewhere and manages to pick out one thing unusual or especially notable and expands upon it. Or he digs around and finds even more to add to the backstory. Readers leave Red Wheelbarrow feeling as if they have found something new or little covered elsewhere.
Saturday, April 10, 2004
Going to the Customer
Here's an interesting little trend: small businesses located in American suburbia are "going to the customer."

Instead of expecting customers to come to them, small businesses are bringing services to customers where those customers work. Small consumer-oriented businesses have found promising niches by providing on-site service at corporate offices. Consider these examples:
  • A dry cleaner offers pick-up and delivery service with next day turn around. The dry cleaner picks up from consumers' workplaces in the suburbs.

  • Shoe shines are provided at local car dealerships and at Pepsico corporate offices.

  • A massotherapist in California offers massages at workers' desks. Employees at Yahoo, for instance, can order the service online.

  • An auto service firm offers oil changes and replaces wiper blades dozens of times a day for employees at local office parks, by going to them at work.
For these small businesses, the presence of corporate offices nearby has been a big business driver. Corporate offices mean affluent employees who are too busy to handle routine errands, but who are willing to pay for convenience. Savvy service businesses understand this trend, and are leveraging it to the hilt.

I think this technique of "going to the customer" is a creative way for business-to-consumer companies to create a business ecosystem around them. The business environment in the United States in the new millenium is increasingly like an ecosystem, where one business relies on another. But the ecosystem doesn't need to be limited just to the business-to-business realm. Even small consumer enterprises can develop an advantageous business ecosystem with large corporations located in their areas.
Friday, April 09, 2004
SBA Loan Cap Removed
Back in January we wrote here and here that the U.S. Small Business Administration had temporarily run low on funding, due to Congress not passing a budget bill. An interim emergency bill alleviated some of the problem. But since January, loans were capped at US$750,000.

Well, now that loan cap has been removed, returning the maximum size of a section 7(a) small business loan to US$2 Million. This is the result of Congress passing, and President Bush this week signing, a bill increasing funding to the SBA.

Here at Small Business Trends we are very glad to hear this news. The U.S. Small Business loan programs have done untold good for smaller enterprises. Consider these statistics: The SBA will have funding of US$12.5 Billion to make small business loans in 2004. The SBA will reach up to 90,000 small businesses with its loans in 2004, a figure which translates into having an impact on half a million jobs.
Thursday, April 08, 2004
The Small-Company Community
Nick Corcodilos, syndicated columnist of Ask the Headhunter fame, speaks about the "small-company community."

In giving advice to a job hunter wanting to know how to find a good small company to work for, he says:

"There are a lot more small companies out there than there are big ones.

While many don't advertise jobs, you will find them in the business-news pages of the newspaper. Pay attention in restaurants and in movie lines. You will overhear talk about small companies because that's where most people work. ***

While one company may not be your cup of tea, its president (or receptionist) may introduce you to another that is. This chain of connections is how they do business with one another, and it's a great way for you to navigate through the small-company community."

Small companies learn about products and services in much the same way -- word of mouth.
Wednesday, April 07, 2004
Productivity Changing Coffee Farming
You wouldn't know it from the price of a cafe latte at Starbucks, but wholesale coffee prices are so low that growers have to sell at a loss.

The situation is so dire that many of the world's 25 million coffee growers -- including millions of "smallholders" -- are facing humanitarian crises.

At the heart of the issue is technology, which has increased productivity, leading to increased supplies of coffee. This in turn drives grower prices down. According to a McKinsey Quarterly study:

    "During the past ten years, the industry's cost structure has shifted as a result of Brazil's productivity-enhancing innovations (including the cultivation of less frost-prone areas, better mechanized harvesting, and increased irrigation) as well as competition from cost-efficient new entrants such as Vietnam. The increasing demand for coffee made from the cheaper robusta bean (a development driven by steam-cleaning technologies that can better mask its bitter taste) and rising consumption by price-sensitive consumers have also had an effect. Arabica beans, which roasters consider a better-quality product, are used in higher-end specialty coffees but have become a shrinking component of mass-market brands...."
Essentially, what the McKinsey study shows is that due to technology bringing productivity improvements, there is no longer a need for as many coffee farmers.

And just like in other industries experiencing improved productivity, coffee growers are going to have to change in order to survive. McKinsey recommends that some growers specialize in the high-end specialty coffee market. Others will have to diversify into areas such as tourism (ecotourism and agrotourism) and light manufacturing, or start growing other crops.

In essence, coffee farming is facing the same issues as manufacturing and many other industries. Technology has brought about fundamental changes and productivity improvements, replacing the need for labor. And like other industries, the coffee industry is going to have to evolve and renew itself. Groups like Technoserve, the non-profit that sponsored the study, provide technical and other assistance to ease the farmers' transition as they move into other businesses or otherwise transform.
Tuesday, April 06, 2004
More on Health Insurance
Last week I wrote about the difficulty of very small U.S. businesses (2 to 5 employees) getting health insurance.

Well, now, Medpundit offers additional insights in a longer article over at Tech Central Station.

According to U.S. Census figures, 15.2% of the U.S. population lacks health insurance coverage. That's 43.6 million people.

And according to figures published by the National Federation of Independent Businesses (NFIB), over 50% of the uninsured are employed by a small business.

Health insurance coverage for small businesses is a very different issue than for large businesses. As Medpundit points out, large businesses can self-insure and have ways to spread out the cost of coverage that small businesses do not. For instance, small businesses are subject to a variety of state laws and regulations which limit what they can do and where they can seek health insurance policies to cover employees. Medpundit goes on:

    "So, when you hear that a state requires all insurance companies to cover infertility treatments or acupuncture, it isn't the deep pockets of Microsoft or the Ford Motor Company that's paying for it. It's the self-employed small businesses, and their employees who foot the bill. That's why workers in small businesses nationwide pay on average seventeen percent more for health insurance than workers in large companies -- if their employer can afford to offer it."

What is the solution? There are several things that can be done to alleviate the pressures of health care coverage on small businesses. Among them, Medpundit favors federal legislation that will allow small businesses to purchase insurance cost-effectively across state lines through national trade and professional associations.

The NFIB also favors giving employees of small businesses the right to purchase individual coverage and have the cost of the premiums reimbursed up to a certain amount by the employer.

Monday, April 05, 2004
Site Acting Erratic
Blogger seems to be having some minor problems. You may get an error message if you click on a permalink or one of the archived sidebar links. Until the issue is resolved, please "refresh" your browser and try clicking again. The problem seems to be sporadic, and sometimes a refresh resolves it.

Visit Carnival of the Capitalists
This week's Carnival of the Capitalists is now posted at Crazy Pundit.

Check it out for links to a showcase of great blog articles on business. For those of you who are new to Carnival of the Capitalists, it is a traveling event that appears each week at a new weblog. Visit here for background information on Carnival of the Capitalists.

Sunday, April 04, 2004
PowerBlog Review: TJ's Technology, Venture Capital and Entrepreneurship

Editor's note: This is the ninth in our popular weekly series of PowerBlog Reviews of other weblogs...

TJ's Weblog is all about "Technology, Venture Capital and Entrepreneurship." This weblog is an excellent source of insights into what it is like to be an entrepreneur in Europe. It is also a great venue for learning about some of the latest and greatest information technology products and trends.

The blog is published by Torsten Jacobi ("TJ"), from Hamburg, Germany. Even though he is German, Torsten blogs in English.

I think it's fair to call Torsten a serial entrepreneur, based on his bio here. In addition to being an entrepreneur, he also now invests in new ventures.

That experience as both a technology entrepreneur and an investor makes for very insightful observations.

One of the things I like best about this blog is the incredibly broad range of information technology developments it covers. You read his blog and think "Where does he find all this stuff?"

For instance, it was through TJ's weblog that I first learned about del.icio.us, a new online bookmarking service than I am experimenting with right now. I initially dismissed del.icio.us. I already had a way of saving my favorite sites. But Torsten's description of it made me take a second look. Especially when he said, "Now I get a decent amount of my noteworthy bookmarks everyday from del.icio.us. Indeed, it is del.icio.us. :)"

That kind of first hand, savvy insight is one reason weblogs are so valuable. Through weblogs such as TJ's, you can get information that is hard to find elsewhere. You might learn about IT applications that are so cutting edge or niche focused, that mainstream media doesn't cover them. And you get savvy first hand insights.

Also, as an American, I find it difficult to get much information about entrepreneurship in Europe from the mainstream media. Certainly I don't find much written in English. TJ's weblog provides excellent insights. With the globalization trend touching us all, it's important to be aware of what is happening in important commerce centers of Europe. That's especially true of Germany, which has one of the world's largest economies.

TJ's weblog has been on the web since June 2003.

The Power: The Power of TJ's weblog is in its unique insights. It examines issues from the perspective of both an entrepreneur and an investor, and gives you the benefit of both. The Power also lies in the global view it imparts to the blogosphere. And there is Power in this blog's coverage of new and unique technologies, that you can't find out much about elsewhere.

Friday, April 02, 2004
Third World Version of Venture Capital
Forbes has an uplifting article profiling tiny businesses that have broken the cycle of poverty and desperation. With the help of microloans, entrepreneurs in places like Pakistan, Haiti, Burma, El Salvador, Tanzania and Afghanistan have started businesses, become self-sufficient, and even employed others:

"In 1995 Mkama was barely scratching out a living for herself, her husband and her ten children by raising and selling tomatoes. With a $50 loan from the Foundation for International Community Assistance, she bought spare parts for her bicycle so she could get to the ferry that would take her to the market in nearby Mwanza [Tanzania]. With subsequent loans, she bought better seed and fertilizer. Now, on a good day, she can pull in a profit of $4."
In underdeveloped countries, especially rural areas, venture capital and traditional bank loans are simply not available. Microloan programs (and related microenterprise programs such as grants and pension savings) play crucial roles.

Take, for example, the Grameen Bank. It is the grandaddy of microlending programs. It has over 3 million borrowers, 95% of whom are women. World is Green reports that Grameen even has started a microgrant program for beggars in Bangaladesh.

What's the secret behind microlending? Peruvian economist Hernando de Soto says private ownership rights foster entrepreneurship. I think that's a big part of the success of microlending. Building something you know is -- and will stay -- yours is a powerful motivator.
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