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Anita Campbell, Editor
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Thursday, September 30, 2004
Small Businesses Are Going Global
GlobeTrade.com is an organization dedicated to helping small businesses go global in their search for markets.

We recently asked Laurel Delaney, GlobeTrade.com's Founder and CEO, to share her thoughts about key trends in small business globalization. Here is what Laurel had to say:

    The World is Your Oyster - Never before in history have conditions been more favorable for small businesses to go global in the search for markets. In the United States alone there are 230,000 small businesses exporting. These small businesses export nearly US$182 Billion annually. This means that in the 21st century, nearly one-third of all U.S. exports come from small businesses with under 500 employees.

    Even more interesting is the fact that a mere 10% of small businesses are exporting. Obviously, there is plenty of room for more small businesses to get their share of global markets.

    Which small businesses are doing the most exporting today? They fall into three categories:
  • Companies which manufacture or distribute niche products. Finding markets for export products depends not so much on price as on uniqueness and expertise. Trying to compete with very low-cost providers in places such as China on basic, undifferentiated goods is not what we are talking about. But we are talking about changing the paradigm, and exporting goods which are the best in the world at their intended purpose. Niche products which require special expertise to manufacture or create, or which fill specific market needs are hot exports today. Examples include home furnishings, sporting goods and recreational equipment, and software applications.

  • Internet-based businesses or online services that can be delivered across borders. The Internet is a crucial tool for exporters. Businesses which have an online presence are far more likely to find markets for export -- by a ratio of 20-to-1. Even service businesses are more likely to be able to find export markets, if they have an online presence. Examples include eBay sellers, site translation services, search engine optimization services, eLearning businesses, logistics coordinators, and border compliance providers.

  • Construction materials and energy sources. China has a red-hot economy right now. It is consuming huge amounts of construction and building materials and related services. Supplying China with the basic materials it needs to manufacture end goods is a key area of exports from the U.S. and other Western countries today, including: steel, scrap metal, engineering services, architectural services, environmental consulting, and of course building products.
    The world can indeed be your oyster if you keep up to date on what is happening across the globe, and get the right help to get into exporting.
Laurel Delaney has more than 20 years' experience in global trade. She is CEO of Global Trade.com and the author of "Start and Run a Profitable Exporting Business." Download a copy of GlobeTrade.com's free whitepaper "The World is Your Market: Small Businesses Gear up for Globalization."
Wednesday, September 29, 2004
Digital Photo Printing Stays Home
Makers and sellers of ink jet printers and supplies can take heart from a recent Lyra Research report while photofinishers can only read and weep. As the number of households with digital cameras increases, home printing of digital photos will continue to be the trend for the majority of users. Worldwide, at-home printing sales are projected to increase from US$7.1 billion in 2003 to US$9.9 billion in 2008.

Whenever a market undergoes a technological change of the magnitude facing amateur photography, existing products and their suppliers invariably fall vulnerable to dislocation. Change begets change, and the question for those already in such markets is whether to embrace the new technology or search for ways to lengthen the lifespan of the old. For those specializing in the new technology, the question is how far and how fast to reach into the new marketplace. Technological change doesn't merely present new opportunity; it demands a response.
Tuesday, September 28, 2004
Business Blogging: Like Dungeons and Dragons
"Blogging is a little like playing Dungeons and Dragons. You find one thing, and it leads deeper into something else, and then into another level, and another...." That's according to blogger Steve Rucinski, of Small Business CEO.

Steve said this in response to a question I asked over coffee today in our local Panera. I asked him, as a small business owner himself, how much value he got out of business blogging.

Blogging is one of the hottest trends on the Internet today -- just look at the number of blogging articles in the media this year. And blogging about business topics is a red hot niche.

But I asked the question as a kind of reality check to see if blogging is truly valuable and has staying power.

After making the reference to Dungeons and Dragons, Steve went on to say that blogging was "one of the most powerful uses of the Internet" he knows of.

Why? He says he has learned so much from blogging, both from reading other people's blogs and from researching topics for his own posts. He discovers new sites, new ideas, and new information all the time. And then there are all the new contacts he has made, expanding his network in the process. He's intrigued by all the interesting people he meets through blogging, and one contact leads to another and another....

A Dungeons and Dragons experience, to be sure.
Monday, September 27, 2004
Changing Role of The Company
Later this week, September 30-October 1, a group is gathering at the Wharton School's SEI Center for Advanced Studies in management, to explore whether the traditional idea of what constitutes a company is obsolete. Their goal will be to reconcile the ways in which companies do business in the twenty-first century with the company model that first began to take shape with the writings of Adam Smith in the eighteenth century.

That model saw a company as the maker and seller of products. At its height it drove firms toward vertical integration. A company strove to own or control everything from the taking of raw materials out of the earth through the manufacture, distribution, and sale of the products those materials were turned into.

Today's global companies are more likely to be the managers of value chains in which many different companies control a part of the materials and processes that bring about the creation and distribution of products. That's not exactly news to anyone watching the business scene. But the results of the change just may be.

For example, it may effect how a company's value is determined. Bricks and mortar, machine tools, inventory, and other hard assets have historically been the heavyweights on a company's balance sheet. Today, maybe the strength of the value chain is more important than the real estate a company owns.

The SEI Center is conducting a survey to see how business executives around the world view the changing role of the company. You can participate by answering four questions.

It will be interesting to see what comes out of these discussions, and others like them that are bound to take place in the near future. One thing is for sure. Smaller enterprises are the recipients of much of the opportunity that the shift to a "value-chain economy" is bringing about. With the largest of companies no longer feeling a need for vertical integration, opportunity knocks for the agile, smaller players who can provide part of what the biggies need.
Sunday, September 26, 2004
PowerBlog Review: @rgumente

Editor's note: We're very pleased to bring you the thirty-second in our popular weekly series of PowerBlog Reviews of other weblogs...

This week we review the @rgumente blog.

The @rgumente blog is a Romanian business blog, written entirely in English. This is a gem of a blog that keeps getting better and better.

Dragos Novac, a software entrepreneur, edits @rgumente. He offers keen insights about business in general and specifically about business in Romania.

Romania is a big mystery to many in the English-speaking world, in part because the Romanian language is not often taught in English-speaking schools and universities.

A source like @rgumente is indispensable if you want to understand the Romanian business environment -- and make connections there. With the Romanian software industry playing an increasing role in outsourced software development, that could be very important.

In addition to Romanian business matters, @rgumente covers European Union business and cultural issues, software industry issues, and general business issues of all kinds.

Recent posts covered everything from the Romanian environment for high-tech business as compared with the U.S., to commentary on what blogs are good for, to the IBM/PeopleSoft deal.

This post with insight into Romania's culture and the whole outsourcing situation is the sort of unique insight you can expect at @rgumente:

"Understanding the cultural differences and acting accordingly is clearly one of the sensitive issues on the whole offshoring agenda. For example in India they discovered that fingerprinting the programmers for security reasons touched a very sensible chord on the Indians - fingerprinting is considered offensive in the Indian culture. I think that this is an important card Romanians can play in the offshore project contracting - besides being Europeans Romanians are fairly adaptable and rather open minded."
I asked Dragos what benefits he got from blogging. This is what he told me:
"@rgumente is a great tool helping me synthesize topics of interest for me and my business. As such, besides acting as a business intelligence repository, the writing gives me the opportunity of crystallizing my thoughts and ideas while having permanent feedback from my readers. Last, but not least, it gives me the chance of meeting very interesting people both online and offline, people otherwise I wouldn't have had the chance of meeting."
Dragos says there are a few Romanian online forums and discussion groups covering business topics, but Romanian business blogs are very rare.

The Power: The Power of the @rgumente blog is in its coverage of Romanian business issues in a forthright way, often comparing the situation in Romania with other parts of the world. And in the process it provides a unique glimpse into the Romanian business scene for non-Romanians.
Saturday, September 25, 2004
Marketing to Small Business Owners
One of the major trends we are seeing in the small business market is that more older entrepreneurs are starting up businesses.

A combination of demographic and societal factors is behind this: the aging of the population in most Western cultures; changing employment practices (does anyone retire at 65 with the proverbial gold watch anymore?); and the growth of entrepreneurial support organizations such as the U.S. Small Business Administration and the availability of inexpensive technology, making it easier than ever to start a business.

buy Ageless MarketingDavid Wolfe, author of Ageless Marketing : Strategies for Reaching the Hearts and Minds of the New Customer Majority and writer of the excellent Ageless Marketing blog, points out that as people age, they become more resistant to traditional marketing techniques.

This is an important concept for any company that markets B-to-B to small businesses.

When you market to most small businesses you really are marketing to the small business owner. The owner is likely to be the primary decision maker for any sizable purchase. Increasingly, this owner is likely to be mature and seasoned. Contrast this with marketing to large corporations, where your message for the same product or service might be targeted to a (younger and less seasoned) middle manager who has equivalent purchasing authority.
Friday, September 24, 2004
Swiss Army Knife + Memory Stick = Trend
One of the most recognizable and copied consumer products of the twentieth century has been updated to twenty-first-century functionality. The venerable Swiss Army Knife-- the all-purpose pocket tool that comes with everything from a corkscrew to a toothpick--now offers the choice of a 64MB or 128MB USB memory stick as one of its "blades". Victorinox, which registered the original Swiss Army Knife in 1897, has brought out the SwissMemory, "for computer users on the move." (Picture/link of the SwissMemory is at the bottom right of the Victorinox website homepage.)

The SwissMemory is a harbinger of things to come. It's a real trendsetter because it tells us that the concept of carrying data with us has hit mainstream. Twenty-three years ago the first IBM PCs went on sale. Now pocketknives carry around more memory than most of the first PC users ever dreamed of having available in their desktop boxes.

As data portability becomes both ubiquitous and invisible, new markets for devices that carry it and for purposes to use it will appear. Sure memory sticks have been around for a while, but not as long as the Swiss Army Knife. At first glance, the impact of mating the two may seem like a gimmicky product enhancement that will sell a few more pocketknives. But the real impact of such a tool is to tell us how important portable memory is becoming, and to wake us up to its use potential.
Thursday, September 23, 2004
Small Boutique Hotels Growing
Have you ever traveled on business and yearned for a quiet, memorable place to stay, away from the hordes of other business travelers? Or a unique vacation experience?

Small, independently-owned boutique hotels are the answer. And these days it is getting easier to find such hotels.

According to Zack Paul, General Manager of The Hibernation Station, an upscale cabin hotel in West Yellowstone, Montana, a trend is growing toward independent hotels:
"A small steady migration is taking place toward privatizing hotels. Hotels that have been part of a chain are breaking off and new ones are being put up without a franchise. These small private hotels are sought after mostly for something they offer that is different. It could be a mystical offering or just something romantic or representing the environment of the area in which they are located. The franchise hotels, on the other hand, deliver consistency no matter where you stay across the globe."
Mr. Paul says that the costs of a franchise, including signage, can cut deep into a hotel's profits. In popular destinations such as Hawaii, the Grand Canyon and Yellowstone Park, occupancy rates run high most of the year, and a franchise is not necessary to fill up the hotel.

The Web has been a significant factor in driving the independent hotel trend. He says, "In the past you needed the large chains' reservations horsepower to fill the hotel. Now the Web can take the place of that engine, depending on location."

Web-based travel services abound. But most cater to the big hotel chains, and not the small independent hotels.

One online travel service that does target small boutique hotels as its primary hotel partners is Academic Ambassadors. Academic Ambassadors is a niche-based travel service that serves the non-profit community. Interestingly, it matches up the academic and non-profit traveler with small independent hotels.

Adam Siegel, the President, is himself a fundraiser for a college. He says the non-profit traveler was an underserved demographic until he started his Web-based company over three years ago:
"Surprisingly, no one had ever aggregated my peer group for travel marketing. Fundraisers alone spend millions on hotel rooms per year. Add to that admissions counselors, museum curators, visiting lecturers, social services administrators, recruiting coaches...and you have a very large market indeed."
Mr. Siegel goes on to describe how his Web-based service gives a boost to small independent hotels:
"The small boutique hotels, which are the model partners for this service, have limited ad/marketing budgets. They rely on word of mouth and favorable PR. What I have provided is expedited (electronically) word-of-mouth marketing for them (for free!).

They love the exclusivity of this arrangement as there are now more boutique hotels than ever with still more in the planning stages."
He notes that most independent hotels are in popular destination locations, such as San Francisco, Miami and New York. It is impossible to find such a gem in a place like Pittsburgh. But he also thinks:
"You will start to see the filling of the gaps to avoid competition and increase notice. It does take some vision, however, to see Knoxville as the next profit center.

With the success of the boutique hotel you are also seeing the big chains get into the act. The "W" hotels, for example, reflect the funky style originated by the Kimpton Chains and others. They do this on a very large scale, however. And something is lost."
Small hotel businesses can compete effectively against large hotel chains by offering their own uniqueness and being different from the large chains. And the Web, with travel services such as Academic Ambassadors is critical for giving small hotels the edge.
Wednesday, September 22, 2004
DNA & The Organization
Organizational DNA is a topic growing in visibility. Interest in it is trending upward, as is its influence on the business world. I Googled the phrase today and got 741 hits. A search at Amazon.com turned up 30 books.

Booz Allen Hamilton's annual rating of the value of its newly developed intellectual capital, which this year included the judgments of individuals visiting their website, listed organizational DNA number one. Booz Allen seems to be a leader in the exploration of organizational DNA and its impact on businesses large and small. In the past year they have:

DNA is used as a metaphor for the intrinsic attributes of an organization. An organization's DNA is made up of its criteria for:

  • Examining opportunity and risk
  • Selecting and retaining people
  • Processing information
  • Distributing resources

An organization's DNA governs its existence in the same way biological DNA governs an organism's life.

The concept of organizational DNA is particularly interesting because it is one of the few metaphors applied to businesses and other organizations that has been organic. Most of the widely accepted metaphors have been along the lines of the reengineering craze of recent years. While these approaches have resulted in valuable examination of how organizations do things, they are not as good at illuminating the why. Why is a motivational question. People, not machines, have motivations. Organizations are made up of people with their emotions and thought processes. Organizations are collective organisms. As such it's time to view them through an organic rather than a mechanistic lens.

Tuesday, September 21, 2004
Entrepreneurs Finding it Harder to be Successful

Editor's Note: A few weeks ago Dr. Scott Shane, a very talented professor here in our home town of Cleveland, Ohio hit our radar screen. He recently was named as principal investigator for a new study commissioned by the Ewing Marion Kauffmann Foundation to examine what factors affect the performance of newly founded companies. We are very pleased to have Dr. Shane offer the following insights about one recent entrepreneurial trend.

Dr. Shane, professor of economics at Case Western Reserve University, says starting a business is more popular than ever in the United States. But he also says it is harder to be successful at a new business:

"Entrepreneurship is becoming an increasingly popular activity, with 4% of the population annually starting a new business -- more individuals than get married each year. But success rates at entrepreneurial activity are not keeping up with start-up rates, making it harder than it used to be to become a successful entrepreneur."
Dr. Shane also says that starting the right kind of business is crucial to the rate of success. He believes the best new businesses to start right now are high technology businesses. "By that I mean not just Internet businesses but companies in any kind of new technology from nanotechnology to new materials to telecom to advanced manufacturing to biotech," he notes.

He offers these ten factors on what it takes to be successful starting a new technology business in the 21st Century:

    1. Select the right industry
    2. Identify valuable business opportunities
    3. Manage technological transitions
    4. Identify and satisfying real market needs
    5. Understand customer adoption
    6. Exploit established company weaknesses
    7. Manage intellectual property
    8. Create barriers to imitation
    9. Choose the right organizational form
    10. Manage risk and uncertainty

Check out his most recent book, Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures, for more on these ten rules for a successful startup.

In addition to being a professor at Case Western Reserve University, Dr. Shane also serves as academic director of the Center for Regional Economic Issues. He is the author of another book, Academic Entrepreneurship: University Spinoffs and Wealth Creation.

[Thanks to George at Brewed Fresh Daily for arranging the email introduction to Dr. Shane.]
Monday, September 20, 2004
Visit Carnival of the Capitalists
Here at Small Business Trends we participate in a weekly business event that travels from blog to blog, called Carnival of the Capitalists. Carnival of the Capitalists showcases business articles from a variety of excellent blogs. It's a great way for you, the reader, to discover new blogs and to read great articles by some of the blogosphere's finest minds.

This week's Carnival is at Voluntary Xchange. Next week Carnival will be over at the Crossroads Dispatches.

If you would like to submit an article or become a host, visit the Carnival home page.
Franchises Are Big Part of Small Biz Market

Franchising is big business among small businesses in the US according to a study by the International Franchise Association Educational Foundation and PricewaterhouseCoopers. The study reports that franchised businesses account for 9.5% of the US private-sector economy.

According to the study, franchises directly employ 9.8 million people, about the same number as the US durable-goods manufacturing sector. Combine direct employment with indirect, and the study says the job total grows to more than 18 million, nearly 14 percent of US private-sector employment.

Two types of franchises are identified by the study:

  1. Business-format franchises such as automobile services, convenience stores, hotels, restaurants, and tax-preparation services.

  2. Product-distribution franchises such as gas stations, vehicle dealers, and beverage bottling and distribution.

Data for the study was collected from a variety of sources and much of the statistical information reflects 2001 numbers when 767,483 franchises were operating in the US.

Franchised businesses play a far larger role in the US economy than a surface view might suggest. While everyone recognizes the corner McDonalds as a franchise, how many realize the local Ford dealer is also one? Businesses that sell to small business would do well to recognize the growing trend of franchising and develop strategies for selling goods and services to master franchise holders. Pricing and service should take into account the value of building relationship with both individual franchisees and parent companies.

Sunday, September 19, 2004
PowerBlog Review: The Playmakers

Editor's note: We're happy to present the thirty-first in our popular weekly series of PowerBlog Reviews of other weblogs...

The Playmakers blog is a lot of fun because it is about toys.

The blog is the online home for the book The Playmakers, by author Tim Walsh.

Of course, there's a lot more to this blog than promoting a book. The blog is also a place to find information on toys, games, dolls and play sets ... and the people who created them.

The book and the blog are about classic toys -- the kind of toys that we grew up with. Many of these toys are now collectibles. Some can be found in museums and have real monetary value as collectibles. Others will be found only in our attics and basements, and have value of a different kind -- nostalgic value.

In this blog you'll find information on everything from Crayola crayons (remember the big 64 crayon box that every kid wanted?), to Play-Doh, to G.I. Joe.

One of my favorite posts highlights a visit to Babyland General Hospital, home of the Cabbage Patch Kids (who could forget them?):

"Call them funny looking, but don't call them "dolls." Cabbage Patch Kids may have a certain homely allure, but it was the elaborate fantasy surrounding them -- the pretense of their being real -- that drove their popularity from the start. While other dolls crawled, ate, cried, slept or mimicked some other human bodily function in an effort to create realism, Cabbage Patch Kids sustained an illusion that was bigger than anything the dolls themselves could do. They weren't for sale, they were "available for adoption." They weren't found in any stores, only at "Official Adoption Agencies." They weren't made, they were "born" in a hospital staffed by women in white nurses' outfits and a man with no medical degree named Dr. Roberts."
Adding to the fun are polls such as the one in which Super Ball won as the greatest toy ball ever, or the one where Sea-Monkeys beat out Chia Pets as the best "living" toy ever.

And on what other blog would you be able to hear a .wav file of the Swoosh made by advancing the reel on a View Master?

I asked Tim how the blog has helped his business. He points to how the site has given him a "voice" and says, "It is an industry site on the toy business and in many ways, it has legitimized me as an expert in my field. It has also given me the ability to convert potential customers into customers by giving them samples of my writing and samples of what can be found in the book."

Tim enjoys having a blog because it is a site he can update himself, so that it evolves and grows. Tim blogs from Sarasota, Florida, where hopefully he stays out of harm's way of hurricanes.

The Power: The Power of The Playmakers blog is its use of a blog format to promote the author's book and book tours. While this has been done before by authors, it is still a powerful format for a sole proprietor such as an author. And The Playmakers is one of the more fun and interesting of the author weblogs out there.
Saturday, September 18, 2004
Big Government Stifles SMEs
It all started when I found a link to a recent survey in New Zealand entitled "NZ's Small Business Sector Crushed By The Cost Of Compliance."

At first glance the title seemed a little sensational to me, and I almost dismissed the article. But then I started digging. I soon realized that there is much more to this story -- and it affects more than New Zealand.

The survey was conducted by the Auckland, Wellington and Otago Chambers of Commerce. It demonstrated how many hours per employee were being spent annually on complying with regulations and completing and filing tax returns. For example, an average of 205 hours a year were spent on regulatory compliance by New Zealand SMEs (small-medium businesses) with 5 employees. The numbers go up from there as the size of the business increases.

However, this point is of interest not just to small business -- and not just to New Zealand.

The connection between regulatory burden and a country's business health has been shown by a recent report by the World Bank.

In its report "Doing Business in 2005," the World Bank notes that the less regulation in a country, the more business growth the country experiences. New Zealand, I learned, actually compares very favorably with most of the rest of the world -- which says a lot about the state of the rest of the world.

If New Zealand business organizations feel they are being "crushed" by government regulation, imagine what it feels like to be an entrepreneur in Argentina. There it takes 15 procedures to start a business, compared to New Zealand's 2 procedures.

Or, imagine the business in Algeria, where it takes 16 procedures to legally register property, versus New Zealand's 2 procedures.

Regulation saps limited resources that entrepreneurs and SMEs otherwise could put to growing their businesses. The surest way to limit business growth is to grow government instead. As the President of the World Bank notes about the report:
Obviously, making it easier for entrepreneurs to start new businesses is good for growth. The same seems to be true for the other activities the report tracks, which include trading property, ease of hand allowing the use of collateral to get credit. It should come as no surprise that countries with streamlined, efficient regulation of these areas enjoy higher growth.
The irony is that a government-funded organization like the World Bank has proven this fact.

[Hat tip Just for Small Business for the link to the New Zealand survey.]
Friday, September 17, 2004
Optical Retailers A Soft Target for Thieves
Optical retailers -- opticians, optometrists and opthalmologists -- are suffering three times their share of shrinkage compared to other retailers. Yet, according to an article in the latest Loss Prevention magazine, they do very little to prevent losses from shoplifting and burglaries, mostly because they do no know how.

According to the article (appears only in the print edition, not online) written by Liz Martinez, who has also authored The Retail Manager's Guide to Crime & Loss Prevention, shrinkage is a problem not just for large chains, but also for small and independent outlets:
Independent opticals and small local or regional chains are owned by optometrists or opticians, who lack basic retail security knowledge. They, like their corporate counterparts, fail to put security measures into place, not out of a lack of concern, but because of ignorance. On the whole, optical personnel are not in tune with the business realities of today. When it comes to security, they don't even know where to begin asking the right questions, and they are paying the price for it.

Although shrinkage statistics are not readily available, the problem is being recognized by the industry. In the U.K. an industry trade group, the Federation of Opthalmic and Dispensing Opticians, acknowledges the growing trend in its crime prevention handbook:
As the deterrent measures taken by some retailers such as the banks and the financial sector take effect, criminals are forced to focus their attention on "softer" targets such as chemists and opticians.

Opticians are considered to be softer targets because we have failed to keep up with the deterrent measures taken by others. At the same time, the nature and value of opticians' goods has significantly changed over the last decade - as has consumer perceptions of eyewear.

Designer frames and sunspectacles are now stocked in greater volumes than before, to satisfy increased public demand for branded "fashion" goods.

Opticians are now high profile targets.
Even more concerning is the growing connection between organized crime, terrorism and retail loss, as this portion of the Loss Prevention article points out:
A burgeoning trend that hasn't yet come to light in the form of a formal report, but is being recognized at the ground level is that organized retail crime plays a huge part in the funding of terrorist activities. Shoplifting and burglary crews target optical goods, among others, and feed the rings of fences that funnel the profits into terrorist organizations.

According to CIS Robert W. Nolen, a lead trainer in a course developed with Bureau of Justice Assistance grant money called "Understanding, Combating and Surviving Terrorism," one of the niches exploited by many criminals from terrorist "countries of interest" is the resale of stolen consumer goods.
Optical retailers typically bridge the gap between retail and the medical profession, and no doubt find it challenging to deal with both sets of demands. Sounds to me like a good opportunity for security services firms, security consultants, and retail loss prevention specialists to offer their services.
Thursday, September 16, 2004
Buying a Small Business
Over at our sister site, TrendTracker, one of the trends we are tracking is the increase in the number of small businesses being bought and sold in the United States.

We've traced this trend in part to the aging baby boomer population. Boomers are deciding to leave Corporate America to be their own bosses. Rather than starting businesses, they are purchasing them (or buying franchises).

This article by Melinda Ligos in the New York Times offers further evidence of this trend:
As more and more corporate managers abandon the security of a weekly paycheck for the satisfaction of running their own show, many choose to buy shops, restaurants and other retail businesses.


Business brokers and small-business consultants report an increase in the number of entrepreneurs looking to buy a small business this year. Ned Minor, a lawyer with the Denver law firm of Minor & Brown, said calls seeking advice on such transactions were up by 20 percent.
This trend has positive and negative implications. On the one hand, some entrepreneurs believe they are limiting their risk by buying an established business. And it's true that they are limiting "startup risk" by buying a going concern.

However, buying a business can bring risks of different kinds. As the article points out, failure to do due diligence can lead to nasty surprises. A business may turn out not to be as attractive or profitable as the buyer expected.

In my opinion, though, this trend is going to continue for the foreseeable future. Service providers that assist entrepreneurs in purchases and sales -- business brokers, merger & acquisition firms, banks, accounting and consulting firms, and law firms -- should find business brisk.
Wednesday, September 15, 2004
Pets Deliver Dollars
When it comes to identifying the trends of the moment and probably the near future, it pays to look at where consumers are increasing their spending. In little more than a decade, spending by Americans on pets will have doubled from US$17 in 1994 to a projected 2004 total of US$34.3 billion. In 2003, the pet-spending total of US$32.4 billion was 60% larger than the toy industry and 33% larger than the candy industry according to an American Pet Products Manufacturers Association (APPMA) survey.

With 40 million Americans shopping for gifts for their pets in the upcoming holiday season, everything from jingle-bell collars to golden ID tags and self-cleaning kitty litter boxes will be moving from store shelves to homes shared with animals. And according APPMA COO Bob Vetere spending on pets is not expected to diminish anytime soon.

When an industry doubles its sales in 11 years, it's telling us something. Yet impressive gains like these often seem to fly under the radar of people looking for the next big entrepreneurial thing.

Looking for a market to exploit or to sell into? How about just following the money?

Tuesday, September 14, 2004
An Economy Based on Experience, Not Stuff
Virginia Postrel writes in the New York Times that Americans are not buying as many tangible goods these days. Instead, we are spending a greater percentage of our money on activities:
As incomes go up, Americans spend a greater proportion on intangibles and relatively less on goods. One result is more new jobs in hotels, health clubs and hospitals, and fewer in factories.

In 1959, Americans spent about 40 percent of their incomes on services, compared with 58 percent in 2000. That figure understates the trend, because in many cases goods and services come bundled together.
She goes on to point out how the experience becomes more important than the goods delivered. When someone goes to a restaurant, they are looking for "memories, not fuel."

The trend that she describes is showing its impact even in the small business marketplace.

As pointed out here on Small Business Trends a few days ago, service businesses are attractive startup candidates for entrepreneurs. Service businesses are relatively easy to get off the ground. On average, you don't need to invest as much capital to start a service business as you do, say, a manufacturing or retail business. And naturally it is much easier to set up a low-cost virtual business model when you need little in the way of plant and equipment to run things day to day.

However, some parts of our economy have not kept up with this shift. They are still operating under the old paradigm of an economy based on goods. Take, for instance, banks.

Many small business lenders are still "asset-based" lenders. They base lending decisions largely on whether the small business has tangible assets that can be used as security for a loan.

The only thing is, the typical small service business has amazingly little in the way of hard assets. They rent office space and equipment, rather than owning it. Service businesses have no inventory to speak of. At most, they might be able to point to some free cash flows and a month or two's accounts receivable, which while valuable, are hardly the motherlode of "kick the tires" assets that banks require as loan security.

And what about all that intangible goodwill (brand name, loyal customers) and intellectual property (systems, know-how) that make up most of a small service business's value? Fuggedaboutit. Conservative banks won't even try to place a value on these intangibles for loan purposes, even if they knew how.
Monday, September 13, 2004
Checking China's Vital Signs
China produces 29% of the world's mobile phones, 58% of its clothes, and 74% of its toys. The McKinsey Quarterly report Checking China's Vital Signs focuses on the country's 9%-a-year economic growth over the past 24 years. McKinsey examines the sources of this remarkable growth, explores its effect on consumers and businesses, and addresses four challenges confronting China.
Misallocated capital

Weak banks

Needed economic liberalization

Economic disparity between rural and urban dwellers

For anyone interested in doing business in China or with Chinese companies this is a must read. McKinsey has devoted a whole issue to China. The Vital Signs report can be read for free, but other topics in the special issue are available only to paid subscribers.
Sunday, September 12, 2004
PowerBlog Review: Oklahoma Wine News

Editor's note: We're pleased to present the thirtieth in our popular weekly series of PowerBlog Reviews of other weblogs...

This week we review the Oklahoma Wine News blog. It has one of the most interesting concepts for a blog that I've run across. That's why I like it so much.

The blog promotes the winemaking industry in northeastern Oklahoma, USA. The title says it all: "Oklahoma state wine industry news and vineyard events. Never miss another local wine tasting. Site includes online archive of winery newsletters, festival dates, recipes, trivia, grape growing info, etc."

This blog is run by the people at Nuyaka Creek Winery, a family-owned business. It's also a generations-old winery.

If you are looking for information about the business aspects of wineries, you've just discovered a gold mine of information. You'll find posts such as How a Winery Operates and Learn the PR Secrets of Successful Wineries.

There are even posts on the nuts and bolts of growing grapes such as Excellent Article on Whip Grafting.

Want to find out about legal developments affecting sales of wine in certain states and over the Internet? Yep, you'll find lots of posts here.

Maybe you are not interested in the business side, but just like wine. Well, there are links galore to all sorts of wine-related sites that I'll bet you never knew existed, such as Wine Television and wine and grape jewelry. You can even find wine blogs (such as here and here).

One of the best things about this site is the way it supports other wineries and businesses in Oklahoma. If you want to know about wine tastings, events, restaurants and places to visit in Oklahoma, the Oklahoma Wine News has it. The blog routinely plugs other wineries in Oklahoma, too.

The Power: The Power of the Oklahoma Wine News blog is in the creative way it supports local tourism and the wine industry as a whole, while at the same time promoting its own business. It's a creative concept that could be applied to just about any consumer-oriented small business.

Saturday, September 11, 2004
Unionization Hits U.S. Small Businesses
Unions in the United States are targeting small businesses these days, especially small service businesses.

Jeff Cornwall over at The Entrepreneurial Mind points out this growing trend in the small business market, saying:
We've all read the obituaries of organized labor in the U.S. But, there is one segment that has seen a growth in unionized workers: service businesses. And who is leading the way in growth in service industries? That's right, entrepreneurs.
Jeff then quotes from an Inc. magazine article by Amy Gunderson that summarizes the issue for small businesses:
True, union membership as a whole continues to decline. But groups active in professional and service industries are booming, their ranks swelled by workers who fear increased health insurance costs and the outsourcing of jobs to Asia. IT staffers, graphic designers, and engineers -- this is the new face of labor. And guess where many of them work? The average workplace organized last year had just 53 workers. "More attention is being paid to smaller workplaces," says Bob Bruno, a labor and industrial relations professor at the University of Illinois at Chicago, who adds that "organized labor has a higher success rate in small businesses." There are several reasons for this. Labor activists have discovered that unlike large corporations, small businesses often lack the resources and the know-how to fight unionization. Plus, their employees are often more receptive to organization because union reps can make a personal, individual appeal for their support.
It used to be that if you were a small business, you didn't have to worry much about unionization. As a small business, you could count on being under the radar screen of union attention. But now, with so many small businesses existing in the U.S., small business has a big bullseye on its back.

This has implications for service providers which support small businesses. Attorneys, PEOs (professional employer organizations), HR consultants, accountants, insurance companies that offer small company benefit programs, even professional associations that small businesses belong to -- all have to be aware of this significant trend.
Friday, September 10, 2004
Business of Sports Is Changing
Over the past decade there has been a decline in consumer interest in major sports when compared to other forms of entertainment according to a recent article in the McKinsey Quarterly. In Europe between 1996 and 2001, the number of TV viewers of sports fell by 15%. In the US, NFL Monday Night Football has lost 17% of its viewers since 1999.

In the US, the number of people participating at the amateur level in sports that are major revenue producers on the pro level is also on the decline. For example, from 1991 to 2001 the number of participants in baseball fell by 10%. It is thought that a drop in participation in a sport ultimately translates to a smaller audience for that sport.

In 2002 US networks lost an estimated $4 billion on sports programming. The rate of revenue growth from global corporate sponsorships has fallen 6% annually since 1996. Sports increasingly are competing among themselves for a tighter pool of funds.

McKinsey identifies six challenges facing every professional sport that must be addressed if that sport is to be a successful business. The historically major sports face a watershed with these six challenges:
- Players' salaries
- Changes in technology
- Pricing
- Internationalization
- Innovation
- Illegal activities by athletes

Are we seeing the end of professional sports as a lucrative business that drives other economic activities? I think not. But professional sports are undergoing an upheaval. Alternatives such as extreme sports are coming on line and the population of sports enthusiasts is aging and changing. Think of the baby boomers and what they no longer play. Think of the teen and preteen girls who follow women's soccer in the US. The picture of professional sports as a business is likely to be a mosaic in the future. That will probably mean less money for the longtime leaders in sports revenues, but more income overall as more sports draw their share of the audience.
Thursday, September 09, 2004
Best Home-Based Businesses
A growing segment among small businesses is the home-based business. Home-based businesses mostly consist of one employee -- the sole proprietor running them. On occasion, you may also find a home-based business with as many as a couple of employees.

With the advent of low cost home-office technology (fast computers, excellent printers, low telephone rates), home businesses are flourishing.

About.com's Small Business Canada has an excellent round-up of the trends in home-based businesses. Susan Ward, the author, says these hot businesses are not for those who want get-rich-quick schemes. Rather, they're for entrepreneurs serious about operating a business:

  • Home Renovation Services - this is a hot trend. As the population ages, people want to stay in their homes and make them more livable.

  • Pet-based Products - Pet owners are indulging their pets. The sky is the limit on what pet owners will spend.

  • Catering Services - These services are not just for parties anymore. People are having everyday meals catered.

  • Cleaning Services - Domestic cleaning services are in high demand. This is not a glamorous business, but there is a good market for it.

  • Fall Prevention Products - Susan says falls are a major cause of injury among seniors.

  • Wedding Planner - Marriage has not gone out of style.

  • Dietary Consultant - This one is not just for weight loss, but for healthy eating in general.

  • In Home Beauty Services - Personalized service for those who desire to look younger is the trend driving this business.

  • Sewing and Alterations - Tailoring can be a lucrative business.

  • Life/Business Coaching Services - Having a personal coach is a hot thing right now.

-- Despite what we read in the papers about "low paying service jobs," lots of entrepreneurs aspire to service businesses. Service businesses are easy to start up, don't require much capital or equipment, and can be conducted from home.
Wednesday, September 08, 2004
Brand is Less Important Today
Product quality and value trump brand in the process of deciding what to purchase and who to buy it from according to a Millard Group online survey. The results come from more than 66,000 respondents. Thirty-seven percent of the respondents listed quality as the most important factor, and 26% cited price. Only 2% pointed to brand as the deciding factor in making a purchase.

For a long time, I've thought that brand was an over-rated, or at the very least misunderstood, aspect of marketing. I think brand is a subset of permission. Customers give permission to marketers to sell to them. During much of the twentieth century, brand acceptance was the mechanism for granting that permission. Brand names indicated quality.

Today's proliferation of products and services combined with a multitude of ways to purchase has lessened the importance of brand as a quantifier of quality and value. When people can turn to the Internet to check out quality reports from actual users of a product or service, brand loses its importance as a value identifier and permission earner.
Tuesday, September 07, 2004
Creating a Great Customer Experience
Editor's note: we are pleased to present another article by expert guest blogger, John Wyckoff. We talk frequently here at Small Business Trends about retail trends and how even though the big guys keep getting bigger, small businesses today are competing by being smarter and better. Creating a terrific customer experience is one way they do it. I've had readers ask me what I mean by "customer experience." John gives us the short answer: it's emotion, not intellect, that creates a great customer experience.

By John Wyckoff

If you deal with or sell to the end user or consumer you should know that all decisions are emotional, often passionate and not intellectual or cerebral. Sure, we all make emotional buying decisions and then apply a rationale to our choice to assure ourselves that we made a pragmatic, informed and educated decision.

Well, here's what's real.

The human animal responds to specific stimuli. The response is emotional. The stimuli consist of some very basic components. They are: color, contrast, shadows, motion, sounds, touch and smell. OK, now you have the data. In order for you to take any form of action that date must be converted into Information, then to knowledge and finally into an understanding that can lead to implementation.

Let's take a very short look at each.

Color - Displays need to be colorful. A display of goods, apparel for example, should be arranged to aid eye scanning by the viewer. That is the colors should not be scattered but grouped. Start with light colors on the left and proceed to dark on the right. The middle range should replicate a rainbow: red, orange, yellow, green blue, indigo, violet. The far left white and pastel shades; the far right dark to black.

Display areas are not two-dimensional. The colors of the floor, walls and ceiling along with accent colors, stripes or designs must also aid the viewer. Light green is soothing. That's why most hospital waiting areas are either white signifying purity and cleanliness or green meant to have a calming effect on patients and their families.

Contrast - Light and dark areas and products should be arranged to create drama. Bright areas highlight attention-getting products. Even the term beige is, well, beige. However, beige, when contrasted with vibrant adjacent colors is no longer beige. Even the name will change to adobe, sand, earth tones.

Shadows are very important. Without taking up the rest of this article with this one subject consider this: Take your digital camera out the front door of your place of business at high noon. Take a picture. Go out again about 45 minutes before sunset and take another. Compare the two. The noon photo will be flat and boring. The photo taken shortly before sunset will be considerably more dynamic. Confirm this by showing both photos to family or fellow workers. You'll be pleasantly surprised.

Before I go much further I'd like to discuss fluorescent lights. This form of illumination was created to eliminate shadows. It began as office lighting. The advantage of this form of lighting is the cost of operation and the fact that the bulbs run relatively cool. Unless you pay close attention to the type of bulb fluorescent lights can make everything look two-dimensional and dead. If you can avoid fluorescent lighting in a showroom or display area and substitute focused lights to create shadows I recommend you do it.

Motion means there are real people involved. If it's in a retail environment there are many forms of motion that will stimulate action. Moving signs, displays and mobiles help. A non-static staff helps more. The staff should not be relegated to stand motionless behind a counter but active on the floor.

Sound means someone is there. Music in the background is expected. Select it carefully and make the selection from the customer's perspective. Sound should not be distracting. For example, I hate paging systems in stores and offices that constantly blare the name of someone. Eliminate this sound by switching to vibrating belt pagers to notify a staff member of someone attempting to get his/her attention.

Touch is a touchy subject. Our society is ambivalent. However, a waiter or waitress will tell you that the tip increases if that person puts their hand on your shoulder at some point while they are serving you. Of course, shaking hands in our society is positive. Like James Bond says: "shaken not stirred." I'd add, not squeezed and not long.

Smell is too often overlooked in businesses that are not involved with the food or fragrance industry. You may have noticed, however, that companies that have a coffee pot on and available attract people to stay longer. I believe that in the morning, coffee smells better than it tastes. Considerably more than half the people in the US love chocolate. The next time you visit a trade show look for a booth that has a bowl of chocolate and you'll see more people with a few feet of that habit-forming stimulant. Chocolate also has an intoxicating smell.

Please note, all of the foregoing are best described as emotional stimulants not intellectual reasoning. As long as we are people dealing with people let's keep in mind that emotions precede intellectual or pragmatic concerns.

John Wyckoff is a highly successful businessman who got his start in sales and built a company by knowing the value of a great customer experience.
Monday, September 06, 2004
eCommerce Gains Ground in Africa
Emeka over at the Timbuktu Chronicles, a blog about African entrepreneurship, reports that eCommerce is on the upswing in Africa.

He points to an African eCommerce website called eShopAfrica, and a speech by the site's founder Cordelia Salter-Nour giving an overview of eCommerce in Africa:
"Since the days of the Internet boom we've been hearing that ecommerce is going to change the way Africa does business. The details of this transformation always remained somewhat fuzzy so it's time to take a look at the nuts and bolts of ecommerce in Africa and to evaluate how its doing so far. As it stands the ecommerce in Africa is worth about $31 million - with $30 million of this coming from South Africa."
She goes on to outline the current status of eCommerce in Africa -- both positive and negative:
  • Connectivity and software were once a problem in Africa but are now sufficient. All the capitals of Africa today have adequate connectivity, and there are plenty of capable IT companies ready to provide software and hardware.

  • Taking credit card payments is a major barrier to eCommerce. Sub-Saharan African businesses find it very difficult to secure payment services for the major credit cards such as Visa and Mastercard. It's especially tough following 9/11, due to legislation closing business residency loopholes that legitimate businesses had relied upon.

  • Marketing is expensive for most African businesses. So far Africa has no eCommerce success stories.

  • Shipping and trade barriers are the same problem on the Internet as off the Internet. African sellers still have to deal with export/import issues, middlemen who control markets for certain commodities and goods, and restrictive trade agreements -- all of which drive up the costs for African sellers.

  • Finally, Africa is facing competition from those two low cost providers, India and China. African sellers now have to worry about holding their own against not only the West, but also against a rising Asia.

Sometimes I think small businesses in the West don't realize the business advantages that we have. I know I take for granted such services as merchant banking for Visa and MasterCard payments -- the options seem endless and it's so easy to sign up for them. I really have to hand it to any African eCommerce business that perseveres despite so many conditions stacked against it.
Sunday, September 05, 2004
PowerBlog Review: Lip Sticking Blog

Editor's note: We're excited to present the twenty-ninth in our popular weekly series of PowerBlog Reviews of other weblogs...

Lip-Sticking is a fun and useful blog that is full of personality. As the title says, the site is all about "Smart Marketing to Women Online."

This blog is run by one really savvy woman, Yvonne DiVita. Yvonne is a business and technology writer who blogs from Rochester in the Fingerlakes region of New York, across the Great Lakes from Toronto, Canada.

Lip-Sticking helps businesses online market successfully to women. Yvonne combines technology knowledge with the ability to write -- and wow does she write! She is the author of Dickless Marketing: Smart Marketing to Women Online.

Yvonne told me that she was urged to start a blog by her fiance, who also has a blog.

Like many business bloggers, at first she had reservations about blogging, because it seemed like a tremendous amount of work for little return. But now she is convinced of blogging's business value.

Blogging has brought her new clients and new business. And the return on investment has been a speedy one. Yvonne says the blog has given her recognition and opportunity faster than any other marketing tool she's ever used.

What I like best about Lip-Sticking is the way Yvonne speaks in her own true voice (often as alter ego Jane) giving tips and insider tricks about marketing to women online. As Yvonne says:

"Shopping online is so different than shopping offline that if a business owner doesn't take the time to learn and understand those differences, it could spell disaster for her or him. Women LIKE shopping in general, and it's natural for them to adopt shopping online for convenience and savings. To understand how that works -- what the women like and don't like -- as well as how shopping online works in general, is what I write about. I'm proud of the fact that my blog provides research and statistics to show ecommerce businesses how to get the right message to the right person, via the right medium."

The Power: The Power of the Lip-Sticking blog is in the way it focuses on a niche -- marketing to women online -- and does it so well. This blog is packed full of valuable tips and tricks of the trade that make it a must-read on any business-blog blogroll.
Saturday, September 04, 2004
Just How Bad is the U.S. Economy for Small Business?
Listening to the nightly news and reading the newspaper, sometimes you get the impression that the situation for small businesses in the U.S. is dire ... worse than since the Great Depression of the 1930's. And I'm certain that if you searched hard enough, you could find a statistic somewhere to support such a downtrodden point of view.

But just how bad off are small businesses today in the United States?

A recent report issued by the U.S. Small Business Administration gives a more optimistic perspective. The SBA's Quarterly Indicators tracks key economic statistics affecting small businesses. Those indicators tell the story of a very favorable economic climate for small business, as shown by this chart:

Business interest rates are at their lowest point in 5 years, making it attractive to borrow money for expansion. Proprietor's income is at its highest rate in 5 years, meaning more money for business owners. Business bankruptcies are trending lower, meaning more small businesses are making it.

The statistics also tell the story of resiliency in the aftermath of an artificial Internet bubble. Although venture capital deals have begun to trend back up in recent months, they are actually down from the heady heights of 1999 and 2000. However, in my view, that's a good thing not a bad thing. We all know that back then deals were getting funded that shouldn't have been. What we are seeing now is a leveling out toward historically sustainable levels.

(In the interests of size and readability I reformatted a portion of the report data into the above chart. You can view the original chart by downloading the entire Quarterly Indicators report here. The report has a lot of additional data and I recommend checking it out.)

I empathize with small business owners who may be having a rough time. I don't mean to minimize how unpleasant that may feel to anyone living through it. Just like many small business owners, I've had good times and not-so-good times alike. When I went through rough patches, I tended to view the world around me as not doing well either. But, always, it is the resiliency of entrepreneurs that enables us to bounce back.

The SBA report looks at objective factors. Looking at these factors, the current economy is a favorable environment for U.S. small businesses to start up, expand and invest in new equipment, services and other purchases.

Thursday, September 02, 2004
eBay on Global Expansion Path
eBay is on a global expansion bid.

As I noted in an earlier post, eBay reported astonishing growth in its latest quarterly numbers. When you examine the numbers closely, much of the growth is coming from markets outside of the United States. The U.S. market accounted for 32% growth. That's less than half the growth rate for markets outside the U.S., which grew 76% year-over-year.

As this article in eCommerce Times notes, eBay has recently made acquisitions in:
  • Germany - Mobile.de (autos)

  • India - Baazee.com

  • China - EachNet

  • Korea - Internet Auction Co.

If you want to see where the next hot eCommerce markets are across the globe, just watch where eBay is expanding. Everywhere eBay goes, opportunity for small businesses follows. Millions of eBay sellers in these countries will benefit, not to mention the myriad of businesses that inevitably pop up to service and support eBay sellers.
Wednesday, September 01, 2004
Companies Fail to Respond to Customer Email
The majority of companies in the US and Canada with sales of over US$250 million are failing to respond adequately to emails with high-value purchase intent and are missing out on revenue opportunities according to an eGain survey conducted in July 2004. Three hundred companies were surveyed, and key cross-industry findings show that 41% of companies did not respond while only 17% responded with an accurate and complete answer.

The retail sector performed the best with 53% responding within 24 hours. Financial services companies were the least responsive with 59% not sending any response.

Smaller enterprises should take note from this failure of larger companies and see it as an opportunity to deliver better customer service. Firms selling customer relationship services to companies should recognize these poor marks for the opportunity they present.
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