Home | TrendTracker | PowerBlog Reviews | The Experts | Newsletter
SMALL BUSINESS TRENDS brings you daily updates on trends that influence the global small business market.
Anita Campbell, Editor
Past life: CEO, corporate executive, tech entrepreneur, retailer, general counsel, marketer, HR ... (more)
email me
free business magazines
Trade publications FREE to qualified professionals. No hidden offers and no purchase necessary.
On Wall Street
The Deal
Computing Canada
Employee Benefit
Oracle Magazine
100+ additional titles. Click to browse.
Previous Small Business Trends articles can be found at the links below:
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
Or, use the search box below to find a
specific post:

Sign up for our FREE Small Business Trends newsletter. (View Current)

We publish regularly and promise we won't share your email address with anyone. (Privacy Policy)
* Don’t have time to read several dozen blogs a day? Pick two or three. Your brain will thank you for it.

Small Business Trends Radio
Tuesdays, 1:00 PM Eastern U.S. time
on Voice America network
Click to listen

November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
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.
More news... more trends... more insight...

Home | Privacy | Terms | SmallBizTrends
(c) Copyright 2003 - 2005, Small Business Trends LLC. All rights reserved.