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Friday, January 30, 2004
RFID for the Little Guys
This week Microsoft announced that it intends to become a player in RFID. Part of those plans include providing RFID-enabled software for midsize companies to manage their supply chains.

RFID stands for "radio frequency identification." It involves placing a chip on items, then transmitting radio frequency signals to track the items and provide information about them. Distributors, warehousers, retailers and transportation companies have jumped on board, implementing RFID at an increasing pace.

Large organizations are leading the way with RFID -- organizations like Wal-Mart, Metro Group, Proctor & Gamble, and the U.S. Department of Defense. That's because RFID is expensive to implement. Larger organizations have the most to gain through automating their supply chains and can therefore justify the expense and effort.

Microsoft aims to bring the power of RFID technology down to tier three and tier four companies. Part of its plan is to RFID-enable the enterprise business applications it owns through its acquisitions of Great Plains and Navision. RFID Journal has a detailed discussion of Microsoft's RFID strategy here.

Look for it to be years -- not months -- before small businesses adopt RFID. It will take standardization of RFID technology, reduced prices, and off-the-shelf implementation ease before small businesses can afford it and justify it. But midsize businesses will need to invest in RFID sooner if they want to stay competitive.

Thursday, January 29, 2004
TV Ad Effectiveness & Viewers Fall
Major TV networks are losing viewers, and they're in a panic about it. NBC plans to rollout the new shows this year following its coverage of the Summer Olympics instead of waiting for the traditional autumnal kickoff. Jeff Zucker, president of NBC Entertainment, News, and Cable said recently that he is also looking at a 52-week schedule in the future.

Such a move if adopted by the rest of the industry would lessen the importance of sweeps -- the concentrated time period that has determined advertising rates for local TV. Further change will come with Nielsen's new people-meter service, scheduled to roll out in Boston later this year and then move into other major markets. It could well be the death knell for sweeps. If so, local TV advertising rates will correlate more accurately with the number of viewers.

The increasingly fragmented TV viewing audience is spread thin by an abundance of cable and satellite offerings. The Internet has taken ownership of a large chunk of what previously had been viewing time as growing broadband access makes Web surfing easier and more responsive.

An example of the problems facing TV advertising revenues can be found in Cap Gemini Ernst & Young's research on agents of influence in the car-buying process. Car advertising is TVs largest category, but only 17% of US consumers said TV advertising influenced their decisions. On the other hand 26% cited ads on Internet search engines, and 48% pointed to direct mail from a dealer. The largest influencer was word-of-mouth at 71%.

When advertising agency heads and other such gurus start touting TV's value because it shows pictures of the cars or talk about it as a "thought-starter" watch out. Such statements are apologies for a medium that isn't delivering numbers or results equal to its cost. Look for network and local TV advertising rates to drop as the number of viewers continues to decline and more accurate audience measurement tells the truth. Companies trying to reach business owners and other purchasing decision-makers, should be better able to bargain for lower TV ad rates. But the real payoff will be for those who find more directed media early.
Wireless LAN Primer for Small Business
As a companion to our previous post on Wireless LAN trends, we also offer this link to Wireless Local Area Networks for Small Businesses: A Primer.

For many small businesses, wireless computer networks can be extremely confusing. With terms like "WiFi" and "802.11g" bandied about, a small business owner can find it a challenge to sort it all out.

The Primer takes this complicated, jargon-filled subject and makes it easy to understand for small businesses contemplating a wireless network. It explains wireless LANs in everyday language.

Acknowledgement goes to the authors, Paramjit Kahai, Assistant Professor at the University of Akron, and Simran Kahai, Assistant Professor at John Carroll University, who are our guest writers. With wireless networks being a sizzling hot topic in the small business market today, we thank them for making the Primer available to Small Business Trends readers.

This is the first in a series of articles the Kahai's will be publishing. This first article starts by simply explaining the basics in a readable fashion. Subsequent articles will address advantages of wireless LANs for small businesses, and how security vulnerabilities have been overcome.

Wednesday, January 28, 2004
SMB Wireless LAN Spending Soars
Small business in the United States spent 50% more during 2003 on wireless LAN solutions, compared to 2002. Total expenditures in 2003 were $.53 Billion (USD). That's according to a study by AMI Partners, a market research firm focusing on the small and medium business market in the IT and telecommunications industries.

A key driver of this growth is that small businesses want to implement solutions to enhance the scalability of their networks, and keep pace with emerging technologies. In particular, small businesses are using wireless LANs to enhance and extend the functionality of their regular office LANs. Falling equipment prices have also helped drive wireless LAN adoption.

This dramatic increase in wireless LAN expenditures by small businesses came even as the weak economy took its toll, with 25% of small businesses reporting declining revenues last year. Small businesses are very optimistic for 2004, though, with 74% expecting increased revenues this year. That sense of optimism will keep wireless network implementations a hot trend among small businesses in 2004.

Tuesday, January 27, 2004
BitPass Micropayments User Survey
This post is a slight departure from our usual format here at Small Business Trends. I’m taking a few moments to describe our experience using the BitPass micropayments system.

From time to time we post photographs on this site to relieve some of the visual monotony that comes from having so many words on a page. Most of the images come from istockphoto.com. They were purchased using a BitPass micropayments account.

Our survey sample is admittedly tiny -- one person, me. But I can report that using BitPass on 8 or 10 different occasions, the experience has been uniformly positive each time.
  • BitPass is a Web-based system, so all I need is a browser -- no software to download. The BitPass user interface is streamlined. Screens don't get much simpler to use.

  • Setting up my account initially was quick and easy. Just the bare minimum of information is requested. I was not required to provide age, gender, household income, hobbies, mother's maiden name, or even number of pets.

  • The way micropayments work is that you purchase credits for your account (similar to buying a gift card). That process was very easy, too. I was given several ways to pay, including PayPal and credit cards such as Visa and Mastercard. I chose PayPal, and the interfaces with the PayPal system worked without a glitch. My initial $3 (USD) was transferred from my bank account to my BitPass account instantly.

  • Once I had a few dollars in my account, I went shopping. Off to istockphoto.com, where I downloaded photographs for $1(USD) each. Here again, using BitPass was fast and easy.
As a user, I saw only two issues: First, photographs are twice as expensive using BitPass versus istockphoto.com's own in-house version of micropayments ($1 versus $.50). Somehow BitPass is going to have to close that price gap. Second, outside of stock photographs, today there is very little content I would want to purchase using micropayments. Until there are more vendors offering desirable content who accept BitPass, usage will be limited.

All signs suggest the market might be ready for micropayments to take off. The last time around, before the Internet bubble burst, micropayments never got much traction. Most of the original micropayments providers went under. But we are now in a different era, with paid Internet content gaining greater acceptance and music download services going mainstream and creating demand for micropayments.

That said, a major issue looming on the horizon for BitPass and other micropayments providers is competition from PayPal. A representative of PayPal has said "we think the stars are coming into alignment" on micropayments. PayPal recently kicked off its own micropayments rate. Backed by its parent, eBay, a cash-rich and well-run powerhouse of a company, PayPal could be a formidable competitor.

Monday, January 26, 2004
New Zealand Looks to California

Auckland, New Zealand

New Zealand, one of the world's most entrepreneurial countries, is creating business connections within the State of California.

Among the initiatives:

  • Today Air New Zealand inaugurated new direct service between Auckland and San Francisco. According to the New Zealand Consul General, Darryl Dunn, it will mean an expansion in trade and business between the United States and New Zealand.

  • Last week New Zealand launched a "beachhead" for information and communications technology (ICT) companies in Redwood Shores, California. The beachhead will provide an office base for New Zealand companies looking to participate in the ICT sector in San Francisco and Silicon Valley.

  • Partnerships between New Zealand and the California film industry have produced recent box-office successes like The Lord of the Rings trilogy.

  • Though small in population (4 million), New Zealand is a world leader for entrepreneurial innovation according to the Kauffman Foundation's Global Entrepreneurship Monitor. New Zealand has particular strengths in information technology, biotechnology and advanced manufacturing (e.g., superyachts).

    One of the reasons New Zealand gave for these moves is its recognition that the United States -- California specifically -- leads the world in the information technology, communications technology, and movie industries. Another reason, no doubt, is that the United States is a major source of investment capital in all three industries. Indeed, 80% of venture funding worldwide happens in the United States, according to the Global Entrepreneurship Monitor.

    Sunday, January 25, 2004
    New SBA Status for IT Resellers and Testing Labs
    The U. S. Small Business Administration announced two new rule changes which will help more U.S. small businesses in the information technology and testing lab industries qualify for Federal contracts and SBA loans. The changes become effective January 28, 2004.

  • IT Value Added Resellers: The SBA created a new classification just for IT Value Added Resellers. Under their own category, Resellers now can have up to 150 employees and still be considered a "small business." The SBA says the change will allow smaller IT firms to better compete for Federal contracts. It will also result in some 1,700 small firms being eligible for SBA loans.

  • Testing Laboratories: Testing laboratories can now have up to $10 Million in average annual receipts and still qualify as a "small business," up from $6 Million previously. The testing lab rule change came as a result of requests from testing laboratories to review the size standard because of upgraded capacities and skills that federal agencies have recently required of laboratories. The SBA estimates that 120 additional firms in this industry will obtain small business status.

  • The current changes affect only IT Resellers and Testing Labs. Each industry group is subject to separate size standards. For more on size standards, click here. Hat tip to Chris Seper at Cleveland.com Chatroom Live for alerting me to this change.

    Saturday, January 24, 2004
    Internet for SMEs in Developing Countries?
    The World Bank's Small and Medium Enterprise (SME) Department promotes local small business growth in developing nations. As noted on the World Bank Group's website:
      "For an impoverished family in a developing country, establishing a small- or micro-enterprise often represents the first tentative step toward self-sufficiency. The SME sector as a whole can galvanize an entire economy, creating jobs and spurring growth.

      In much of the developing world, the private economy is almost entirely comprised of SMEs. In Ecuador, for example, 99 percent of all private companies have no more than 50 employees. Bottom line? SMEs are frequently the only realistic employment opportunity for millions of poor people throughout the world."
    Out of the four key ways that the World Bank helps SMEs, one of them is through helping smaller enterprises obtain access to the Internet and information technology. The World Bank aims to help SMEs leverage technology and the Internet to discover market information, link up with suppliers and sell to global customers.

    It is surprising to find that the World Bank places so much emphasis on the Internet and information technology -- so much so that it's one-fourth of their SME strategy.

    Without a doubt, the Internet has increased the pace of globalization dramatically. And it has become an indispensable tool for businesses in the developed world.

    But are most SMEs in third world countries really ready to do business using the Internet? Or do they have more pressing needs? We are reminded of the Gates Foundation, which announced in 1997 that it would donate computers to third world countries in an attempt to bridge the digital divide, only to change its priorities a few years later to focus on health care. Why? Because of Bill Gates' realization that third world countries had more immediate and urgent needs than access to computers and the Internet.

    Friday, January 23, 2004
    U.S. Policy Emphasizes Small Business
    U.S. President George Bush has been making it a point to single out small business in his most recent speeches. This is an extension of the White House's stated policy of support for small business.

    For instance, here is an excerpt from his address on January 23, 2004 before the U.S. Conference of Mayors:

      "... [O]ne of the things in the tax relief plan that I hope you find inspirational for your cities is it is aimed at the entrepreneur. Much of the tax relief is aimed at the small business owner. And the truth of the matter is the vibrancy of the inner cities of our country depend upon ownership.

      When more people own a small business, when people are starting their own business, when people are creating small businesses, they're creating jobs. They're not only creating a more vibrant and hopeful community, more jobs are being created. And the tax relief we passed was, in part, aimed at small businesses -- for this reason: Most small businesses are sole proprietorships or sub-chapter S corporations. And they, therefore, pay tax at the individual income tax rate. And so, therefore, when you reduce individual income taxes, you're injecting capital into the small business sectors of America's cities.

      The entrepreneurial spirit is strong in America. You know it as well as I do. The desire for some to own their business is strong. And the tax relief we passed helped invigorate that spirit."
    And here is what he said about small business in the State of the Union address on January 20, 2004, from the transcript reported on CNN.com:
      "Congress has some unfinished business on the issue of taxes. The tax reductions you passed are set to expire. *** Unless you act, small businesses will pay higher taxes. *** What the Congress has given, the Congress should not take away: For the sake of job growth, the tax cuts you passed should be permanent.

      Our agenda for jobs and growth must help small business owners and employees with relief from needless federal regulation, and protect them from junk and frivolous lawsuits."

    Here at Small Business Trends we do not take political stands. Our goal is not to advocate for a particular political party or particular candidate, or even to focus on a particular country. Our mission is simply to identify trends that impact the small business market -- worldwide.

    So in that light we consider it important to comment when the leader of the world's largest economy demonstrates the significance of small business by singling it out for support. In and of itself, that is a key trend in the small business market. We'll leave it up to the individual reader to decide whether the President's policies will achieve the desired results.

    Thursday, January 22, 2004
    CEOs Criticized for Offshore Outsourcing
    Don Manzullo, Chairman of the U.S. House of Representatives Small Business Committee, has criticized CEOs of large public companies for offshore outsourcing.

    Manzullo said that CEOs who measure success by the closing price of their company's stock are putting at risk the long-range viability of small businesses. He singled out CEOs who are sending work offshore in droves, "exploiting cheap labor for short term stock gains." He noted that these companies are pulling work from smaller subcontractors and seeking cheaper offshore providers.

    Manzullo urged those same CEOs to look long-term. In a committee hearing earlier this week, experts testified that "the long-range value of a company improves the more the company invests in its workers instead of relying on cheap labor."

    Offshore outsourcing is a political hot potato in the United States. Yet, as much as small businesses may agree with Representative Manzullo's sentiments, it's unlikely his words will have much impact on the behavior of large publicly-traded companies and their CEOs.

    Wednesday, January 21, 2004
    More Entrepreneurs Buying Businesses
    We've pointed out before here at Small Business Trends that the United States is becoming more entrepreneurial.

    More people own small businesses than ever before. Depending on which statistics you use, the number of U.S. small businesses is somewhere between 5 and 10 million. That estimate jumps to over 20 million if you include the self-employed and sole proprietors.

    An important subset to this overall entrepreneurial trend is the increasing number of Americans who are buying existing small businesses, instead of starting their own. According to a report by Wachovia, small business acquisitions are growing in popularity. On any given day in the United States, 1.7 million businesses are for sale.

    The reason people are buying businesses instead of starting them is money. For many kinds of industries, such as manufacturing or owning a motel, the cost of starting a new business would far exceed the cost of buying into an existing operation.

    Anecdotal reports from mergers & acquisitions professionals and business brokers suggest there are more buyers than sellers in certain industries. One reason is the number of out-of-work corporate executives. These days, more than ever before, there are greater numbers of veteran business people who can come up with the $100,000 to $2 Million (USD) they might need to buy an existing small business. And who prefer to be business owners rather than employees.

    Tuesday, January 20, 2004
    Australia's SMEs Have Attitude
    From Scotland comes this observation on the state of small business in Australia:
      "Far from being viewed as the poor relation, SMEs in Australia enjoy a reputation as innovators, capable of providing high-quality products and services and representing a key engine for growth. ***

      Fascinatingly, rather than treating its entrepreneurs as charity cases, the Australian government believes the best way to help indigenous businesses is to do business with them.

      *** Australia's approach has really resulted in a level of self-belief among its indigenous companies."

    A positive, encouraging environment for small and midsize business leads to increased self-belief and confidence by the businesses. In turn, that results in small and midsize businesses becoming even more successful. No mystery there.

    Monday, January 19, 2004
    Holonics Beats Offshore Outsourcing
    Small manufacturers in Australia, Canada, Japan, the European Union and the United States face mounting pressure to be competitive in the 21st century. Some manufacturers have turned to offshore outsourcing to take advantage of lower labor costs.

    But another answer may be appearing on the horizon -- holonics. Holonics shifts the paradigm, providing manufacturers with an alternative to offshore outsourcing.

    Holonic manufacturing refers to flexible systems that allow manufacturers to change their manufacturing processes on the fly, without having to reconfigure the entire manufacturing plant or assembly line.

    According to a recent presentation given by Jim Barlow, President of Western Reserve Controls, holonic automation is the future of manufacturing. He gives the example of auto manufacturers who he says are leading the way with holonics, driven by the near-future goal of 3-day guaranteed delivery of a car. In order to deliver a car with the consumer's specified features and options in 3 days, it will mean manufacturing very small quantities at local locales. Holonics will be crucial if manufacturers are to meet this goal. Manufacturing large quantities in far-off places like China just doesn't cut it.

    Barlow says the implications of holonics for manufacturers are significant:
  • competitive advantage is generated for local manufacturers

  • overseas labor cost advantages are contained

  • new industry/technology/services are created

  • local vendors are favored

  • new opportunities are presented for small businesses.

  • Download the Western Reserve Controls presentation here.

    Holonic manufacturing holds significant promise for small manufacturers. It provides a viable alternative to offshore outsourcing. Japan and Europe are leading the way with holonics, while the United States lags behind. What's it going to take to make holonic manufacturing a reality in the U.S.? Among other things, investment in holonics technology and adoption by the large industry players, both OEMs and automation manufacturers.

    Sunday, January 18, 2004
    Small Business Confidence Rises
    A recent Wells Fargo survey conducted by the Gallup Organization shows confidence among U.S. small businesses is up. Revenues are stronger. Cash flow is better. Other positive signs reported in the survey include improved financial situations, higher capital spending, and more credit availability. Read the story here.

    The Wells Fargo survey is in line with the most recent NFIB Small Business Optimism Index, which we noted in our January 16 post here at Small Business Trends. All signs point to good times ahead for small business. We look for small business sales to increase over the next 12 months, which will have a ripple effect. Small businesses with increased revenues in turn will invest in goods and services and hire more staff.

    Saturday, January 17, 2004
    Insurance Industry Crucial to HSAs
    The new Health Savings Accounts (HSAs) are being touted as capable of revolutionizing health care in the United States. According to the National Center for Policy Analysis, HSAs will put health decisions back into the hands of doctors and patients, and out of the hands of insurance companies.

    However, HSAs will not take insurers completely out of the picture. In fact, HSAs will create new opportunities for insurers.

    That's because HSAs are only available if used in conjunction with special high-deductible insurance policies.

    Passed in December 2003 as part of the Medicare reform law, HSAs have been widely hailed as a major benefit for individuals and small businesses. And there is no doubt they offer some great features.

    In order for HSAs to become widely used, the insurance industry will have to develop and offer more high-deductible insurance products.

    Insurers such as Aetna have rushed to get new HSA-related products launched and available.

    HSAs offer an important way for small businesses to contain health insurance costs and still provide benefits for their employees. Small employers are expected to lead the way with HSAs. Large employers are more likely to sit back and watch how smaller businesses fare before changing their own employee benefit programs.

    Friday, January 16, 2004
    Economy Ready to Rock and Roll
    Small business optimism jumped for the third straight month in December in the United States. That's according to the National Federation of Independent Business (NFIB) Small Business Optimism Index.

    The Index now stands at 106.9, the fourth highest ranking in the Index's history, and the highest ranking in the last 20 years. "The economy is ready to rock and roll.... [H]iring plans and capital spending plans took off...", according to the NFIB's report.

    The first quarter of 2004 would be a great time for companies that sell to small businesses to launch sales and marketing initiatives. If your company wants to reach small businesses with a service or product, especially a capital purchase, and you haven't already kicked up your efforts, don't wait any longer. Small business appears to be in a buying mood.

    Thursday, January 15, 2004
    SBA Loans Back On
    The U.S. Small Business Administration announced yesterday that it has re-opened its 7(a) loan program.

    Last week the SBA had abruptly suspended its main loan program -- with no advance warning. All due to lack of funds as a result of Congress not passing a budget before leaving on winter break.

    The re-opening is only temporary. It is based on short-term funding resolutions passed by Congress pending approval of a full 2004 budget.

    The re-opening came only after the SBA was publicly chastised by U.S. Senator Olympia Snowe, chair of the Senate Committee on Small Business and Entrepreneurship. She pointed to an "institutional breakdown in communications at the SBA. That, in turn, led to its failure to properly alert Congress of the funding shortfall, which left thousands of small business owners and entrepreneurs abandoned by the federal government."

    The heat continues, however, over the SBA's other unprecedented move, in which it limited the maximum size of 7(a) loans to $750,000. Not only has this abrupt decision incurred the ire of Senator Snowe, but it also brought outcries from George Herrera, President and CEO of the U.S. Hispanic Chamber of Commerce. He says he is "outraged" at the action that detrimentally affects the 1.2 million Hispanic-owned businesses in the United States.

    Wednesday, January 14, 2004
    Web Impact on Politics to Affect Business
    The 2004 presidential campaign has changed the way information is acquired, events are organized, and money is raised. The Internet has become big-time for the first time, and nothing in the political process will ever be the same. Credit the Howard Dean campaign with its cadres of young supporters for being the first to actualize the Web's potential to sell ideas, create a movement, and develop a grassroots funding system. Never again will a candidate run for a national political office without a full-blown Web strategy as a major campaign component.

    But the change won't stop with politics. I can't help but believe that what the Web is doing to political campaigns, it will also do to commerce. We've already seen a steadily increasing reliance on the Web for pre-purchase research and actual buying by both individuals and businesses. The "Webizing" of the 2004 presidential campaign will accelerate that trend. In fact, I think the day will come when we look back and identify 2004 as a time when the Web made another quantum leap in our collective consciousness.

    Young, Web-savvy organizers have delivered the Web to politics, and their contemporaries are listening. A joint Pew Research Center for The People & The Press and Pew Internet & American Life Project survey has identified that those between the ages of 18 and 29 are nearly three times more likely to turn regularly to the Internet as a campaign information source than those over the age of 50. Regardless of age, the Internet is the fastest rising campaign information source in a fractured media landscape. According to the survey, the number of Americans who cite the Internet as their first or second major source for campaign information has risen 85% since the 2000 election.

    After the election, there is no reason to believe that these people will walk away from the Internet as a major information source for things that matter to them. Given the news coverage of the Web's impact on the election process that will probably appear, it is more likely that even greater numbers of people will be drawn to the Internet as a primary source.

    So, what's it all mean for businesses? As a result of the 2004 election, look for faster adoption of the Web as a daily news and information source by the public at large. Look for Internet advertising and marketing to grow more rapidly. Look for innovative new technologies to spring up to take advantage of this fast rising trend. And finally look for a way for your company to gain from this development earlier rather than later.
    Tuesday, January 13, 2004
    Anti-Spam Act Ignored, Ridiculed?
    Well, here's a sorry state of affairs:

  • The newly passed Anti-Spam Act in the United States is being universally ignored, according to one survey.

  • The Act is being almost ridiculed in some quarters as being ineffective at best, and at worst giving "spam gangs" a cloak of legitimacy.

  • And to top everything off, the Act has burdened legitimate businesses with yet another layer of legal requirements, it now appears.

  • According to the Spamhaus Project, 90% of spam received in North America and Europe comes from a hard-core group of 200 spam outfits. The vast majority of spam you receive in your inbox is NOT coming from legitimate companies trying to sell their products -- it's from this "Gang of 200." If that's accurate, then the Anti-Spam Act has just added an unnecessary regulatory burden to legitimate businesses in the U.S. who were not the problem in the first place. But never fear. In typical American entrepreneurial fashion, the Anti-Spam Act could be a boon for some small businesses, including (1) companies offering services that will be of much more practical use than the new law to help filter out spam, and (2) service providers such as marketing consultants and lawyers offering to help the legitimate marketers comply with the new law.

    Broadband Adoption Sets Historic Pace
    With over 100 million lines, broadband has become one of the fastest growing technologies in history, according to UK based research group Point Topic. That number is a year-end projection of worldwide third-quarter growth from 79.4 million lines to 89.4 million. Actual fourth-quarter numbers have yet to be determined. The projection is conservatively based on a constant rate of growth, even thought the rate of growth in the fourth quarter is usually faster than that in the third.

    Comparing broadband to cell phones shows how impressive the growth has been. It took cell phones 5.5 years to go from 10 million to 100 million. Broadband did it in 3.5. The rapid growth has been spurred by a number of influences, but two stand out: Growth has finally taken off in the large industrialized nations, and major DSL operators have been slashing prices.

    China and all the G7 nations (US, Canada, France, Germany, Italy, Japan, and UK) are now among the top ten in terms of total broadband lines. The top ten in order are US, Japan, South Korea, China, Canada, Germany, France, Taiwan, UK, and Italy.

    China is expected to overtake Korea in the first-quarter of 2004, Japan within a year, and eventually the US. South Korea continues to be the world leader in broadband penetration with one line for every four persons, but growth there is leveling off.

    DSL is gaining and cable operators are slowly losing market share as phone companies using their greater financial strength extend coverage and cut prices. The eighth edition of the DSL Worldwide Directory -- Consumer Services showed an average reduction of 25% in DSL fees between September 2002 and September 2003.

    Broadband's rate of growth should pick up even greater speed as demand increases for other technologies that depend on it. Voice-over-IP is one such co-technology. Expect broadband to become ubiquitous and dial-up service to all but disappear within a very few years. In communication technology, speed is everything.
    Monday, January 12, 2004
    Entrepreneurship Hot on College Campuses
    Entrepreneurship is a hot topic on college campuses in the United States these days.

    An article by Jim Hopkins of Gannett News Service points out:

      Historically, universities prepared students to manage Fortune 500 companies, education experts say. Schools taught big-company finance and organizational behavior but little about start-ups, such as developing business plans and seeking venture capital.

      That changed, especially in the 1990s, after research showed most jobs and innovations are created by start-ups. Also driving academic interest in small business:

      Demand. More students think self-employment is a safer haven than working for big corporations. "Many saw parents downsized out of work," says John Challenger, chief executive officer of executive outplacement consultant Challenger Gray & Christmas.

      But big companies also don't want to get left behind. In campus job hunts, they're seeking students with entrepreneurship skills so they can better compete against start-ups.

      More than 500 universities have entrepreneurship majors in undergraduate and MBA programs, up from as few as 175 in 1990. "Huge growth," says Donald Kuratko, head of the National Consortium of Entrepreneurship Centers, an academic trade group.

      Fund raising. Universities discovered that entrepreneurs and companies are more interested in supporting schools that teach entrepreneurship.

    Yet a further sign that the American economy is becoming more entrepreneurial. Perhaps it is true -- that more people are turning to self-employment out of choice rather than lack of job options.

    Sunday, January 11, 2004
    Franchising: What's Hot in 2004
    The most stunning growth in franchises during 2003 related to senior-care. And the senior-care market is expected to lead the franchise opportunities in the year ahead.

    That's according to Entrepreneur magazine, which is out with its report of the hottest franchise trends for 2004:

  • Senior care: Seniors age 68 and over account for $588 billion (USD) in spending power in the U.S. As the population ages, more seniors want to stay in their homes, but need assistance. Franchises related to assisting seniors with services are expected to remain a growth area for many years to come.

  • Kids products and services: Parents, especially dual-career parents, want their kids to have fun and be well-educated. They will spend on everything from supplemental education for their kids, to fitness programs, to self-improvement and enrichment programs like dance lessons.

  • Tech: Technology services, especially computer training and consulting, has seen a rebound and growth surge recently. People and businesses need advice on what to buy and not to buy, and how to overcome problems.

  • Home improvement: Consumers keep spending on their homes. The home improvement category recorded almost 15% growth in 2003, and is expected to be a strong growth area in 2004. The leading sectors: building services, handyman, remodeling, windows, painting and lighting.

  • Fitness: Fitness franchises have been around for a long time. Recently, though, they have been revitalized, with women-only fitness centers leading the pack.

  • Income tax: Franchises for preparing tax returns have also been around for years, but are showing strong growth fueled by two trends: (1) the increasing complexity of the tax laws, and (2) advances in information technology which have made it possible for franchisors to leverage economies of scale.

  • Business consulting: The growth in business consulting is primarily being driven by small businesses that need answers but don't have any place else to turn.

  • Specialty ice cream: Yes, sugar is always a strong seller. Especially in ice cream. The growth in this category is being driven by ice cream stores that allow consumers to personalize the confection with candy, fruit, little sprinkles and other items.

  • Coffee: Think coffee is a trend that has reached maturity? Think again. Coffee continues to be a strong franchise category, with growth occurring in the franchises that offer something unique, such as jazz coffeehouses.

  • In case you had any doubt about it, catering to small business is big business. At least two of this year's hot trends -- tech and business consulting -- are being driven in whole or in part by small business. And arguably even a third trend -- tax returns -- could be said to be related to small business. Just more examples of small businesses whose main business is catering to other small businesses.

    Saturday, January 10, 2004
    Red Planet Means Business
    With the favorable publicity of the Mars landing, major contractors say they are counting on President George Bush coming through to reinvigorate the business of space.

    Mars Photo Courtesy of NASA

    Contractors such as Lockheed Martin and Boeing say that the U.S. has lacked a clear sense of direction for the space program for the last 30 years. They are looking forward to President Bush's announcement next week in which he unveils his ambitious goals for the space program. Among the items expected in the announcement: returning to the Moon and sending astronauts to Mars.

    The contractors say that not only must there be a clear vision, but there must be some money put behind it.

    New investment in the U.S. space program could mean substantial new business for prime contractors like Lockheed Martin and Boeing. And it will also be good news for those small businesses which are subcontractors. A rising tide raises all ships.

    Friday, January 09, 2004
    Punching Out on Overtime Laws
    Many small business owners in the United States aren't sure when to pay employees overtime. They're risking major penalties as a result -- penalties that could put their businesses into bankruptcy. And it's all because of outdated laws from over 50 years ago.

    In 1938 Congress gave rank-and-file workers the right to be paid overtime for working more than 40 hours per week. The overtime law was passed to protect workers from being forced to work endless hours. Managers, professional and administrative personnel ("office workers") were exempt from the overtime requirement.

    Over the past half century the American workplace has changed. Fewer employees work in factories and other settings where they get paid by the hour. Many more employees work in managerial, professional and administrative roles. The face of the American worker increasingly looks like this:

    With all these changes, the current overtime rules are outdated and hard to apply properly in today's workplace.

    Making the wrong determination about overtime could be disastrous for a small business. An employer making the wrong decision could end up having to pay an employee up to 3 years' back overtime pay. Even worse, the employer may be forced to reclassify entire categories of employees and pay them back pay, also.

    Thomas M. Sullivan, Chief Counsel of the SBA's Office of Advocacy, hails the current efforts of the U.S. Department of Labor to update the overtime rules. At first blush the new rules might seem to be a bad thing for small business. That's because the revised rules will immediately result in 1.3 million jobs being eligible for overtime, at a cost to small business of over $500 Million (USD).

    But the rules will also be clarified. Small businesses will not be in such peril of making the wrong decision about who is and is not exempt from overtime laws.

    Clarity in the overtime laws will be a definite improvement with small business. At least then small businesses will be able to forecast their employee costs in advance, knowing who will be paid overtime and who not. Instead of being blindsided with penalties years later, penalties so onerous they could be driven out of business.

    Thursday, January 08, 2004
    Small Business Loans Limited
    Small business has been hit with a double-whammy from the U.S. Small Business Administration.

    First came the announcement that the SBA's primary loan program -- 7(a) loans -- would be capped at $750,000 (USD). Previously the SBA was approving loans as high as $2 Million. That change is effective today, January 8, 2004.

    Then came yesterday's announcement that the SBA has run out of money! All due to Congress's failure to pass a budget for the SBA before adjourning last month. The SBA has therefore temporarily suspended its 7(a) loan program. This suspension is expected to be lifted as soon as a budget is passed. Despite being temporary, the suspension is a blow to small business.

    Small businesses seeking expansion funding and additional working capital suddenly have fewer options. This comes at a particularly bad time, just when the U.S. economy is poised for a strong upturn. As a result, small businesses may find themselves without the funds to hire staff, buy new equipment or take other actions to capitalize on the opportunities ahead.

    Wednesday, January 07, 2004
    Webcasting Heyday Has Passed
    The heyday of webcasting as a marketing tool has likely come and gone already. This prediction comes just as webcasts caught on in 2003. A mere flash in the pan, so to speak.

    So reports Sam Whitmore, editor of Media Survey, in his column appearing on Forbes.com.

    He is referring to TV-like webcasts used as online infomercials to generate marketing leads -- not other kinds of webcasts.

    His prediction goes against some of the market hype out there. For instance, he reports the results of a survey by Boston-based Bitpipe, forecasting that "tech marketers' use of Webcasts will rise 25% in 2004, the highest jump among any form of direct marketing measured in the survey."

    Yet, he says that webcasts won't make it because they are costly to produce and not a very efficient way of generating leads for vendors. Moreoever, he believes that from a viewer's standpoint, webcasts are not popular because they are just plain dull. And your name gets put into a marketing database with all the ongoing downsides that brings.

    For all the small tech startups out there trying to make a go of it by offering webcast services, as well as large companies looking for targeted ways to market products online, Whitmore's contrarian prediction is something to consider. What does he predict will be a better online direct-marketing tool? He says to watch pay-per-click advertising in 2004 -- and all the innovations expected to come there.

    Tuesday, January 06, 2004
    Doctors Want Controllable Lifestyles
    Doctors don't want to work 80 or 90 hours a week. They just want a life without beepers and being on call 24/7. More like a 9-to-5 job -- where they can leave and forget about their work.

    The New York Times reports that a remarkable shift is going on in the medical profession right now in the United States. Lifestyle considerations are driving more doctors to specialties like dermatology, radiology, anesthesiology and even emergency-room medicine. All of these specialties allow doctors to put work behind them when their shifts end.
      "The symbol for 'controllable lifestyle' is dermatology. And when residents graduate they can count on plenty of faces and bodies to heal and reconstruct, thanks to an aging, and affluent, population."
    This trend comes as the medical profession is already strained due to overwork.

    Although this signals a shift from past patterns, is it any surprise that medical students and doctors are emphasizing quality of life over compensation? Like many other small business owners today, doctors want their work lives and the personal lives to co-exist in greater harmony and balance.

    Monday, January 05, 2004
    Small Business Loyalty to Banks
    Banks have to work at retaining the trust of small businesses as those businesses mature and grow. Otherwise, small business owners will take their higher-profit banking business elsewhere, leaving the banks to handle low-margin transactions.

    That's according to a study by Financial Insights, a research firm for the financial services industry.

    The research states that in order to succeed with small businesses, banks must understand how to retain their trust and their loyalty. Small business customers are often forced to work with banks across many different departments and silos. Successful banks, however, overcome this to present an integrated consistent face to customers.

    Also, the age of the business often determines the type of services a small business requires, and banks need to be responsive to this. Small businesses between 2 - 5 years old are the most likely to use Internet banking and online bill payment. Older businesses are not as easily wooed away from their existing, established business practices.

      "We found small businesses to be loyal to their banks, but that loyalty only goes so far," said Jeanne Capachin, research director, Corporate Banking Group at Financial Insights. "Although they may turn to their primary bank for basic advice, more mature small businesses will choose specialists for services such as investment planning. This leaves the banks providing low margin transactional services as the more profitable business is siphoned away."

    Here at Small Business Trends we've been asked why we frequently post on banking trends. The answer is simple: virtually all small businesses need a bank. And with the number of small businesses in the United States ranging between 5 million and 10 million (depending of whose statistics you use), and the number worldwide being far greater, banks are working overtime to figure out how to get a bigger piece of this segment. And that's an important trend in the small business market.

    Sunday, January 04, 2004
    Is 2004 the Year of Nanotechnology?
    With the recent passage of the $3.7 Billion (USD) Nanotechnology Bill in the United States, could 2004 be shaping up to be the Year of Nanotechnology? Judging from the amount of attention Forbes magazine is giving nanotechnology, they certainly seem to think so.

    OK, first for some background. If you are like me, you have been hearing about nanotechnology, but you are not sure exactly what it is. So, just to be on the safe side, I looked it up and here is what I learned: Nanotechnology means "any technology related to features of nanometer scale: thin films, fine particles, chemical synthesis, advanced microlithography, and so forth."

    Great. Now that we have that cleared up....

    Actually, nanotechnology identifies ways of manipulating matter at the level of individual atoms -- matter so small it is about 1/100,000th the width of a human hair. At this level, the laws of physics create novel properties that allow materials to be much improved. Materials are made smaller, thinner, stronger, better.

    Nanotechnology, it is predicted, will affect just about every industry. According to a White House statement issued upon passage of the Nanotechnology Bill, "Nanotechnology offers the promise of breakthroughs that will revolutionize the way we detect and treat disease, monitor and protect the environment, produce and store energy, and build complex structures as small as an electronic circuit or as large as an airplane."

    Nanotechnology has been used to create waterproof/spot-resistant fabrics, auto bumpers, improved pharmaceuticals, Flash computer memory, cosmetics such as skin cream, OLED displays instead of LCD displays in digital electronics, ski wax, semiconductors, sporting goods like tennis rackets (it's the new "titanium"), and scratch-resistant sunglass coatings.

    Forbes has kicked off an entire Website to focus on nanotechnology, called ForbesNanotech.com, and an associated Weblog called ForbesWolfe Blog. Even the U.S. government has a dedicated Website: Nano.gov.

    Nanotechnology is being employed by tiny start-ups all the way to huge multinational corporations. Nanotechnology is expected to become part of a $1 Trillion global economy. Venture capitalists and Wall Street will be zeroing in on nanotechnology in a big way.

    Saturday, January 03, 2004
    Local Internet Search -- Getting Lots of Attention
    Local search (i.e., using the Internet to search for businesses in a local geographic area) is attracting a lot of attention right now. Expect advancement and innovation in this area during 2004.

    Many small businesses that consider their markets to be local are unable to take full advantage of Internet search and pay-per-click advertising. Up to now Internet search sites have not been very good at enabling users to find local information, i.e., local retailers and local service providers.

    Sure there are local-focus Websites where small businesses can advertise to increase visibility in local markets. Local newspaper sites are one example.

    But when it comes to a more comprehensive approach -- using major search engines like Google, Yahoo and MSN, and other major search tools like online Yellow Pages to find local businesses -- the process is awkward and hit-or-miss, at best.

    Yellow Pages providers and the major search engine companies aim to change all that, starting in 2004.

    According to the Kelsey Group, a market research company for the Yellow Pages industry, about 60% of small businesses report that the majority of their customers come from within a 50-mile radius. Also, 10% of all local searches ultimately result in a buying decision. Obviously, enhanced local search capabilities could provide a big boost to small business.

    The major search engine providers are working on a variety of ways to enhance local searching. For instance, Google is working on two ways, including plotting Internet IP addresses geographically and asking searchers to plug in their location when they search.

    One advantage that the Yellow Pages providers have is their local sales forces. Properly deployed, the local sales forces can help educate small and medium-sized businesses on how to advertise to get the most out of local-search techniques on the Internet.

    Local search is a hot trend in the Internet world right now. There are a lot of dollars at stake, particularly in the paid local-search category. The Kelsey Group estimates that the market for local-paid search could be $2.5 Billion (USD) in the United States alone by 2008. With this kind of money up for grabs, we expect to see considerable improvement in local searching capability during 2004.

    Thursday, January 01, 2004
    Europe is Leading the Way with Micropayments
    A number of startups in the United States and Canada have been in the news this past year with their launches of new micropayments solutions. Yet, a company in Europe -- Germany to be exact -- is leading the way with micropayments.

    Firstgate Internet, out of Cologne, has been in operation since 2000. The company boasts nearly 2 million customers, at a time when the North American providers are either still in Beta stage or number their customers in the hundreds and thousands.

    Micropayments describes a payment system that enables consumers to pay small amounts (often less than $2 USD) for Web content. While each of the micropayments solutions works differently, they all are designed to enable small Websites, independent publishers, writers and artists to sell content affordably and still make money without having all their profit eaten up by credit card transaction fees.

    See the article at MIT Technology Review for more about the current status of micropayments businesses.

    Micropayments have the potential to enable small Web businesses, independent publishers, writers and artists to sell content affordably over the Web. One of the main challenges is going to be getting enough small businesses, artists and Website merchants to adopt micropayments. Perhaps the new paid music download services will be enough to feul demand. The other challenge is to make the technology interface simple and easy for consumers to use.

    Deer Farming is a Growing Business
    Just when you think that small farms are disappearing in many parts of the developed world, replaced by large agribusiness, along comes a reminder of the almost-trendy kinds of farming that are growing at a fast clip. Deer farming is among those.

    Deer farming, you say? Even in the United States, where the only time these animals seem to make the front page is in reports of deer overpopulation?

    Yes, deer farming.

    And deer farms are not just in the United States. They also thrive in Canada, New Zealand, Norway, Australia, China, the U. K., Sweden, Korea, Russia, Vietnam, and other parts of the world.

    Related to deer farming is elk farming, reindeer farming, and even antelope farming (popular in Texas).

    Deer farms have been around for centuries. However, real growth into an industry has occurred only in the last 20 years.

    A recent article in Ohio Business magazine points out the extent of deer farms in just one state -- Ohio -- alone (the article is not online and only available in the December 2003 print edition). It says Ohio has "some 500 deer farms scattered throughout the state, with an estimated population of at least 6,000 deer." The article profiles a husband-and-wife entrepreneur team who started a deer farm 10 years ago and work at it part-time, while holding down full-time jobs.

    People get involved in deer farming in part because they enjoy being around deer and the lifestyle associated with raising them. There is also a profit motive for most farmers. Deer can be raised as livestock for food. They can be raised for hunting preserves. They can be raised for "velvet antler" which is prized in Asia as a food supplement. Last, but not least, they are raised for breeding purposes, in much the same way horses are put out to stud for a fee. A champion buck can be worth $1 million (USD).

    Many issues face this nascent industry as it grows. Among them: it can be capital intensive (e.g., breeding stock); production standards are non-existent; many producers are small with farms that are part-time or hobbies.

    Another important issue is the existence of chronic wasting disease (CWD) among deer. CWD is a disease in the same family as mad cow disease. However, for a number of years now surveillance programs have been in place in many U.S. states to test entire farm herds for CWD once a year. In some ways, deer farms may be better protected than U.S. beef herds, of which only a small percentage of the herds are tested.

    For more information about deer farming visit the following sites:

  • Deer Farmers' Information Network contains a large number of articles about deer farming worldwide.

  • DeerFarms.com has a directory of deer and elk farming associations, along with listings of farms and deer for sale.

  • North American Deer Farmers Association contains background information about deer farming, and also serves as a clearinghouse for information about chronic wasting disease (CWD). Also publishes The North American Deer Farmer Magazine.

  • Deer farms, along with elk farms, reindeer farms, antelope farms (and even goat, alpaca and llama farms) are a trendy kind of small business. Farmers can start out small while still holding down a full-time job elsewhere. The herds require much less space than traditional livestock, and much less attention. In many ways deer farms are the perfect moonlighting business. But the deer farming industry is still in a fragile state. It has a ways to go before it becomes a well-established industry with large sustainable markets for its products.

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