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Small Business Rules

by Alf Nucifora

Anecdotal evidence suggests that small business is big business; that it's the quiet turbine that drives the US economy; that creates the jobs; that spurs innovative business thinking and entrepreneurial risk. But, it's always a battle to pin down the real numbers or truly divine the attitudinal make-up of today's average small business person. Until now.

The Small Business Buying Power Study

From The NETWORK of City Business Journals comes a groundbreaking report on the buying power and behavior of American small business. Entitled "The Changing Landscape of Small Business" this 700-participant study, made up of small businesses (1-99 full-time employees) drawn at random from Dun & Bradstreet's database, was fielded in the May-July 2000. What follows are a selection of choice pickings from that study:

  • 7.4 million small businesses in the US today (up 28% since 1995)
  • Average of 6.1 employees per firm (down 27% since 1995)
  • Average sales per employee…$279,000 (up 36% in the last 5 years)
  • The service sector leads…
    • Retail trade 27%
    • Business and professional services, including healthcare, 17%
    • Other services 21%
    • Manufacturing 10%
    • Construction 7%
    • Finance, Insurance and Real Estate 6%
    • Wholesale trade 6%
    • Miscellaneous 6%
  • 92% have experienced growth in the last three years with 52% growing at a rate of 10% per year or better
  • The vast majority (70%) derive a 100% of their revenue from their local region or market (22% from national; 8% from international)
  • Profiling the average small business and its owner…
    • Average annual sales…$1.7 million
    • Average years in operation…17.6
    • Average age of the top executive…49.3 years
    • Average annual household income…$222,600
    • 40% women-owned
    • 9% minority-owned
    • 26% are home-based
    • 74% are company founders
    • 42% are college graduates
  • Small business spending on B2B products and services topped $1 trillion in 1999
  • Average spending on B2B services was $142,783 per firm
    • Real Estate…$32,085
    • Insurance…$27,307
    • Marketing…$18,706
    • Office supplies/services…$11,674
    • Computer/Internet…$11,407
    • Other capital spending…$11,061
    • Telecom…$10,399
    • Professional services…$9,089
    • Employment services and training…$7,755
    • Travel…$3,300
  • Small business Internet usage has doubled in the past year (39% to 82%)
  • Small business Broadband access (DSL, ISDN, T-1, T-3, Cable modem) has doubled in the last year to 40%
  • What do small businesses use the Internet for?
    • Search for info about products…84%
    • Search for/read news…81%
    • Obtain tech support from vendors…62%
    • Look for/obtain business advice…61%
    • Use computers remotely…46%
    • Bank electronically…31%
    • Chat with other business people…28%
    • Make phone calls…19%
  • 51% of all small businesses have made at least one on-line purchase in the last twelve months (up from 21% the year before)
  • What are small businesses buying on-line?
    • Travel…62%
    • Computer software…44%
    • Office supplies…42%
    • Computer hardware/peripherals…38%
    • Financial services…37%
    • Books…32%
    • Office equipment (ex computers)…20%
    • Raw materials…14%
    • Association memberships…12%
    • Telecom equipment and services…10%
    • Stamps…9%
    • Subscriptions…9%
    • Executive gifts…9%
    • Professional services…6%
    • Automobiles/Trucks…4%
    • Insurance…2%
  • 35% of small businesses have web sites (up from 15% the year before)
  • What employee benefits do small businesses offer?
    • Health insurance…60%
    • Prescription medicine plan…34%
    • Retirement/Pension plan…27%
    • Dental insurance…15%
    • Cafeteria benefits plan…10%
    • Vision coverage…9%
    • Stock option plan…6%
  • Who is the primary decision maker?
    • In companies with 1-5 employees, 40% of all purchase decisions are made by the principal; in 32% of the decisions, others provide advice but the principal makes the decision; 23% of decisions are made jointly
    • In companies with 6-19 employees, the principal makes the sole decision (25%); the principal makes the final decision based on input from others (35%); and makes the decision jointly (35%)
    • In companies with 20 or more employees, sole decision…17%; with advice…35%; jointly…41%
  • What are the top small business concerns?
    • Workforce issues…34%
    • Cost-related concerns…17%
    • Generating sales…16%
    • Competition…11%
    • Cash flow and collections…11%
    • Government-related problems…9%
    • Interest Rates/The Economy…6%
    • Keeping up with technology…5%
  • Management style, concerns, traits and values:
    • "I believe in reinvesting the profits we earn back into my company"…85%
    • "When making major decisions about my business, I give serious consideration to what other people in my company have to say"…82%
    • "I tend not to use professional advisors and outside consultants to help me make important business decisions"…59%
    • "I'd rather keep my company's debt to a minimum even if it means growing at a slower rate"…79%
    • "It's not what you do, but how you do it that counts most to me"…91%
    • "I'm excited by the challenge of doing something that no one else has done before"…72%
    • "Fame, fortune and security are less important to me than doing what I enjoy (80%)…and having my fate in my own hands" (88%)
    • "I prefer to separate my business life from my personal life (56%)…but in reality they are closely intertwined" (79%)

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