SMB Survey Takes the Pulse of Small Businesses

By Keith Girard

Edward Fields has a pretty good feeling about small business in the coming year. The financial consultant says his outlook is based on what he sees as a kind of Goldilocks equilibrium in the economy right now.

"Interest rates are higher, but they’re not high,"

he says. "Banks have plenty of money so businesses can get loans, and there is an extraordinary amount of private equity money around."

What’s more, he adds, people with money are looking for deals as opposed to people with businesses looking for money. "A lot of people are doing business. Business is good," he says.

His optimistic view is shared by 79 percent of the small business owners who were questioned recently in a comprehensive survey by AllBusiness.com. Those business owners also said they expect things to get better in the coming six months compared with 4 percent who expect things to get worse.

The sweeping survey, the first of its kind by AllBusiness.com, sampled the attitudes of just over 1,000 small business owners on a range of subjects, from the macroeconomics of the economy to the microeconomics of running their firms. A key part of the survey also looked at how small business owners are using technology to grow their companies.

"The Web is certainly factor," says Herb Shields, an independent management consultant who took part in the survey. "I have my own Web site, so people that have an interest in what I do have a place to go, and I have gotten business contacts from it."

Having your own Web site — Shield’s is hshieldsconsulting.com, is almost automatic for most small businesses these days, and a Web presence seems to be the most frequent use of technology by many small business owners.

In the survey, 83 percent said the Internet has helped improve communication about their company, 61 percent said it has opened new markets for business to them, and 57 percent said it has lowered the cost of doing business.

But there is a flip side to the Internet as well. Sixty percent of those surveyed said the Internet has increased competition for their businesses. No one knows that better than Lyle Landhuis, who co-owns a small job printing company in suburban Los Angeles.

"You’ve heard of the paperless society? It’s finally hit," he says. "We’ve taken a giant hit in last five years from online [competition] and computers."

Fortunately, Landuis’ company, Century Press, has been around for more than seven decades and has a long-standing customer base. "The really loyal customers are hanging on," he says. "But it’s getting harder than heck to replace them."

Landhuis is the first to admit that his company still largely does business the old-fashioned way. He has yet to fully embrace technology, and his company still has no Web site, although he’s currently exploring options to go online. He says he has no choice. "A few years ago I used to kill myself to get the work out. Now I kill myself to get the work in," he says.

If Landhuis takes the plunge, he will join 80 percent of the small business owners in the AllBusiness.com survey. They say they are using the Internet in their businesses more than ever. An overwhelming number, 87 percent, say they use it for business-related email and an even higher 89 percent say they use it regularly for research.

Of those surveyed, 44 percent said they already have a Web site up and running, and another 38 percent said they plan to launch a site within the next six months. Of those who have a site, 92 percent said they use it to provide information about their company; 74 percent said they use it to provide product information to their customers.

Only a small number of business owners, however, use the Internet for more than just the basics. About one in five, for example, say they use the Web right now to do online marketing, although 43 percent say they intend to start marketing online within the next six months. Based on follow-up interviews, e-newsletters appear to be one of the more popular forms of online marketing. Another 36 percent are actually engaged in e-commerce where customers can purchase products or services directly from their sites.

Kevin Stirtz, who ran a small franchise publishing business in the Minneapolis-St. Paul area, says the Web played a large part in his business. He not only used it to generate leads and get information to people, but also went one step further than most small business owners — he published his own "blog."

Blogs are one of the hottest trends on the Internet. The term is short for Weblog, a journal or newsletter that generally reflects the personality of the author.

"I wrote a blog and that also helped in that people could see me as someone who had ideas and probably could help them," he explains. "It’s not that we got customers from it, but we got a lot of good feedback."

Experts say that using technology innovatively is one of the keys to growth for most small businesses, and in the AllBusiness.com survey, growth ranked highest as a key objective for owners. Of those surveyed, 76 percent say they would like to "significantly grow" their businesses this year. But standing in the way, the survey found, are a number of hurdles.

The biggest comes right from recent headlines — rising energy costs. Although the price of oil has stabilized recently, energy costs remain high, and 45 percent of those surveyed said it was their greatest worry. The next top concerns were largely microeconomic: managing cash flow (44 percent), managing growth (36 percent), hiring and retaining employees (35 percent), and the cost of employee health insurance (30 percent).

Business owners expressed less concern about the after effects of Hurricane Katrina, the cost of investing in technology, and rising interest rates. Most experts believe the Federal Reserve has reached the end of its cycle of rate hikes. That, in turn, has fueled a stock market rally. The Dow Jones Industrial Average eclipsed the 11,000 mark in early January for the first time since the tech-stock boom five years ago.

Ironically, while rapid growth is high on the wish list of business owners, few of those interviewed in a follow up to the survey said they have formal, written business plans outlining how they plan to get there.

Industry consultant Shields was one of the few who actually has a formal business plan. He created it, he says, after joining an organization of small business CEOs. As part of a peer group, members advise each other on business issues. "One of the things my group does is help keep me on track," he says. "When, you’re on your own, you don’t have someone to challenge you. It can be a very lonely business."