For Small Businesses, Positive Change Is On the Horizon
Every year, people predict something revolutionary is going to happen in the small-business space, and every year things seem to plod along as usual. Despite our best efforts, change comes slowly for the 29 million small businesses in the U.S. I’m not going to claim that this year will be any different, however, I do think that we’re getting close to bucking this trend in the near future.
As the co-founder and CEO of BodeTree.com, I have the opportunity to interact directly with thousands of small business owners and am on the front lines of what’s happening in the space. Over the past eight months, I’ve noticed several trends emerging that indicate real change is closer than ever.
Small businesses are starting to spend again.
It’s no secret that small business forms backbone of the U.S. economy. They make up over 99.7 percent of all employer firms and are responsible for over 60 percent of all new job creation. Still, we’re in the fifth year of a very weak recovery in which small businesses have been hit hard by tight credit markets, slow sales and limited spending.
Today, I believe we’re finally starting to see these small businesses begin to hire and spend on technology. According to a recent Wells Fargo/Gallup Small Business Index survey, 71 percent of small businesses report they expect their financial position to improve over the next 12 months. Similarly, about a quarter of the respondents reported they intend to hire new employees, up from about 16 percent a year earlier. These businesses will be primed and ready to adopt new technology and solutions to help them manage this expected growth.
The performance gulf is growing.
Though it’s too early to quantify, I’ve noticed a growing gap between the performance of small businesses who adopt modern technology and those who insist on dragging their feet.
Forward-thinking businesses are utilizing cheap, easy and powerful new solutions to organize their data, improve efficiency and reduce overhead. Historically, it’s been difficult for outsiders to pick up on the improvements these systems provide but lately it’s become obvious to those of us who are in the trenches, so to speak. I believe we’re moving towards a world of technological haves and have-nots, where businesses that fail to adopt technology will have a significant and systemic disadvantage in the marketplace going forward. This performance gulf will create internal pressure for small businesses that will likely drive even more tech adoption in the future.
Banks are getting smart.
Perhaps most importantly, banks are starting to understand the need to provide a better experience for customers.
For the last few years, the financial technology sector has been dominated by consumer-facing solutions. Last year, we saw an explosion of credit monitoring tools, spending trackers and personal investment services. Now that the consumer segment is largely played out, banks are becoming increasingly desperate to find innovative ways to introduce financial tech to the small-business market.
This year I expect to see an explosion of innovation in the financial technology space, as banks and other financial institutions decide to do more with the volumes of data at their disposal. The small-business sector in particular is poised to benefit as it becomes safer and easier to connect real-time transaction data to third-party solutions like QuickBooks, Xero or a host of other applications. Working with banks will never be the same, as these real-time data connections drive faster decisions, more opportunities and better service for small businesses. Once the banks start utilizing these solutions as part of their lending process, widespread adoption by the small businesses they serve becomes inevitable.
Taken independently, these trends represent more of what we’ve come to expect from the small business sector: incremental change that builds up over time. Taken together, however, it becomes clear that the internal and external pressures building have the opportunity to lead to a revolution in how things are done.