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The Big Concerns of Small Business

Owners of small and midsize businesses say rising inflation, the trade deficit and the collapse of the dollar, and energy shortages are the three issues that pose the greatest threats to their success, according to a new national survey, the Interland Spring 2005 Business Barometer. The survey also found that "the Middle East and terrorism" now rank near the bottom of a long list of concerns, despite the ongoing conflict in Iraq.

"Fears of terrorism were noted by only 11% of respondents, even below a catchall category of 'other' that got 13%," says John Lally, a vice-president at Atlanta-based Interland, an online sales and marketing firm that sponsors the national survey twice yearly. "That's way down compared to our last couple of surveys." The results did not indicate whether U.S. business owners feel safer overall, or whether the intensity of concern about terrorism has simply faded due to the passage of time since 2001.

SHORT ON TORT. Interland polled 1,032 business owners with 500 or fewer employees and revenues ranging from $250,000 to more than $5 million. Sixty-eight percent of respondents have been in business for five years or more.

One of the survey's more surprising results revealed that tort reform -- particularly limiting class-action lawsuits -- is not a major priority. While reform proponents in Washington frequently cite the impact of lawsuits on small businesses, and big business lobbies have made their own push, 67% of those surveyed said they do not believe, or were not sure, whether tort reform would benefit companies of their size.

"Small-business owners don't have a very active interest in legal issues, apparently," Lally says.

"IN CRISIS." The majority of business owners also do not let potential lawsuits influence their decisions. When asked whether they evaluate the risks of being sued when making business moves, 66% answered "rarely" or "never." The response raises the possibility that "while litigation is widespread in the macroeconomic environment, they are not educated or informed about how or whether they can lower that risk," Lally says.

On Social Security, respondents seem to deviate from the prevailing opinion among the general public. During his barnstorming tour this spring, President George W. Bush has had to struggle to drum up serious concern about potential Social Security insolvency, but the small-business community already seems to be taking his warnings to heart.

When asked how important Social Security reform is, 43% of the business owners surveyed said the system is "in crisis and needs to be fixed now." Another 34% said the system has serious shortfalls that need fixing but are not critical. Only 23% termed the issue "a manufactured crisis" or said the problems have been overstated.

"OVERCOMMITTED AND UNDERDELIVERING." Other recent national surveys, on the other hand, show that more than 50% of Americans now oppose private savings accounts, a cornerstone of Bush's Social Security reform push (see BW Online, 5/9/05, "Bush's Blunder on Social Security").

"Entrepreneurs tend to be very bottom-line focused, so it's not surprising to see them look at Social Security from a needs-to-be-fixed standpoint," Lally says. "The small businessperson is a pragmatist, so when he sees a system that is overcommitted and underdelivering in the long term, he sees that as a big problem."

Many of the survey's questions dealt with online marketing and sales. Results show that companies are continuing their adoption of online communications and Internet-based sales and marketing, with only 6% of respondents saying that their companies have no Internet access.

NEOPHYTES LAGGING? The use of e-mail, in particular, is becoming ubiquitous, according to the survey data. Only 14% of those surveyed said they never use business e-mail, while 70% called e-mail "very critical" or "somewhat critical" to their daily operations. Seventy-two percent said they use e-mail to communicate with existing customers, though only 33% said they use it to get and request bids.

Although the adoption of e-mail has been strong, a surprising number of companies (47%) still lack their own Web site. Of those, 51% said they are looking into launching one or plan to eventually, 49% said they have no interest. "I'm a little surprised by that," says Lally, who suggested that many of the companies without Web sites may be younger than those that do. "There's a lot of churn in the very small business categories, so perhaps some of these companies have just started in business."

The companies least likely to have their own sites were those in the "personal services" category, such as landscapers, plumbing companies, and hair salons. The categories most likely to have sites consisted of retailers, educators, and nonprofit organizations. Some businesses, such as independent gas stations, may never establish Web sites, Lally says, predicting that the saturation point for small-business Web sites will probably settle in at around 75%.

SALES BOOST. But many companies that are not on the Web now -- and say they don't plan to be -- will likely change their minds, says Kim T. Gordon, president of the National Marketing Federation, a consultancy based in Key West, Fla.

"As they begin to see other businesses like theirs have success on the Internet, they'll change their tunes," she says. "It takes a while for these ideas to really percolate. Even a small medical office that today doesn't think it needs a Web site will realize eventually how many people are looking up health information and researching doctors online, and they'll realize they do need a Web presence even if they never intend to make sales online."

Mary Hertert, for one, redesigned her company's Web site in early 2004, determined to reach customers nationally. Since then, sales at Color Creek, her eclectic fabric-dyeing shop in Anchorage, Alaska, have jumped at least 150%.

LEARN BY EXAMPLE. Hertert is getting orders from all over the country, from customers who want to transform their wedding dresses, sweaters, jackets, and other fabrics into a rainbow of custom colors. Along with expanding her site, Hertert says, she also focused her online marketing and had her site "optimized" to draw more search engine hits. "Before, people would find me by happenstance," she says. "Now, I get regular hits on the Web site. That is my lifeline, right there."

Stories like Hertert's will no doubt serve as catalysts for Web-resistant businesses to take plunge in the coming years or months -- and perhaps cause a change in the results of Interland's next Business Barometer survey.

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