A Small-Biz Crystal Ball, Part 1

The first half of this look into the future examines the next 10 to 20 years on the Net, in outsourcing, retailing, and more

By Karen E. Klein

Q: I am wondering if any study has been done regarding the future of small business. If so, what small businesses will be hot for the next 10 to 20 years? --R.N., San Francisco


Who wouldn't like to gaze into a crystal ball and get an inside line on the future of small business? Predicting the industries that'll be hot and those that won't, however, is more the subject of speculation than scientific study. Because so many variables and unforeseeable events can radically affect the future -- think September 11 -- not many people are brave enough to attempt long-term forecasts.

While studies are scarce, a bold group of professionals called "futurists" spends considerable time studying history, analyzing trends, reading up on new technology, searching out up-and-coming business opportunities, and advising their clients about the future.

You can read about futurists and find a list of consultants at The World Future Society. Also, futurists Edith Weiner and Arnold Brown have written a book, Insider's Guide to the Future, that's available at Amazon.com. Although they seldom agree on what's to come, Smart Answers gathered some samples of their predictions for small business.

The Internet: A few years ago, many experts loudly declared that brick-and-mortar firms would soon be going the way of the dinosaur. Despite glowing predictions about the opportunities for the Internet to "level the playing field" for small business, however, the majority of entrepreneurs today do not use the Internet to its full potential -- and a substantial number are still not online at all!

David Pearce Snyder, a consulting futurist and lifestyles editor of Futurist magazine, believes small businesses have plenty of good opportunities to capture larger markets online -- once entrepreneurs conquer their technophobia and invest in Web sites that do more than act as postcards for the businesses. Niche markets and highly specialized products and services are the way to go for small companies, Snyder says.

Outsourcing: "Computers have overwhelmed the planning and decision-making mechanisms of most large institutions with more relevant data than they're able to meaningfully assimilate -- data that, when looked at with care, often call into question long-standing policies, practices, and assumptions," Snyder points out. The corporate information overload has opened doors for small companies to step in and pick up subcontracts to do things like administrative support, employer evaluations, research, and design, Snyder says.

"The preeminent enterprises of the 21st century will be continuously evolving networks of strategic partnerships, short-term consortia, outsourced contractors, and hundreds of virtual teams," he predicts. He believes small companies will thrive if they can take over particular corporate tasks, do them well, and do them cheaper.

Employment: Small, local human resources and training firms will flourish over the next 10 to 20 years as HR continues to become a separate industry and fewer larger corporations handle employee recruitment, training, and management in-house. Even payroll, benefits, and retirement planning will be outsourced, so the corporation can concentrate on its core competency in the marketplace.

Experts/Appraisers: In a global market, expertise is increasingly needed on everything from environmental management to technical knowhow to cultural sensitivities of consumers. Small companies that can make a name for themselves by knowing how to handle specific situations will find demand rising for their services and expertise, Snyder believes.

Final Assembly/Delivery: Large manufacturers will continue to establish brands, set standards, and do marketing, but they'll increasingly turn over the final assembly and delivery of their products to smaller companies under contract to sell in local markets. This way, small companies can benefit from international advertising and corporate R&D, but they'll have to compete for contracts that may leave them with very slim profit margins.

Retail: Unless independently owned dress shops, restaurants, and other retailers find a way to provide extra service, specialized attention, and unique items that sell to upscale clientele, they're going to suffer in the future, Snyder predicts. "Small retailers cannot compete with the buying power and advertising power and bulk marketing of the chain stores and restaurants," he says. "The regional and local entrepreneurs that used to be the backbone of our economy are going away. The sole proprietors must offer extras to tony, upscale clientele who aren't happy with the standard offerings."

Ethnic Specialization: Niche markets serving immigrant populations with language specialization or cultural goods and services not offered in the mainstream are another growth area, futurists predict. Community bankers who serve special markets will continue to thrive in the next decades.

Coming in Part 2: How consumers' quests for information, health, security, and emotional/spiritual well-being will drive small business in the first two decades of this century.

Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.

Before it's here, it's on the Bloomberg Terminal.