A Small Business Manifesto by Ray Hays, www.rayhays.com
Bottom line, it’s up to small businesses to save the world. Big business, financial markets and politicians have lost touch with the common man.
They’ve also lost touch with reality. They worship false deities – mysterious and faceless entities, with names like DOW, S&P, DAX and Hang Seng. When the financial gods become angry, the politicians and Central Banks attempt to appease them through complex rituals in which they manipulate magic potions with names like the debt ceiling, interest rates, financial regulation, fiscal policy, money supply and stabilization programs. They posture and debate how these potions should be mixed, while the world’s economy sits on the brink, awaiting some miracle to emerge from the voodoo fog bank.
So what can we do as small business owners?
For one thing, spend more time working on your business and less time worrying about the economy. It seems that the only certain thing in the financial markets is uncertainty. Over the past week, we’ve heard it on the news ad-nauseam: “The market shows signs of uncertainty.” Really? What the heck does that mean? Just tell me how I can retrieve my retirement account as it swirls down the toilet.
Then some talking head comes on the TV screen and explains that the uncertainty might be attributed to unemployment indicators… or the debt ceiling… or the Standard and Riches credit rating… or rumors that a camel passed gas in Oman.
We stand back and scratch our heads, inwardly embarrassed that — despite our years of business experience, and regardless of our academic pedigrees — we have no clue what they’re talking about. Join the club of ignorant masses. Unless you are one of the minions in the financial markets, you are probably mystified by the swirling market forces that shape the destiny of the global economy.
However, in the real world, business is not about some abstract financial benchmark or macroeconomic policy. As small business owners, we know that business is about people: our employees, our customers and our community. It’s about hard work and good management. It’s about simple concepts, like sales, costs and profits.
Who will be our economic savior from the economic winds of uncertainty?
Politicians? Stock market gurus? Central Banks? The banking sector? The real estate sector? Multinational corporations? China? God? Superman? … Superheroes aside, I would place my bet on the small business sector.
Look at it historically. Prior to the industrial revolution, small businesses represented the heart of economic development in most countries. Before the days of “big business” and the stock market, small entrepreneurs built the foundation on which the industrial and financial giants of today stand.
However, today, big business and politicians are tied to the hip with global financial markets. (Or is it vice-versa?) Comparatively, small businesses have significantly more freedom and leeway from the market. Sure, small businesses are impacted by global market forces, including inflation, interest rates, labor costs, fuel prices, etc. Sure, economic downturns destroyed many small businesses, which were defenseless to the onslaught.
Yet small businesses are more nimble than their large brethren. We can adjust more quickly to market risks or opportunities. A small business can re-brand in a week, whereas it takes United and Continental Airlines over a year. We can completely change our business strategy without worrying about the perception of shareholders and our stock price on Wall Street.
That said, increasingly small businesses are burdened with chains of the global economy, which prevent us from change and strip us of our independence.
It’s time to take control of our destinies. Long Live the Small Business Revolution!
Yes, small businesses DO have the power to change the global economy. Let’s take the example of the U.S. market. According to the Small Business Administration, small businesses (fewer than 500 employees):
- Represent 99.7 percent of all employer firms.
- Employ just over half of all private sector employees.
- Pay 44 percent of total U.S. private payroll.
- Have generated 64 percent of net new jobs over the past 15 years.
- Create more than half of the nonfarm private gross domestic product (GDP).
- Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).
- Are 52 percent home-based and 2 percent franchises.
- Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.
- Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
Definitions and perceptions on small businesses vary. For example, in Europe a small business is identified as fewer than 50 employees compared to 500 employees in the U.S. Some consumers perceive franchises as “big business chains” that kill off small business competitors. In reality, a significant majority of franchisees are small businesses that are locally owned. In terms of franchisors (the franchise headquarter companies), the majority of them are also small businesses. The big players, such as McDonald’s and UPS, are more the exception than the norm.
Definitions aside, small businesses play a critical role in the worldwide economy. Think about it this way. If the small business sector could add 10% more jobs, the U.S. economy would erase the rise in unemployment since 2008, which improves consumer spending, which grows retail sales, etc. In short, shifts in the small business sector can make a big impact on the world economy.
Okay, I’m on-board with the small business revolution. What’s our goal?
Big government or a big business clients – If more than 25% of the revenue of your small business comes from on government or big business, you are chained to the market.
Big business vendors or suppliers – If your business relies on big businesses suppliers, you are chained to the market.
Big banks – If your small business is dependent on large banks – for small business loans, etc. – then you are chained to the market.
Financial services – If your small business is in a sector that deals with financial services or commodities, you are chained to the market.
Real estate – If the health of your business is impacted by booms or busts in the real estate market, you are chained to the market.
“Discretionary” consumer products and services – If your revenues comes from non-essential products and services that are subject to discretionary income, you are chained to the market.
Which chains weigh down your business? How heavy are they?
Realistically, most small businesses will always be connected to the market to some degree. As a small business owner, what chains can you break and what chains can you weaken? How can you minimize your dependence and exposure to big business and financial markets? Possible solutions include:
Completely reinvent your business – If you are in real estate or financial services, either get out of the business or diversify into other sectors. Ask yourself: If I were not in real estate or financial services, what other business would appeal to me? Don’t wait. Start building your business life boat now.
Introduce new products and services – Ask yourself what new, innovative products and services you could introduce, which are recession-proof? For example, if you own a catering company, you could begin to sell affordable school lunch packages for kids.
Replace your big business and government customers with small business customers – Ask yourself, if my big customers disappeared tomorrow, what other types of small businesses could I service? This may require changes to your products and services, as well as changes to your strategy of marketing and sales. Don’t wait for those big clients to disappear. Do it now!
Replace your big business vendors with small business vendors – This may be difficult, and it may cost you more money, but ask yourself: As a customer, am I more valuable to a big vendor or a small vendor? A small vendor is more likely to provide you with personalized service, they are more likely to refer clients to you, and they are more vested in the success of your business. Is that worth paying a premium for the product? In most cases, the answer is “yes.” Most importantly, you will help another small business owner to break their chains to the market.
Cut out the big company middle man – One advantage of the global economy is that small businesses are better able to simplify their supply chain. Ask yourself: Why can’t I just go to the source for products? For example, if you sell uniforms that are made in China, do you really need to purchase through a large distributor? Why not work directly with a small manufacturer in China? Again, you will have more control over your supply, better leverage and in some cases, better pricing. Tip: If you have no idea of how to import, you may wish to engage an international business consultant to help you identify overseas suppliers, and engage a small, licensed customs broker to manage the import process for you.
Replace your big bank with a small bank – Like all small businesses, small banks are more flexible than big banks. Small banks are hungry for your business, and relatively speaking, your small business will be a much larger client to them.
Hire more employees – During a downturn, fear of “uncertainty in the market” prevents small business owners from hiring. Step back and evaluate your values as an employer and the mission of your company. Do you believe that your employees are your most important asset? Many good employees are on the market today. If you add two or three… or ten “top-performers” to your team, what would this do for your operational capacity or your sales growth? How can do your part to reduce unemployment and still prosper as a business?
Entrepreneurship, innovation, customer service, employee loyalty, family values… These are the enduring hallmarks of a successful small business. With these values in-mind, it’s time to level the playing field and allow small businesses to chart their own destinies.