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The Tech-Powered Small Business

by Charles Colby on March 29, 2011

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Small business owners are as optimistic as they have ever been since the start of the recession, but their confidence as competitors is at a low point.  According to the January wave of the Small Business Success Index (SBSI) (by Network Solutions and the Smith School of Business at the University of Maryland), only a third (33 percent) of small businesses felt they were successful at positioning themselves as having the same capabilities as larger firms in their industry.  This level is down from a year earlier when it was almost half (47 percent).  The broken spirits of small business owners does not surprise me given the magnitude of the recession.  Over the past two years, the SBSI has documented how the poor economy has led to cutting employees, reducing owner pay and draining cash reserves.

What can small businesses do to regain the competitive edge?  The SBSI, which provides insights into small business success, tells us that in the market competition between large and small businesses, technology is an equalizer.  We are able to document this by counting up the number of internet business solutions a small business deploys, and comparing it with overall success.  Throughout most of the recession, the small businesses that deployed the most technologies rated highest on an index of competitive success, particularly in the critical areas of marketing and innovation.

*Includes those who have now plus those planning to within 2 years

Internet business solutions consist of technologies that help small businesses market themselves or operate more efficiently.  In our deep dive analysis, we can see that today the depth of usage of these solutions is associated with greater success in positioning the small business as being as good as the big firms, converting marketing leads into buyers, ensuring efficient ways to advertise, and innovation.  A professional website helps a small business build buyer confidence by projecting the right image and by offering self-service and online purchasing functionality that bypass the big box store.  While big businesses can afford to spend on traditional advertising, a small business can use well-placed online advertising, a smart Search Engine Optimization (SEO) strategy, and savvy use of social media to drive new customers to their website.  A new frontier for the more farseeing enterprises is the use of mobile marketing.  Our research shows that many small business owners consider these ahead of their time or cutting edge, but there is great promise in building business by advertising on location-based websites, creating mobile websites for customers with portable devices, and texting customers about new promotions.

Ironically, many small businesses cut back on internet business solutions in the midst of the recession.  For example, the incidence of web-sites actually dropped in the past year, while the rapid growth in social media use by small business slowed.  The January wave of the Small Business Success Index shows that small businesses are starting to add back these technologies – for example, website use is now 56 percent, an all-time high, and the share of small businesses with a social media presence is now 31 percent. Many small businesses have future plans to advertise online, expand their social media presence, add a website, and add online purchasing capabilities.  Short on employees and financial resources, small businesses are now relying on internet business solutions to respond efficiently to the hoped-for surge in customer buying.

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