Shoestring Marketing: Survey quantifies impact of small business on economy

Anecdotal evidence suggests that small business is big business that it's the quiet turbine that drives the U.S. economy, creates the jobs, and spurs innovative business thinking and entrepreneurial risk. But, it's always a battle to pin down the real numbers or truly divine the make-up of today's average small-business person. Until now.

A new study from The Network of City Business Journals reports on the buying power and behavior of American small business. Titled "The Changing Landscape of Small Business," this 700-participant study, conducted May-June, was made up of small businesses those with 99 or fewer full-time employees drawn at random from Dun & Bradstreet's database. The following is a selection of choice pickings from that study:

There are 7.4 million small businesses in the United States today, up 28 percent since 1995. Small businesses have an average of 6.1 employees per firm , down 27 percent since 1995, and average sales per employee of $279,000, up 36 percent in the last five years.

The service sector leads among small businesses: 27 percent are in retail trade, 17 percent are in business and professional services (including health care), 21 percent are in other services, 10 percent are in manufacturing, 7 percent are in construction, 6 percent are in finance, insurance and real estate, 6 percent are in wholesale trade, and 6 percent are in miscellaneous businesses.

According to the study, 92 percent of small businesses have experienced growth in the last three years, with 52 percent growing at a rate of 10 percent per year or better. The vast majority, 70 percent, derive 100 percent of their revenue from their local region or market while 22 percent make their money in the national market and 8 percent bring in money from international business.

The average small business has annual sales of $1.7 million and has been in operation for 17.6 years. The age of the average top executive is 49.3 years with an average household income of $222,600.

In terms of ownership, 40 percent of small firms are women-owned and 9 percent are minority-owned. Twenty-six percent of small businesses are home-based. Among small-business owners, 74 percent are company founders, and 42 percent are college graduates.

Small-business spending on business-to-business products and services topped $1 trillion in 1999, and average spending on B2B services was $142,783 per firm. That figure breaks down to $32,085 for real estate, $27,307 for insurance, $18,706 for marketing, $11,674 for office supplies/services, $11,407 for computer/Internet services, $11,061 for other capital spending, $10,399 for telecommunications services, $9,089 for professional services, $7,755 for employment services and training and $3,300 for travel.

Small-business Internet usage has more than doubled in the past year, from 39 percent to 82 percent. Small business broadband access (DSL, ISDN, T-1, T-3, Cable modem) has doubled in the last year to 40 percent.

Small businesses primarily use the Internet to search for information about products (84 percent) and search for and read news (81 percent).

Other uses include obtaining tech support from vendors (62 percent), looking for/obtaining business advice (61 percent), remote computer use (46 percent) electronic banking (31 per-cent), chatting with other businesspeople (28 percent) and making phone calls (19 percent).

The study also indicates that 51 percent of all small businesses have made at least one online purchase in the last 12 months, up from 21 percent a year earlier. Sixty-two percent of that total purchased travel services, 44 percent purchased computer software, 42 percent purchased office supplies, 38 percent purchased computer hardware/peripherals, 37 percent purchased financial services, 32 percent purchased books, 20 percent purchased office equipment (excluding computers), 14 percent purchased raw materials, 12 percent purchased association memberships, 10 percent purchased telecommunications equipment and services, 9 percent purchased stamps, subscriptions and executive gifts, 6 percent purchased professional services, 4 percent purchased automobiles/trucks and 2 percent purchased insurance.

In employee benefits, 60 percent of small businesses offer health insurance, 34 percent offer prescription medicine plans, 27 percent offer retirement/pension plans, 15 percent offer dental insurance, 10 percent offer cafeteria benefits plans, 9 percent offer vision coverage, and 6 percent offer stock option plans.

The top concerns of the small businesses polled were work force issues at 34 percent, cost-related concerns at 17 percent, generating sales at 16 percent, competition, cash flow and collections at 11 percent, government-related problems at 9 percent, interest rates/the economy at 6 percent, and keeping up with technology at 5 percent.

(Alf Nucifora is an Atlanta-based marketing consultant.)