Small Business Labs

The Clean Energy Economy = Small Business Opportunities

The Clean Energy Economy is a report by the Pew Charitable Trusts that shows the emerging clean energy economy has grown significantly over the last decade.  According to the report, between 1998 and 2007 the number of clean energy jobs grew at almost 3 times the rate of jobs in general.

The report provides a detailed analysis and listing of clean tech jobs by type and by state.  Pew classifies clean tech jobs into 5 categories: clean energy, energy efficiency, environmentally friendly production, conservation and pollution mitigation and training and support. 

The report points out that the majority of current clean energy jobs are in conservation and pollution mitigation, but job growth over the last few years is faster in the other categories.

We believe small businesses will play a key role in the emerging clean energy economy.  Power production via environmentally friendly methods (solar and wind, for example) is often small scale and distributed.  These systems require local installation, maintenance and support and small suppliers are well suited to these tasks.

Conservation, mitigation and increased energy efficiency includes retrofitting existing plant and equipment - another set of tasks where small businesses will be competitive.  Training and support is an industry with lots of small players and small training and support firms should do well in the clean energy area.

The next decade will see substantial growth in the clean energy economy and new small business opportunities will be created. 

Self-Employment Not Falling

The New Times article Are We Becoming Less Entrepreneurial has a chart showing that the percentage of the U.S. workforce that is self-employed has been falling since 1990.  The data source is the OECD Fact Book.

However, as the chart below shows, according to the U.S. Bureau of Labor Statistic (BLS) the percentage has been roughly steady to slightly up over the last decade.

  

I haven't had a chance to check out the OECD data, but it appears likely that the OECD only counts unincorporated self-employment.  It also looks like they include agricultural self-employment, which is generally not included when looking at U.S. self-employment.  See our post on agricultural self-employment for more details.   

Because self-employment data collection pre-dates the creation of LLCs and other self-employment incorporation methods, the U.S. BLS classifies self-employment into two categories - unicorporated and incorporated self-employment.

Unincorporated self-employed refers to people who identify themselves as self-employed but don't have a corporate entity.  The percentage of the U.S. workforce who are self-employed but unincorporated has trended down over the last decade, going from 7% in 1998 to 6.44% in 2008. 

The second group is incorporated self-employed.  This group consists of people who identify themselves as self-employed and say their business is incorporated.  The precentage of incorporated self-employed has trended up over the last decade, going from 3.2% in 1998 to 3.93% in 2008. 

There are many reasons for the self-employed to incorporate including limited liability, customer expectations and tax advantages.  And with the creation of the LLC, the cost of starting and operating a corporate entity is quite small.  As the chart below shows, incorporated self-employment  has become popular over the last decade and continues to increase as a percentage of total self-employment.

   

As with most small business data, self-employment data is open to interpretation and, unfortunately, there are no definitive answers.  Some argue that having a corporate entity means you are not self-employed.  I disagree and point to myself as an example.  When I first became self-employed I was unincorporated.  I now have an LLC, but I am still self-employed. 

While self-employment as a percentage of the U.S. workforce has been relatively stable, we believe over the next decade the percentage of self-employed Americans will increase.  Our reasons - too long to list here - are laid out in the Intuit Future of Small Business forecast reports which we co-author. 

Baby Boomer Entrepreneurs Hot

Baby boomer entrepreneurship is a hot topic these days, with lots of recent discussion, studies and information on the trend.  Three of the more interesting are:

 - Seniors as Entrepreneurs in Business Week.  Key quote:

A combination of economic volatility as well as the growing number of baby boomers with time, energy, and money on their hands has redefined the starting age for new startups and has led to a surge in senior citizen entrepreneurs.

 - A recently released Kauffman Foundation Study - nicely summarized by the study author in an article in The American - that suggests that baby boomers will create a boom in entrepreneurship.  Key quote:

Several facts have emerged from Kauffman Foundation research that indicate the United States might be on the cusp of an entrepreneurship boom—not in spite of an aging population but because of it.... These factors include the shifting age distribution of the country, the continued decline of lifetime employment, the experience and tacit knowledge such employees carry with them, and the effects of the 2008-2009 recession on established sectors of the economy.

 - Entre-Boomers Rule by Jeff Cornwall on The Entrepreneurial Mind blog, who points out:

We also need to understand that most of the ventures that Entre-Boomers are creating will be small and organic.  They will be bootstrapped by both choice and necessity. 

We've been tracking the trend towards increased baby boomer entrepreneurship since Professor Cornwall and others helped us identify it several years ago.  We included it as a key trend in our Changing Faces of Small Business forecast report and follow it closely.

We agree with the current view and continue to forecast baby boomers will increasingly start small businesses.  Many will do this by choice, but for others financial need and limited job options will be the driver. 

The SBIR Debate - Should VC Backed Firms Be Eligible?

The Small Business Innovation Research (SBIR) program is up for renewal and there is a battle going on over whether or not VC backed firms should be allowed to win SBIR grants.

Started in 1982, the SBIR program is designed to help small businesses develop and commercialize ground-breaking new technologies that have broad benefits.  11 federal agencies participate by setting aside 2.5% of the research and development budgets for small businesses. 

The program provides roughly $2.2 billion in annual grants, and in 2008 about 3600 phase 1 grants were awarded.  Until 2003 VC backed firms were allowed to apply for and win SBIR grants.  This was changed in part because several SBIR winners were firms backed the venture arms of large corporations.

There are two SBIR bills currently winding their way through Congress.  The House bill eliminates restrictions on VC backed companies and lets them fully compete for SBIR grants.  The Senate bill eases restrictions, but limits VC backed firms to a maximum of 8% of the grant money (except for the Department of Health and Human Services, which would be capped at 18%).

There are good arguments on both sides of this debate, but missing is a very important point:  if the House bill passes, larger VC firms will quickly start providing their portfolio companies with extensive and specialized support helping them identify, bid on and win SBIR grants.  The math associated with the grants is simply too good for them not to. 

This means the playing field will quickly tilt in favor of VC backed firms and we should expect VC backed firms to win the majority of SBIR grants within a few years.

My view is that a compromise between the House and Senate bills makes sense.  Allow VC backed firms to win SBIR grants, but limit the amount to a maximum of 40% of the total pie.  This will provide access to innovative VC backed firms but also keep SBIR money flowing to other deserving small businesses. 

Teen Necessity Entrepreneurs

The New York Times article Teenagers are Building Their Own Job Engine talks about teens starting their own businesses because of a lack of jobs. 

According to the article, teen unemployment is at 22.7% and the economic downturn is leading older workers to take jobs that teens would normally get.  This is resulting in teens becoming necessity entrepreneurs - starting businesses because there are not other options.

Gen Y continues to appear to be a very entrepreneurial generation. 

Tweet Chat on Small Business Credit Tuesday at 2:00pm Eastern

Intuit is hosting a tweet chat Town Hall on small business credit this tuesday, June 30th at 2:00pm eastern/11:00am pacific.  

The focus of the Town Hall is practical advice for small businesses seeking credit and loans.  The participants are myself and:

Phil Bryan, senior vice president of retail and lending at Metro Credit Union in Massachusetts, which is one of the largest credit unions in the state. Metro is also the top SBA loan producer for credit unions in Massachusetts.

Gene Marks, small business owner, expert and author. He recently co-moderated a series of Intuit Town Halls.

The tweet chat name is #Intuitth.  Click here for more details and how to participate in a tweet chat. 

Please stop by and join in.

Number of U.S. Personal Businesses Grew by Almost 1 Million in 2007

According to new data released by the U.S. Census, the number of personal businesses - whicy are single person businesses with no employees - increased by close to 1 million in 2007 reaching 21.7 million.  This is an increase of 4.5% over 20.8 million personal businesses recorded in 2006.

This increases the total number of U.S. small businesses (defined as less than 500 employees) to roughly 28 million. 

Personal business total receipts (roughly equivalent to revenue) grew 2.2% to $992 billion.  This means personal businesses generated about 7.5% of America's economic activity in 2007.  The average personal business had about $46,000 in receipts in 2007.   

The personal business category includes freelancers, independent contractors and other forms of self-employment.  The Census derives this data from tax returns.  This number includes full time and part-time personal businesses.  The Census calls this group "nonemployer businessess." 

The number of personal businesses has been growing steadily since the late 90's when the Census first started collecting this data. 

We are forecasting that this growth will continue over the next few years due to lower personal business start-up costs, lower relative risk associated with starting a personal business and the economic downturn reducing traditional employment options.

Longer term we see multiple structural shifts driving the growth of personal businesses.  We cover this in more detail in our Changing Faces of Entrepreneurship research report and in our personal business and self-employed blog categories. 

Forrester on The Future of the Social Web

I had the opportunity earlier this week to participate in a panel discussing the future of the social web at a Society For New Communications Research (SNCR) event hosted by SAP. 

Forrester's Jeremiah Owyang was the star attraction and he presented the results from his recently completed study on this topic, appropriately called The Future of the Social Web.  Also joining us was the well known social media blogger, SNCR Senior Fellow and communications expert, Mike Manual from Voce Communications. 

Jeremiah's presentation was a fascinating look at the growing role online social relationships and social media are playing.  His 5 year forecast is quite aggressive and suggests substantial changes in how consumers and businesses will use the web in the coming years.

According the Owyang, new technologies are emerging that will create portable online identities and allow consumers to bring their identities and  social networks with them where ever they go online.  This will effectively turn all aspects of the web into shared, social experiences.

He also suggests that our network of friends, colleagues, family and peers will become our primary source of online information and the major commerce influencer.  These socially connected consumers will strengthen the power of online communities and accelerate the power shift from companies to consumers.

As a forecaster I'm always excited to learn about other forecasts.  Mike and I had the job of asking questions and trying to poke some holes in Jeremiah's analysis.  But the forecast is too well constructed and thought out - Jeremiah easily won us and the audience over with his presentation. 

Normally I would provide more details, but since the forecast report is available for free I suggest you go to the source. 

Small and Mid-Sized Business Software Usage Trends

Good article on bMighty on SMB software plans and usage.  The article summarizes several Forrester Research reports and adds commentary from bMighty editor-in-chief Fredric Paul. 

The article reports that application integration and reducing costs are currently the top software goals of SMBs, followed by using information technology to increase innovation.

Topping the list of software products of most interest to SMBs was unified communications.  This was followed by open source software and mobile development tools. 

And despite the hype and others reporting questionably high usage of Web 2.0 tools like blogs, wikis and other social media, Forrester has what I think is a much more realistic view - which is way less than half of small and mid-sized businesses are current users of these types of tools. 

Most Americans Are Not Techies

Interesting report from Accenture on U.S. consumer use of electronic products and services.  One of the highlights for me is the number of Americans who are not actively using things like blogs, social media, mobile email, etc. 

As the chart below (from the report) shows, most Americans do not participate in a wide number of online activities.

     

These numbers are not surprising given home Internet and broadband penetration rates.  According to Pew Internet only 63% of American adults have broadband access in their home and 21% of American adults do not have home Internet access at all.

While online participation rates are growing for most online activities, it is important for small businesses to keep in mind a large percentage of Americans are not heavy users of the Internet at home. 

New Research Brief - Small Business Credit: It's a Crunch, Not a Crisis

Our latest Intuit Future of Small Business research brief explores the outlook for small business credit with an emphasis on the role small and mid-sized financial institutions are playing.

Interviews conducted this spring with small business owners and financial services executives suggested that while large financial institutions have cut their small business credit and lending activities, small and mid-sized financial institutions were still active in the small business credit markets. 

To explore this further Emergent Research and Intuit's financial services division, Digital Insight, brought together about 2 dozen leaders from small and mid-sized financial institutions for a series of round tables covering small business credit. 

The key findings from the research are:

1. Community banks and credit unions can be an excellent and accessible source of credit for small businesses who meet their lending criteria. They want the business and are ready to lend. But small banks and credit unions are conservative lenders and credit standards are high. 

2. Businesses that can demonstrate the ability to manage assets and cash flow will find credit is still available, although not unlimited.

3. Credit availability will remain tight. Even though community banks and credit unions are looking to expand small business lending, they simply don't have the asset base to replace the large lenders.

4. The reality is that the smallest of small businesses - those with five employees or less - often will not qualify for business credit. They'll need to rely more heavily on relationships with their bankers or seek other sources of funds. 

For more than a decade the U.S. economy has been driven by a wave of debt.  Consumers and businesses both benefited from easy access to cheap credit.  But the recession has changed this.  The next decade will see a de-leveraging of the U.S. and  global economy. 

Credit will continue to be hard to come by as lending institutions revert to traditional, more stringent lending standards.  Small businesses will need to adjust their credit appetite and expectations to this new reality.   

LinkedIn Groups for Freelancers

The oDesk blog has a great list of 20 LinkedIn groups for freelancers.  This list includes groups for freelance writers, designers, software developers, virtual assistants, call center professionals, marketing and PR and others.

For those not familiar with oDesk, they provide an online staffing marketplace that matches freelancers with hiring organizations.  They also provide tools and services that make it easy for both the freelancer and hiring organization to work together. 

Mobile Computing Empowering Social Entrepreneurs

Social Edge, a blogfocused on social entrepreneurship from the Skoll Foundation, has a post on 3 mobile computing trends empowering social entrepreneurs.  These are:

1.  Mobile technology is expediting the reporting and response to human rights violations.

2.  Providing access to essential data to level the playing field in terms of access to opportunities and  knowledge.

3.  Giving communities new ways of addressing issues and contributing to the health of the community.

The post provides examples of each trend and further explanations of the trends.

10 Recent Smartphone and Mobile Computing Articles

Ok, so the new Palm Pre and iPhones are generating a lot of press.  But even eliminating these, there has a been a lot of recent coverage of the smartphone and mobile computing space. 

Here are the 10 recent stories not on the Pre or iPhone I find most interesting (in no particular order):

1.  Local mobile content usage up 51% and 20.7 million Americans used mobile browsers in March.   comScore research via Marketing Charts.

2.  NY Times article The Smartphone's Rapid Rise from Gadget to Necessity says despite the recession smartphone sales will increase 25% this year.

3.  Tech Crunch highlights a report from Juniper Research forecasting that cheap cellphone sales will reach 700 million units by 2014.

4.  The LA Times reports that Broadcasters compete to put TV on cellphones.  The switch to digital broadcasting is creating the opportunity.

5.  KnoxNews.com suggests that instead of banning cellphone use in schools we should use them to teach. 

6.  The SF Examiner reports Delta Airlines now lets passengers check in with cell phones, avoiding the need to carry paper boarding passes.  They call it "paperless, mobile check-in."

7.  PC World weighs in with their 2009 Smartphone forecast.  This reviews the latest smartphones and looks at what is coming. 

8.  The Washington Post Reports on a Yankee Group study forecasting 41% of North American consumers will purchase a smartphone as their next mobile device.

9.  The Wall Street Journal warns of the risk of "cellphone elbow" stress injuries.  While it doesn't mention it, it probably can be fixed with Tommy John surgery.

10.  And we will close with Experts Revive Debate over Cellphones and Cancer from the NY Times.  There continues to be concerns that kids in particular are at risk from too much cell phone use. 

The Connected Car

Good article in the Economist Technology Quarterly on the connected car.  The article points out that cars have become mobile computing platforms.  Modern cars have hundreds of sensors and a high end Lexus has over 60 microprocessors.

        

As the article points out, navigation systems are the best known connected car technology.  Over 33 million cars in the US have navigation systems, with over 90% being portable. 

Most navigation systems provide more than just directions.  They also provide a wide range of location-smart applications - including local business listings - and connect autos to the network.

This combination of computing power and network connectivity is creating new businessess and business model.  Key quote:

"There is also scope for new business models built around connected cars, from dynamic insurance and road pricing to car pooling and location-based advertising. “We can stop looking at a car as one system,” says Rahul Mangharam, an engineer at the University of Pennsylvania, “and look at it as a node in a network.”

With American spending an average of 45 hours per month in cars, it is no surprise that creating products and services to make that time more entertaining and productive is a growing business.

Social Entrepreneurs = Entrepreneurs

Social Entrepreneurship Revisited is a fascinating article in the Stanford Social Innovation Review. It describes research on social entrepreneurs by NYU professor Paul Light.

What really jumped out at me about this article is the description of social entrepreneurs is almost exactly the same as most descriptions of private sector entrepreneurs.  Key quote:

Social entrepreneurs appear to make quite deliberate decisions to solve social problems, rather than simply stumbling into their work by accident or circumstance. They are often quite sober about their decision to attack a social problem, and they usually understand the consequences of challenging the status quo. I also find that social entrepreneurs are driven by a persistent, almost unshakable optimism. They persevere in large part because they truly believe that they will succeed in spite of messages to the contrary. This optimism can border on overconfidence, but is essential to their 24/7 commitment.

Sound familiar?  The article goes on to describe 5 or so other attributes of social entrepreneurship that sound pretty much the same aprivate sector entrepreneurship.

This doesn't surprise me.  It makes sense that the same type of person that pursues regular entrepreneurship is also the type to pursue social entrepreneurship.  And most of the great private sector entrepreneurs I've known have been driven in large part by a desire to change the world. 

But what is really interesting is that this is listed as a new insight in the article.  This seems to suggest that it is only recently that social entrepreneurship has attracted the type of entrepreneurs that are common in the private sector. 

We've recently started a deeper dive on social entrepreneurship.  Many of the experts and social entrepreneurs we've talked to feel we are entering a golden age of social entrepreneurship.  There are many reasons for this (more later).  But the key reason is simple - the sector appears to be attracting many more true entrepreneurs than in the past.   

Book Review - The Future Arrived Yesterday

Michael Malone's newest book is The Future Arrived Yesterday:  The Rise of the Protean Corporation and What it Means for You.  It describes Malone's vision of the future of the corporation. 

And according to Malone, the future corporation is "protean," which is an adjective meaning: 1. able to change form; variable or continuing changing in nature, appearance or behavior. 2. versatile; showing great variety and diversity.  

The protean corporation Malone describes consists of a series of rings.  At the center is a small group of long term employees that understand and guide the firm's culture, goals and strategy.  These core employees provide strategic direction and build and maintain the firm's business infrastructure.

The next ring is comprised of salaried workers with benefits.  They manage the day to day operation of the firm and have some job security, but are not as secure as core employees.

The outer ring consists of freelancers, contractors, suppliers and others that provide the firm with great flexibility and ability to quickly shift and change direction.  Malone describes this ring as the cloud, but in this case the cloud contains people and suppliers, not just computing resources.

From a small business perspective, the most interesting part of Malone's vision is the increasing role freelancers, contractors and small businesses will play.  Protean corporations will greatly increase their supplier and freelance employee base so they can more quickly shift and respond to changing market conditions.  

This view is very similar to our view that large and small companies will increasingly work together (see The New Artisan Economy research report for more details).  The major difference is Malone's is looking at these trends from the point of view of the large corporation and we look at them from the point of view small businesses and freelancers. 

But regardless of which direction you view it from, the result is more opportunity for small and personal businesses as large corporations expand their network of business partners. 

An excellent book that is fun and easy to read - and useful for small and personal business owners thinking about or wanting to work with larger corporations. 

Americans Watching More TV

Despite news of TVs demise, according to Nielsen Americans are actually spending more time watching TV.  They are also spending more time online, watching more online videos and taking advantage of time shifting technology to watch more TV and videos.

     

And for those who can't get enough data about the TV watching habits of Americans, a Nielsen multi-client study group calling itself the Center for Research Excellence released a really detailed study on TV viewing.

It too finds that we are spending more time watching TV and that TV dominates our video viewing habits.  It also has the most complex and desne data charts I've seen in a long time. 

A couple of points about the chart above:  (1) the TV time is for the average American watching at home in hours; (2) the Internet time is home and work; (3) watching video online is an average for those who watch video online; (4) watching video on a mobile phone is the average for those who watch video on a mobile phone.

The Importance of Incremental innovation

A recent academic research paper, The Curse of the First Mover; When Incremental Innovation Leads to Radical Change, argues that incremental technological innovations can sometimes have more influence than radical ones.

The paper defines incremental innovation as "refinements and extensions of established designs that result in substantial price or functional benefits to users."  The paper uses case studies from Apple and Google to illustrate their point.  Key quote on Google:

"Google...has never produced any radical innovation, but owes its success to incremental improvement of existing products (search engines, web mail, maps, etc.). 

Our research on small business innovation shows that many small businesses are continuous incremental innovators.  It has been suggested to us that incremental innovation is not "real" innovation and because of this most small businesses do not innovate.

We disagree and believe incremental innovation is extremely important.  It is nice to be able to point to academic researchers who agree. 

Smartphone Users Accessing Location Based Services

Interesting article from the online research firm Compete on location based services.  These are applications - delivered to mobile devices, cell phones and PCs - that allow users to access information based on location. 

A good example would be searching for "Olive Garden Palo Alto CA" in Google.  I used this search term with my smartphone just last week and yes, they treated me like family.

The chart below (from Compete) shows the percentage of smartphone users taking advantage of location based services and also shows how many would use these services if they were more aware of them.

    

The use of online location services is growing rapidly and small businesses need to be aware that consumers are increasingly using these services to find and purchase goods and services.  

Maker Faire and Small Business

We attended Maker Faire over the  weekend.  For those not familiar with Maker Faire, it is billed as the largest do-it-yourself festival in the world and is sort of a cross between a state fair, craft show and a science fair.   It is sometimes goofy, often strange and always fun. 

We spent most of the time interviewing makers to better understand how the DIY movement is related to small business.

Not surprisingly, most of the exhibiting makers owned or worked for small businesses and their exhibits were designed at least in part to market their goods and services.

The 2nd largest group was educational groups, most of which were non-profits of some kind.  The third largest group were clubs.

There were few independent, hobbyist makers exhibiting.  This, of course, makes sense given the effort required to be a exhibitor. 

Lots of cool products, inventions and ideas.  And lots of people turning their passions, or hoping to turn their passions, into small businesses.

We will provide more details on our interviews in the near future. 

GM to Enter Bankruptcy; Become Government Motors

According to multiple news reports, General Motors will enter chapter 11 bankruptcy on monday. 

If the everything goes as currently planned, the U.S. government will soon own 72% of GM. 

It is likely that bankruptcy will take at least a year and many more billions of government funding.  It is unclear how strong GM will be when it emerges from bankruptcy. 

Propublica has a good summary on this and the clever government motors logo comes from them.

The McClatchy Group has a more detailed story on GM entering bankruptcy.

Presentation on 2009 Top 10 Small Business Trends

We put up a presentation version of our 2009 Top 10 Small Business Trends on Slideshare. 

It is more detailed and wordy than the presentations we use in front of live audiences.  We did this so it would be more self-explanatory.

Click here for the text version.

Synthetic Biology

 Synthetic biology is the application of engineering principles and approaches to biological system design and development. 

Today the research mostly consists of inserting carefully crafted DNA into bacteria cells to make them behave in new ways.

More commonly called genetic engineering, potential applications include new forms of biofuels, bacteria based biosensors, bacteria that eat pollutants and new drug therapies. 

Frankenstein type creations are still very, very far away - so no need yet to alert the villagers. 

A number of trends are driving the emergence of synthetic biology.  Vast increases in computation power and speed make simulating and understanding simple biological organisms possible.  And advances in genetics and genome sequencing make genetic engineering possible.

The Royal Academy of Engineering in England has put out an interesting report on synthetic biology.  It is quite optimistic about the possibilities it has to change the world. 

Part of our mission at Emergent Research is identify and track trends and shifts that will impact small businesses in the near to mid-term future.  Synthetic biology is still a ways out, but the future often arrives faster than we think.

Necessity Entrepreneurs

Tom Abate's SF Chronicle story Laid-off workers start own businesses covers the growing trend of people turning to small business or self-employment after losing a job. 

The article describes what UC Santa Cruz professor Robert Fairlie calls "necessity unemployment."  This occurs when people start businesses because they don't have traditional job options. 

Fairlie is the lead author behind the  Kauffman Index of Entrepreneurial Activity and a leading entrepreneuship researcher.  His work shows that self-employment increases during times of economic stress and flattens out during good economic times.  This is due to necessity entrepreneurs returning to traditional employment.

The good news for necessity entrepreneurs is the cost of starting a small business, and especially a small business based at home, is lower than ever before.  Technology has become inexpensive and in many cases even free. 

And while most necessity entrepreneurs will return to traditional jobs, our research indicates that a growing number of displaced workers find they prefer self-employment.  The reasons given by these people for preferring self-employment are the same as other small business owners.  They prefer working for themselves, job and work flexibility, passion for their business and work/life balance reasons. 

This group will continue as small business owners even after the economy improves.