Small Business Labs

Escape From Corporate America

The book Escape from Corporate America by Pamela Skillings is a What Color is My Parachute for the new economy.   It is focused on helping disenchanted corporate workers find jobs, careers and work options that better fit their life goals and aspirations.  While the book covers a wide range of career options, it stresses leaving big company jobs for entrepreneurship and small business. And like “What Color is My Parachute,” it is full of advice and exercises that help the reader plan for their new career.

The book is positive and upbeat about self-employment and small business, but without the over the top sugar coating and hyperbole that usually comes with “how to” entrepreneurship books.   Skillings even points out that there are a lot of good corporate jobs and corporate employers. This is good because the decision to leave a corporate job and head out on your own should not be made lightly.  And not everyone is cut out for and/or ready for entrepreneurship. 

Escape from Corporate America does a nice job of helping the reader think through and plan career change decisions.  While targeted at unhappy corporate employees, the book is useful for anyone thinking of changing careers.  I also think corporate execs and HR managers should read this book.  It does a great job of describing why so many corporate employees are unhappy.

Spending on Pets Continues to Grow

We have 4 dogs and 1 cat in our family.  How this happened is a long story, but between food and health care (2 of the dogs are old) we spend a lot of money on our pets.

According to the Yankelovich Monitor Minute, we are not alone.  Key quote:

"In 2007, Americans spent $41.2 billion on their pets, an increase of 142% from the $17 billion spent in 1994."

Some of the more interesting pet related small businesses mentioned by Yankelovich:

• Dogcars.com - a blog on pet friendly cars and travel.
• Eddies Wheels for Pets - wheel chairs for handicapped pets.
• The Barkely Pet Hotel and Day Spa - exactly what is sounds like. 

The Yankelovich Monitor Minute is quite interesting and covers a wide variety of consumer research and trends.  Well worth reading and/or subscribing to.   

Employees Want to Work on Their Terms

Interesting report by Deloitte called Competing for Talent.   The study suggests that companies need to change the nature of work to continue to attract and retain high value employees.  Key quote:

"For today’s workers, hefty compensation packages and fancy retirement plans just aren’t as appealing as they used to be. What they really want – more than anything else – is to control when, where, and how they work. They’re happy to work hard, but want to do it on their terms.

And by the way, we’re not just talking about "Gen Yer’s", also known as, "Millenials." As it turns out, recent retirees who are re-entering the workforce want many of the same things as their younger counterparts. So do "Gen X’ers," although most are too afraid to ask."

In our research on very small (5 employees or less) and personal businesses (one person businesses), work flexibility, work/life balance and values are consistently mentioned as key reasons for starting small businesses.  Competing for Talent looks at this issue from the point of view of larger organizations, but reaches the same conclusion as our research - people want more work flexibility and  want to work on their terms.

EDN has a related article on this study that discusses Gen Y in more depth.   

Paid Volunteers

Interesting article called For Love and a Little Money on Yahoo Finance and originally from the New York Times.  The article talks about volunteers asking to be paid for their work.  Key quote on paid volunteerism:

"The phrase may sound oxymoronic, but an ever-growing number of retirees and nonprofit executives say it is an apt description of the way modern retirees view nonprofit work. And while no one has gathered statistics on the tendency, experts say there is a good chance that the automatic link between doing good and working for nothing has been permanently severed."

The article lists multiple reasons for this trend including the economic need by many to make money.  But I think the key reasons is listed early in the article:

"An organization and a person are simply more committed to each other when the person is paid.."

Aging boomers are increasingly looking for work that both reflects their values and allows them work/life balance and flexibility.  Many are choosing to work for non-profits and social service firms.  However, boomers want to do meaningful work and they want their work to be recognized.  Paid positions - even if the pay is well below their market value - helps to insure their work is valued.

Middle Class Millionaires and Business Coaches

I recently posted on the book The Middle-Class Millionaire.  One piece of information from the book that really surprised me was the extent middle-class millionaires (defined as having a household networth between $1 and $10 million dollars) use business and personal lifestyle coaches. 

Their survey showed that "about half of middle-class millionaires have hired a business or life coach in the past three years, and another 20 percent or so say they intend to hire one in the next few years."  The primary purpose they cite for hiring a coach is "help with career skills (90 percent)." 

We've been following the trends around the growth of personal services, but I wasn't aware of how common business coaching had become. 

FedEx Lawsuit and the Use of Independent Contractors

Interesting article on MSN Money on a lawsuit between express delivery company FedEx and the IRS.  The suit is over the employment status of FedEx's fleet of drivers.  FedEx classifies them as independent contractors - the IRS claims they are really FedEx employees. 

The issue is money. The IRS claims it loses billions of dollars in payroll taxes due to under-reporting by contractors.  FedEx sees the use of contract drivers as a way to save money and make their operation more efficient. 

The suit has huge implications because: (1) companies of all sizes are increasingly using contract workers; and (2) a growing number of people are choosing to work as independent contractors. 

This used to be much simpler issue from the standpoint of the independent contractors - they almost always wanted to become full-time employees.  Unlike contractors, full time employees have half their social security paid for by the company, receive benefits and, generally speaking, have a more secure employment relationship.

But more people are looking for contract work.  They are seeking the flexibility and work/life balance advantages contract work brings.  Many believe their contract wage rate coupled with the additional freedom more than make up for lost benefits.  They also feel that being independent is actually more secure these days than working for a company. 

The suit has major implications on the use of contractors by both large and small businesses.  If the IRS wins it will be mcuh harder for corporations to use contractors.  This, of course, it will impact the growing number of independent workers who are choosing contract work relationships. 

It is a lawsuit - and issue - worth following. 

Teaching Boomers to Play the Piano

We continue to track the growth of personal services firms, which are businesses that provide support services and instruction to consumers.  A major sector of personal services is teaching kids.  This sector includes small businesses that focus on the instruction of kids in music, sports, theater, academics, etc. 

In our recent interviews with piano teachers we've been told an increasing share of their business is teaching baby boomers and older adults.  One teacher told us her boomer business had grown from nothing a few years ago to over a third of her practice.  In addition to being a new market segment for her, most of her adult students prefer morning lessons - traditionally a slow time of day for music teachers.  Teaching older adults has expanded her addressable market and income. 

As boomers age and retire many will have both the time and resouces to pursue their hobbies.  This group will look for instruction and help, and be willing to pay for it.  We expect the personal services small business segment to continue to grow rapidly over the next decade.

Home Businesses Versus Non-Home Based Small Business

Saw an interesting presentation at the Consumer Bankers Association Small Business Banking conference last week from Genie Driskill, who is the head of research at Synergistics Research Corporation.  Synergistics focuses on the financial services industry and does a lot of survey research work on small business.

Her presentation focused on the differences between home based small businesses versus business that are not home based.  The survey looked at businesses up to $5 million in revenue.  A lot of good stuff:

• home based business owners are older at age 55.  The average age for non-home based business owners is 50
• The annual sales volume for home based businesses was lower than others, but not substantially.  Home based businesses had a medium of $151k versus $200k for non-home based small businesses in their survey.  Synergistics focuses on full time home based businesses, which is why the home based number is as high as it is.
• Home based businesses had a median of $50k in liquid assets.
• 18% of home based businesses surveyed said they would need international financial services in the next two years.  This is quite interesting given how few home based businesses today export.  This is yet another indicator of the growing interest by small businesses in international markets.

Personal Businesses and Job Growth

Personal businesses are single person businesses that do not have employees.  This includes sole proprietorships, independent contractors, most home businesses and most micro businesses.  The US government calls them "businesses without employees" or "nonemployer businesses", and there are over 20 million in the US.  For a variety of reasons they are a relatively understudied segment of our economy, and only recently starting to be recognized for their economic impact. 

I just finished reading a fascinating paper by John Haltiwanger, who is a research associate of the Center for Economic Studies and a senior research fellow with the LEHD program at the US Census. The paper is titled "Entrepreneurship and Job Growth", and it covers several interesting topics. What really jumped out at me is that a large number of employer businesses started as non-employer businesses.  Key quote on this topic from the report:

"a substantial fraction of young employer businesses have a pre-history as a nonemployer business. ...about 30 percent of young employer firms ... have a pre-history as a nonemployer. These patterns vary considerably across industries with some industries such pre-history accounting for as much as half of young businesses."

While somewhat intuitively obvious that many employer businesses would start as non-employer businesses, there has been little data to back this up and the overall value of personal businesses to the US economy has been questioned. 

We are forecasting strong growth in personal businesses over the next decade.  This should result in a steady stream of new employer businesses as some of these personal businesses grow into businesses with employees.