5 Key Microbusiness Trends for 2009

Microbusiness trends for 2009Microbusinesses — firms with fewer than 5 employees — face a difficult environment coming into 2009 and it will be harder for them to navigate than the 2002-2003 downturn. The economy will be the story for most of us during the next twelve months. The basic trend – no surprise – is that almost all of what we will be doing next year will in some way be a response to what is expected to be the most difficult economic downturn in almost a century.

That said, the nation’s microbusinesses are better structured to endure these difficult times, thanks to a lean operating style and creative business models. Because of that, they will end the year having taken less damage than their larger cousins and will be in the best position from which to lead the way out of recessionary darkness into the light of a new business growth-cycle day.

♦ Lots more of ‘em — Perhaps the biggest microbusiness trend of 2009 will be a renewal of strong growth in their numbers. Sure, the current icky economy will cause plenty of microbusiness failures but, in the aggregate, the number of microbusinesses is likely to zoom during the 2008-2009 period.

Historically, people tend to start many more very small businesses during economic downturns, either because they are out of work and desparate for income or need extra cash in hand to make ends meet. Over the next year, large numbers of laid-off workers will start new single-person businesses, referred to be the Census bureau as “nonemployer” firms and defined as firms with no paid employees other than the business owner(s). In addition, tough times will cause microbusiness employers to cut jobs and some will shrink back down to nonemployer businesses. The result is that we will see a return of the 4-6% growth in nonemployer numbers that we saw during the last recession.

Meanwhile, firms with up to 20 employees will also be shedding workers, which should make up for losses in the number of microbusiness employers. As one economist said to me recently, “Everybody’s going to be a bit smaller.”

♦ Lean machines – Pundits have been predicting that Americans will learn to live within their means as a result of the twin challenges of a faltering economy and a collapsing credit market, and microbusinesses will be no exception. Of course, they tend to be lean operations by definition. But, in 2009, nobody is going to want to spend a dime more than they have to, so look for microbusinesses to take frugality to new heights.

Among other things, don’t expect hiring to pick up anytime soon in this firm size class. Even more traditional business owners will discover the cost savings to be had from running virtual businesses with home-based help or hiring microbusinesses or independent contractors (those “nonemployer” businesses) on a project-by-project basis rather than creating full-time positions. That strategy, which can help them to keep going during lean times, may work so well that many will not return to creating quite so many traditional jobs even when the economy turns the corner.

That, in turn, will mean lots and lots of work for microbusinesses and nonemployer businesses, which will help them to stay afloat in uncertain times. In the end, there is a good possibility that these changes in hiring practices could finally start a much-needed conversation about the changing nature of “work” and “jobs” in the 21st century economy.

♦ Sniffing out opportunity – It seems counter-intuitive, but game-changing ventures are often started during business cycle troughs and this one will be no exception. The industries to watch over the next couple of years will be energy and health care.

Right now, the health care sector is the only one that is still adding jobs and that trend will continue into the next twelve months, particularly if the health care industry goes through some major retrenching instigated in Washington.

The same goes for the fuels and energy industry sector; with President-elect Obama making plans to make R&D in renewable energy a part of his economic recovery plan, there is likely to be plenty of investment and growth potential here. One or two energy sector microbusinesses started within the next year may go on to change the world.

Another area that many new microbusinesses will discover is the world of product repair. Since budgets are so tight, the market for fixing things so that businesses and consumers won’t have to buy new to replace worn or broken stuff has already picked up and is likely to be quite strong in the coming year. Among established microbusinesses, we’ll hear a lot about saving money. Savvy business owners know that, in the current economic climate, anybody who offers to show consumers or businesses how they can spend less, get more out of what they do spend, improve cash flow or anything along those lines should find demand high.

A bit of creative price structuring — a sliding scale charging a percentage of the savings realized, for example — may counter tightened belts and help many low-overhead micros weather the storm and thrive.

♦ Moving and shaking online – Nobody seems to know exactly how many small businesses use the Web and/or do business there but a Jupiter Research report last year found that 89% of them are microbusinesses. That research also found that microbusinesses had been quick to sign up for social networking sites but slow to use them, probably because many of us thought we didn’t have the time.

With the economy in a shambles, though, look for even more adoption of social networking among microbusinesses looking for cheap marketing alternatives. The growing popularity of LinkedIn, Facebook and Twitter among microbusinesses is a trend that shows no signs of slowing down.

Lots of opportunity there for software developers and how-to gurus, provided they learn from the mistakes of the SEO crowd. Microbusiness owners tend to be a do-it-yourself bunch, preferring to find (and often pay for) information rather than forking over buckets of money (which they don’t have) for highly-paid consultants to do things for them.

♦ And attracting a bit more attention from legislators — Back in 2005, I predicted that policy makers would be decidedly more interested in microbusinesses by the 2008 election cycle. ‘I told you so’ is always obnoxious but there has definitely been an uptick in interest in the nation’s smallest businesses on Capitol Hill, particularly among House Democrats looking for a middle class agenda. So far, the growing focus on microbusinesses been very behind-the-scenes but look for 2009 to be the year for several microbusiness-aware lawmakers to out themselves.

It won’t be a revolution, exactly, but somebody has to push that snowball off the top of the hill. Don’t be too surprised, for example, if House Small Business Committee Chairwoman Nydia Velazquez (D-NY) holds a hearing on microbusinesses and their issues during the next session of Congress. Over in the Senate, newly named Committee on Small Business and Entrepreneurship Chairwoman Mary Landrieu (D-LA) represents one of those Southern, largely rural states with chronically struggling economies. That perspective might inspire her to focus more specific attention on microbusinesses than we’re used to in the Senate.

It’s not likely that any specific legislative proposals will come of all of this but it’s progress and you have to start somewhere.

* * * * *

About the Author: Dawn Rivers Baker, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the Publisher of the MicroEnterprise Journal, where the nation’s business meets microbusiness.  She also publishes the Journal Blog.

36 Comments ▼

Dawn R. Rivers


Dawn R. Rivers Dawn R. Rivers, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the publisher of the MicroEnterprise Journal. She also publishes research at the Microbusiness Research Institute and she blogs at The MicroEnterprise Journal Blog.

36 Reactions

  1. Are there >25 million small (micro) business companies in America? How big percentage is that of the total amount of companies in the USA?

  2. According to the most recent data available, microbusinesses comprise 91.3% of all U.S. firms.

    Some people (like the National Association for the Self-Employed) consider microbusinesses to be those with fewer than ten employees, in which case, they make up 95% of all U.S. firms.

    By contrast, firms with between 10 and 499 employees make up 8.7% of U.S. firms and large businesses (over 500 workers) are less than 1% of all U.S. firms.

    Although you’d never know any of that to listen to the news, would you?

  3. Hi Dawn,
    I love this post. Thanks for the effort you put in to write it.

    I would add one this to this part, though: “With the economy in a shambles, though, look for even more adoption of social networking among microbusinesses looking for cheap marketing alternatives. The growing popularity of LinkedIn, Facebook and Twitter among microbusinesses is a trend that shows no signs of slowing down.”

    Cheap marketing alternative, but TIME-consuming, for sure!!!

    A big piece of my work involves social media/networks and I am constantly having to show every piece of what I do and the expectation is that it will deliver immediate results simply because you can see the result (a posting or a podcast) so quickly. But any of us in this arena know that it isn’t true. So, cheap only comes true if you don’t value your time.

    However, to be super clear — I know that is not what you meant when you said cheap. You meant that it is an affordable way, very affordable method, to reach prospects and that is totally true. Keeping them engaged and buying is another story altogether!
    Thanks again for the post.
    TJ

  4. Dawn, do you think the new businesses that are likely to be launched will set up smarter eg. with some research done before launch to see if there is a market need or just get launched and hope for the best?

  5. “Historically, people tend to start many more very small businesses during economic downturns, either because they are out of work and desperate for income or need extra cash in hand to make ends meet.

    Nice article, Dawn. However, I’m worried with the paragraph I pasted above. Do you think small businesses launched with a desperate cause will succeed?

  6. @TJ

    You’re right. Social networking can certainly present a time management challenge for a microbusiness owner. Of course, some of them are not busy right now, which is the problem. Some will figure it out and some will tweet or link in or facebook for a little while and then abandon it when it doesn’t produce results fast enough. But, as it does produce results for those who stick with it, I think it will prove an excellent avenue for the kind of relationship building that is essential for 21st century business growth.

    @ Susan

    No, unfortunately, I don’t think they’ll be set up “smarter” because many of the folks involved have no business management background and few recognize the need for planning or even for pre-launch training. It’s pretty typical for microbusiness owners to have a Nike moment and “just do it.”

    @Arthur

    Some will survive and some won’t. A lot will depend on the financial circumstances of the business owner before they launch. If they have an available credit line or perhaps some personal savings to lean on, they can operate with a slightly cooler head. And some people, in these circumstances, discover in themselves a talent for managing their microbusiness that they might never have expected in themselves. Marketplace winners and losers are often difficult to predict.

  7. Dawn, great post. I coach executives who want to become entrepreneurs and I agree this year we will see lots of people leaving corporations to set up shop. In addition to equipment repair and web-related business, what do you see as some of the interesting areas for solopreneuring and micro-startups?

  8. Thanks Dawn – I’m sick of hearing about all the businesses that will fail or that are in trouble. You’ve done a wonderful job of outlining the micro-businesses and needs that will require filling. Thanks so much!

    The other thing I see in this article that this economy is creating a specific environment that will require non-employed workers to identify product and service niches they can fill with their unique talents.

    I’m thinking networking and partnering will be bigger than ever. You have to figure that core events or elements aren’t going away because the economy stinks.

    People will need to eat, take care of their health, communicate, deliver goods and services, etc.

    I’m thrilled at the new opportunities that this economic downturn is uncovering. Delivering real value is the name of the game and we shouldn’t look at products and services that are eliminated in the process as a bad thing – rather a cleansing and right-sizing. The fun part of this will be the journey and adventure of re-focus.

  9. Great article, Dawn. I work with a number of small/micro business and see their numbers proliferating over the next 12-18 months. Many of these companies, due to their size, have to rely on word-of-mouth and social networking to advertise their businesses. This can be a great time-suck for entrepreneurs. It’s not easy to develop a winning social networking strategy.

    Another trend we are seeing: there is investor money available for micro businesses with strong concepts. Many investors want an entrepreneur to prove his/her business model before investing, but money is available.

  10. Dawn, I think you make a great point about signing up for social media sites, but not necessarily having the time to use them (or, at least, THINKING we don’t have the time to use them).

    Part of that thinking may be due to all the noise about so many social sites — it can be confusing. But if microbiz owners would just focus on a couple of social media sites and master those, they’d get a lot of value out of them. And not be overwhelmed.

    – Anita

  11. @Mitchell

    Well, as I mentioned in the article, I think a not-to-be-overlooked possibility would be any business that helps people (consumer or B2B) save money. I know several people who have recently launched computer repair micros and they’re doing a brisk business among folks who’d rather get their machines repaired than dash out and buy a new one, and among businesses that prefer to upgrade the motherboard rather than ditto.

    @Anita

    You’re perfectly right. In fact, that matches my experience. I pretty much ignored the whole social networking thing because there were so many sites that I knew I couldn’t keep up with them all. Even now, I have profiles at FB and LinkedIn but have chosen to focus on twitter. The focus has been rewarding, too. :)

  12. Good article. Nice to see some positivity on small business. I think the key thing with small businesses is the difficultly they have in attracting capital. Because small businesses are leaner and generally focused on revenues, I think they’ll absolutley be able to squeak through this downturn.

  13. Great article. My wife and I started a small business about three years ago. We began it out of our housejust as a side business. It is now a great blessing and is all we do. We have the flexibility to work as hard as we want even in this economy. Personally, I would shy away from MLM type opportunities. Our service is a monthly membership service – I highly recommend looking into a residual type business that allows you to create a service and build on it. The internet is a perfect place to provide this type of business model. Create a service that helps people get through the rough times. Provide something that inspires them and price it so that you can have many clients. Don’t try to make a lot off of fewmake a little from many. It will add upfast!

    It’s hard work, but so worth it!

    God Bless,

    Matt Sullivan

  14. Great article! Microbusiness is poised to get the world out of the recession. Just look at the success of microloans starting microbusinesses in economically depressed areas of the world. As a Technology Coach I encourage all micro business owners to get involved in online communities. This should be part of your marketing plans. Just make a schedule and stick to it. I recommend you dedicate at least 30 minutes per day to developing relationships online. For more free tips and tactics you can use to dramatically reduce your technology costs, just get my free ebook Nearly Free IT.

  15. Hi, you’ve posted the data below previously. Where else can I find this data? I would like to know the source for this information. Please, point me in the right direction. Thanks!!!

    -
    According to the most recent data available, microbusinesses comprise 91.3% of all U.S. firms.

    Some people (like the National Association for the Self-Employed) consider microbusinesses to be those with fewer than ten employees, in which case, they make up 95% of all U.S. firms.

    By contrast, firms with between 10 and 499 employees make up 8.7% of U.S. firms and large businesses (over 500 workers) are less than 1% of all U.S. firms.
    -

  16. Hi Kimberly.

    You can get the raw numbers from the SBA Office of Advocacy (http://www.sba.gov/). To get the percentages will require the employment of a little sixth grade math, though. :)

  17. Thanks! I’ll be checking the info out there.

  18. I do think today’s shadow IT phenomenon is very similar indeed to the PC revolution of the 1980s in terms of the drivers. As for how it’s manifested, I think it’s even more disruptive since the barrier to adopting alternative IT solutions that are generating the some higher revenues.

  19. Hi Dawn and rest of the team

    As an organization that services microbusinesses in the South, I think it is time for us to let our needs be heard. Let me know how I can help.
    Scotty

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