In recent years, the economic situation has created a new wave of “accidental entrepreneurs.” There are now more small businesses than ever seeking the key to business growth and recent reports indicate that some may have just found it. With many small businesses tightening up their purse strings, there are those that are focusing their spending where they think it will pack the biggest punch – IT progression. Laurie McCabe joins Brent Leary to share her recent findings on the topic.
* * * * *
Small Business Trends: Can you tell us a little bit about your background?
Laurie McCabe: Basically my partner, Sanjeev Aggarwal, and I founded the SMB Group about two and a half years ago. We both have been analyst and researchers in the technology industry for quite a while. We decided we really wanted to concentrate on the small and medium business segment and their needs; helping vendors to serve small and medium businesses better, with better solutions. That is what we are all about and that is what we do.
Small Business Trends: Let’s talk about your technology predictions for 2012. “Economic Anxiety Lowers SMB Revenue Expectations”’ and “SMB IT Progressive Class Gains Ground.” Can you talk about those two?
Laurie McCabe: Yes, those were the two I definitely wanted to combine. Basically the first one is about small businesses being skittish in terms of their own revenue performance going forward this year and consequently tightening up on their wallets.
In the study, we found that these small businesses are getting a little bit bullish again. But in 2011, there was other issues happening. I think a lot of the worries and uncertainties came back and caused a damper. For instance, in 2011 we found about three quarters of small businesses surveyed expected growth. Looking ahead for 2012, we found only 56% were looking for growth. That means that they were also cutting back a little on their IT spending.
There is this category or segment of small businesses we call progressive IT SMB’s. This category plans to increase IT. What distinguishes them is they see technology as really critical for business growth and business transformation. Whether it is helping them open up a new market, create a competitive advantage, or level the playing field against companies, they view technology as going hand and hand enabling them to do that.
I think that in looking at those two things what we might take away is that these IT progressive companies can open up a pretty big gap among the companies that are not investing and are not really looking at IT strategically.
Small Business Trends: What percentage of the SMB Class or the SMB Segment would you put in that SMB progressive class?
Laurie McCabe: I think about 20% or so. But we always find a difference between small and medium in terms of their sophistication and their thought process, in terms of using IT strategically for their business. It is probably more in medium business, but you know it is not a huge majority by any means.
Small Business Trends: Can you talk about the #2 that you picked out for us today?
Laurie McCabe: Well that one gets into the Cloud computing area. Our prediction was the Cloud becomes the new normal. What we have really seen is that demand for Cloud base solutions is accelerating. For instance, in the past 24 months only about 17% of small businesses purchased Cloud accounting or ERP solutions. Thirteen percent of small businesses planned to purchase accounting or ERP as a Cloud solution in the next 12 months. That is significant because that is doubling.
Small Business Trends: Is the Cloud still being driven by marketing and promotion aspects of business?
Laurie McCabe: Yes. The biggest theory that we see, and the biggest one for gains going forward, are things like marketing automation, business intelligence, and that big category of CRM.
Interestingly, we see a pretty good pickup in things like desktop virtualization solutions. Not everybody wants to have everything in a public Cloud. They like the application that they are using but they just want to have it hosted and managed in a virtual desktop environment. For some companies, that can be a great way to get rid of all of the hassles of managing all of these systems.
Small Business Trends: Can you tell us about the Accidental Entrepreneur?
Laurie McCabe: Basically, the number of people that are becoming entrepreneurs is really growing. The U.S. Census Bureau said that small businesses without a payroll make up more than 70% of America’s 27 million companies with annual sales of $887 billion.
Because the recession was so horrible, a lot of people got laid off and could not find jobs. There are a lot of entrepreneurs today that never intended to become entrepreneurs. They just decided that they needed to make some money. A lot of them have stayed solo because they realize they like that better then going back on the corporate payroll. In some cases, the unemployment situation is so bad and employment options are limited.
I think some of them may have the desire to grow the company and become an employer business. But I think a lot of them really have no desire to hire and manage employees and have that kind of business model.
We think this class of accidental entrepreneurs is spiking the demand for applications and services that will help them grow the business in terms of revenue and profitability without any employees. It does not mean that a one person business will be a five million dollar company. Instead of making $50,000 to $60,000, you will grow to making $100,000 by automating things and doing things smarter.
Small Business Trends: Where can people see the whole list?
Laurie McCabe: They can go to our home page at SMBGroup.
This interview is part of our One on One series of conversations with some of the most thought-provoking entrepreneurs, authors and experts in business today. This interview has been edited for publication. To hear audio of the full interview, click the right arrow on the gray player below. You can also see more interviews in our interview series.
Click to listen!
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.