Small businesses across our nation are facing an eternal threat from the economic downturn experienced by the larger business community. Most small companies with under 500 employees constitute about 48 percent of American private-sector employment and 43.5 percent of GDP. Yet despite their size, these relatively small enterprises face many of the same challenges that the larger organization does. Small businesses with less than 500 employees also account for a disproportionate share of total bankruptcies in our nation.
In reality, the small business is often the most effective way for a business owner to stay afloat during lean times. Entrepreneurs must not allow the problem of economics to dissuade them from realizing their business dreams. Today’s entrepreneurial economy provides ample opportunity for entrepreneurs to enter the global marketplace. The fact that the Internet has created so many opportunities for entrepreneurs to operate businesses at home and abroad makes the global economy more accessible to small businesses than ever before.
However, the current crisis confronting small businesses is a sobering reminder of why entrepreneurs need the structure of a properly diversified business to withstand times of economic instability. Unfortunately, the current crisis represents a significant break from past practices. Just over three decades ago, small businesses operated almost entirely in the confines of the home, seldom ventured outside of their home state, and maintained very few employee positions. Today’s small business is a different animal. For one thing, the vast majority of small businesses are home-based.
Moreover, home-based small businesses now employ over 25 million people-many of whom work at home in their underwear. Entrepreneurs must understand that there is a substantial cost to operating a home-based business today. Workers will require health insurance, paid holidays and sick leave, childcare, and numerous other benefits that make hiring employees much more costly than it used to be. Further, many new home-based businesses require the use of computers, which can run into the tens of thousands of dollars per employee. For these reasons, entrepreneurs must adopt a novel approach to dealing with these unique challenges.
Fortunately, entrepreneurs have a number of options at their disposal to address the challenges of an increasingly globalized business. Entrepreneurs should seriously consider establishing an online presence-even if it is just an online presence-to expand their market share and boost their net profits. Online businesses provide several distinct advantages over their home-based competition. First, online businesses offer much greater flexibility to entrepreneurs-from the ability to accept credit cards and debit cards, to the ability to accept electronic checks and, in some cases, to accept payments in the currency of the customer’s choice.
Second, online businesses typically give small businesses greater access to customers. When small businesses operate solely online, they do not have to pay the high fees that many brick-and-mortar establishments pay to high-profile marketing firms. This cost advantage has been particularly important in the wake of the recent economic crisis, when even the largest companies were forced to cut their budgets due to the current crisis.
Finally, online businesses can also reach a significantly larger market than small businesses based in traditional locales. Even relatively small businesses operating solely online have a far wider geographical footprint than most small businesses based in quaint little cities and towns. Moreover, there are several millions of potential customers online, making it easy for even small businesses to attract customers and raise revenues. In fact, according to a recent study, there could be as many as three million more customers online right now, waiting to buy or invest in a business based in the United States and other developed countries, than there are in the United States alone!
While the recent recession has certainly dampened business sentiment somewhat, many businesses have shown strong signs of recovery. There are a number of signs that the current crisis will not have much of a lasting effect on these businesses. Indeed, many small business owners believe that things will only get better, as the current recession remains a thing of the past.