5 Small Business Predictions for 2011

Okay, every year I've offered some insight into the year ahead for small businesses. In fact, I think it's quite common for any consultant and would-be psychic to demonstrate their astute prowess and outline clear bets. And this year is no different!

So - in a very envelope-to-forehead moment - here I go: my five predictions for the small business in 2011.

1. Lean. Call me a nattering naybob but I'm still not convinced that postponing tax breaks is going to eliminate uncertainty, nor is sustaining the current level of taxation going to put more money in people's pockets. I mean, it hasn't already so...? Economists are forecasting flat employment growth throughout 2011. So I think the small business is going to stay lean. They might even get leaner, employing some of the trends and tech below to reach even higher economies of scale and automation. Small businesses are learning - must learn - to do more with less, consistently, to survive. Look for some small businesses to fold whereas others take more drastic steps to achieve profitability: fire bad customers, lay-off entire regions or divisions, or, eliminate the need for a building.

2. Cloud. Why own when you can rent? That's really the idea being tossed around in the housing market but it's also applicable to small business computing! Why own a server, or, an application, when you can rent it for a period of time? And when you don't need it any more, ditch it? Efforts by all of the major vendors is making the cloud easier to reach and use by everyone. More small businesses will adopt cloud-based technologies and abandon the use of local servers. Look for more small businesses raising their hand and asking about the maturity of some of this technology, and for developing a migration strategy.

3. Social. If mass media is too expensive and budgets are tight, it doesn't take a rocket scientist to believe small businesses will start looking at social media as a viable alternative. Social networks allow businesses to get closer to consumers than ever before and to personify their brand. Yeah, we're going to see more of that. Look for small businesses to out-pace enterprise adoption, and to apply this technology more creatively, winning-over tight-wad consumers and convincing them to spend their scarce dollars locally! You just watch ... look for a substantial shift in marketing expenses away from television, radio, and print as traditional media continues to writhe and die a horrible, prolonged death.

4. Mobile. Next year will bring a gaggle of new gadget tech. The new iPhone 5 that'll feature 4G; a new iPad 2; a bunch of Android competitors; more eBook readers. Personally, I don't know where consumers are going to find the funds to invest in all of these disposable toys but, hey, the demand seems to be there. Look for small businesses to start leveraging Cloud and Social strategies across Mobile platforms to offer themselves greater flexibility in staffing and building expenses. Watch for people who passed on the iPhone 4 to scoop up the iPhone 5, and Apple - whose being fiercely eaten alive by Android in terms of market share, will announce some really cool features and enticements to retain their customer-base and pull-in defectors from the Android camp.

5. eBooks. Everybody's getting into them. Amazon, Google, Apple. This whole decade will be about transforming the distribution channel for books and video into an electronic medium, just like last decade was about music. Everybody, including you, are changing your consumer preferences! Self-publishing is here. Also, self-service is here because of plentiful low-cost bandwidth. Look for downward pressure on growth for large chain booksellers and video outlets; look for small/niche/specialty sellers in local communities cropping up to take their place. Look for our consumer habits to shift with more people consuming digital media over paper.

Predictions? Or perhaps I've just a command of the obvious? Meh, you decide.

By the way, I really liked this article from the Business Insider articulating 10 ways every small business should be preparing for 2011. Really good read!

R

5 Ways to Sabotage Your Small Business

So on the drive home from a networking event today, I was thinking about the ways you could kill your business. Here are my ideas:

• You Place Too Much Investment in One Person. If your business is critically dependent upon one person then there's darkness on the horizon. Spread the knowledge around. Don't make one person the linchpin that you can't live without. Not only is it a bad bargaining position but it could hamper business continuity should that employee go on vacation or get hit by a truck. Don't deliberately make your business dependent on anyone, especially you.

• You Fail to Automate/Outsource Routine Business Processes. Why is your company still processing anything by hand? Take the low-hanging fruit and get rid of it: payroll, invoices, payables, and receivables - classic business processes - can be entirely automated. Think about cost-shifting to providers who can manage these processes for you at a stronger economy of scale. BBSI out of Vancouver, WA is a great example of a payroll processor for small businesses. The faster you get the invoice out the door, the faster you get paid, the more likely you can take advantage of early payment discounts, and why not take advantage of electronic funds transfer instead of depositing checks? Companies who're not doing this will comparatively spend more in labor, make more mistakes, have a longer cash-flow cycle, and be more difficult to work with.

• You Ignore Self-Service. Transfer labor away from you and push it to your customers. Really, they don't mind. They expect it. Empower your customers with web-based tools. Heck, empower your employees with similar web-based capabilities. In what ways can your business put nearly everything a customer (or even an employee) needs to do business with you online? Or even mobile, like a smartphone app?

• You Ignore Search and Social Media. It's time to start thinking about SEO/SEM/SM strategies. If you don't know what these concepts are and what they mean to you in terms of being found by consumers, and retaining customers, start asking questions now: you're behind the curve. A great local guy that can help is Matt from Fringe Media Web Design in Vancouver, WA. Your customers are most likely to find your company through search engines and by asking friends on social networking sites. If you're not planning for this, your competitors are, making them easier to find and interact with than your company.

• You Assume the Best. Right. You should be planning for the worse. I've written about the state of the economy numerous times. You may already know that, in August 2010, the nation added approximately 26,000 private sector jobs; and you may also know that the country needs to add ten-times that (250,000) new private sector jobs consistently every month for three years to just re-employ the 8 million unemployed... bringing us back to where we were in 2007... and that's not even counting all of the newly unemployed added to the ranks since that time. This is all very unlikely to happen. Thus, it's time to face the music: barring some economic miracle, if you're not already learning how to do more with less consistently (indefinitely), you're at a competitive disadvantage to those who are. Your competitor is learning how to be more productive and efficient, and how to be more profitable. If you're optimistic and waiting for the tides to change, and just waiting, you may be waiting too long on the shore as the ship sails away. It's time to go on the offensive and to consider how to drastically reduce expenses while extending the highest value to your customers, and, achieving the highest efficiency.

R

2010: Server Upgrade Choices for the SMB

Many small to mid-range companies upgraded their server assets with the release of Windows Server 2003. The 2003 server was very popular and contributed to Microsoft retaining a 88% server market share, fending off Mac and Linux in this space for most of the decade.  However, as it's now five years old, the 2003 R1 Server product is entering its extended support phase, meaning direct support costs from will go up and Microsoft will begin releasing only limited updates for licensing, compatibility, and new features.  Hardware warranties on this equipment have long expired, and many of the hard disks/arrays in these units will be reaching their MTBF (Mean Time Before Failure) ratings this year; their likelihood of crashing is much higher. So, small to mid-range businesses should soon be thinking about their strategy for retiring the legacy asset.

Surely, the state of economy will likely push these decisions out for another 12-18 months as business owners stay put with what they got and contend with larger problems. Analysts are seeing the results of fear and uncertainty when we look at the results of Microsoft's last earnings report in June 2009: sales are down 17-percent from the previous quarter and profits are down 30-percent for the year. Okay, so you're a small business: what are your options?

It used to be that I had only three answers to that question: one, do nothing - ride out the extended support period for the next five years and assume increasing risk of hardware failure; two, upgrade the existing platform and the operating system to the current o/s release; three, replace the server entirely. This year, I'm really happy to say that the small business has many more choices.

Windows Server Upgrade and Asset Replacement.

The default position for most will be upgrading or replacing their Windows Server 2003 with a Windows Server 2008 - whether or not they do it now, or, wait for Windows Server 2008 R2 scheduled to be released Q4 2010. Companies that would do this are tied to the Microsoft Windows product: software solutions they own are locally-installed apps that require a centralized server on their LAN to function, and they use Windows, and these companies are forced to upgrade to maintain support on those legacy applications. Or, maybe they'll stay on the Windows platform because they know Microsoft and trust it. Either way, it's the default choice.

Doing Nothing and Staying Put.

An alternative is to do nothing. I think a lot of SMB (small to mid-range business) consumers are going to stay with Windows 2003 for as long as possible; similar to what we're likely to see with WindowsXP, Windows Server 2003 will be one of those microcomputer software products that will have an extreme, unheardof longevity encouraged by apathy for Microsoft's licensing costs and complexity. Business owners will find no compelling functional reason to upgrade, may be risk-adverse with the economy the way it is, may distrust other choices presented to them, or simply have shallow pockets.

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Open Source.

The risk-tolerant SMB may look at the need for an in-house server because they have privacy concerns. They don't want anybody else holding their files, mail, or mission-critical data; they want to hold this stuff close to their chest and mistrust cloud or hosting options. On the other hand, this consumer isn't married to Microsoft: they just need a network appliance. Something that can perform backups and disaster recovery, centralize security, manage a database, file, and print services, and route email. Linux - particular the Ubuntu distribution - is a good choice here, either as an alternative to Windows with existing hardware, or an alternative o/s for a new machine. Up-front licensing costs would be much lower, and TCO (Total Cost of Ownership) would be comparable to a Windows Server. If the SMB is looking for a reliable appliance - just something that runs in the background and provides basic network services - and doesn't have a dependency upon Windows in their application portfolio, Open Source is a credible option in 2010.

Private Hosting.

Some companies just can't escape the need for a server - a Windows server or otherwise. They have mission-critical apps that are specific to their industry and they need to have that functionality. On the other hand, they don't want to be saddled with the cost and expense of owning a server; they want to get out of "ownership" and into "rental" or "leasing". They want to "rent" their capabilities, not "own" their capabilities, and cap their costs to a fixed-term, fixed-rate subscription expense that scales with their needs. Virtualization and terminal services make this option pretty attractive in terms of cost: some ROI projections see this as a 15-20% savings plus the added benefit of having your data and applications accessible anywhere you are, and, transferring the risk to a 2nd party.

Abandoning the Server - Cloud Computing.

Even more trendy is the fashionable idea of ditching the server entirely. Cloud computing is a more risk-tolerant model where we'd transfer your data and services to a 2nd party provider. Google, for example, could host and manage your email, your files, and information security and disaster recovery. The investment would be made in migrating the data away from servers to the 2nd party, then training and configuration expenses to get applications and devices to use the 2nd party. The ROI is fairly material: 30-50% savings as compared to owning your own server. Data is available anywhere, there are no licensing or up-front capital expenses (usage is billed by subscription, per-user), and the risk for managing your applications is transferred to the 2nd party provider. Again, instead of "owning" capability, the small business is "renting" capability, allowing for zero time to maturity and low barriers to entry - out of the gate, the small business can have the same technical capabilities as more mature competitors who paid a premium over the years developing their IT infrastructure.

So the small biz has a lot to consider over the next twelve months - especially if you tack on problems associated with workstation upgrades and Windows 7. Here's a real chance, I think, for competitive advantage: business can either stay the course and own their assets, and pay a premium for similar services that their competitors can acquire at costs up to 50-percent lower; or, businesses can strategically adopt open, hosted, or cloud solutions that take advantage of mobile computing, low licensing and maintenance expenses, and risk transfer; or, the small biz can do nothing - stay put and hope for the best. I think, in today's economy, staying put is exactly the opposite that somebody would want to do, and strategically-applying technology to dramatically reduce costs and liability... in some shape or fashion... would be the better option.

R