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Small Business in 2020: Dramatic Shifts Predicted

By Ned Smith, Expert


You may not have a crystal ball, but a new report predicting 20 key demographic, social, economic and technology trends that will change the world over the next decade highlights opportunities for small business growth.

This 10-year look into the future predicts the global economy will swell with the addition of one billion new middle-class consumers. Health and wellness will become top-of-wallet issues for the world’s consumers and cloud computing will begin to erode the foundation of traditional bricks-and-mortar commerce. In short, brace yourself for world-changing tectonic shifts. The report was conducted for Intuit by Emergent Research.

“We are already seeing fundamental shifts that are changing the way we all live and operate, but rarely do you see so many trends directly affecting the global economy and community in such a short time,” Kris Halvorsen, Intuit’s chief innovation officer, said in a statement.

While trend-spotting can often be as chancy an occupation as reading tea leaves, here are the top four substantive bread-and-butter economic issues that the report identified:

Startups will be cheaper and easier

By 2020, starting a small business will be easier and more affordable than ever. As smaller, lighter and smarter systems, components and manufacturing methods emerge, the cost of starting and running a small business will continue to decline. Embedded digital technology will become ubiquitous in a growing array of business processes, services and products, cutting costs and lowering barriers to entry.

Lightweight infrastructures will change the economies of many industries, opening the way for small businesses to successfully challenge industry incumbents. Small business will also shift, the study predicts, from fixed-cost to variable-cost business models, adopting a pay-as-you-go approach that minimizes investment risk as well as up-front cash requirements.

The unknown factor in this scenario is the effect that government intervention may have, says the Small Business & Entrepreneurship Council (SBE Council).

“In fact, the changes and advancements in technology and the marketplace are making it far easier to start up a small business, and to become competitive quickly,” said Raymond J. Keating, the SBE Council’s chief economist. “There’s no doubt about that. The questions come on the governmental front.  What are the obstacles being erected and burdens imposed by government that work in the opposite direction, making it harder to start up and build a business? Those include new taxes, regulations and mandates at all levels of government. The more intrusive and expansive government becomes, the more difficult it is for entrepreneurship to flourish,” he said.

Sustainability will be mandatory

Sustainability will no longer be feel-good gesture — it will be a business necessity. Once the world climbs out of its economic malaise, the return of growth will renew pressure on resource supplies and prices, with regulation, taxes and other initiatives aimed at reducing our carbon footprint adding to these pressures.

Consumers and business-to-business customers will increasingly demand sustainable business practices, products and services.

The march toward sustainability may not be an unalloyed blessing, the SBE Council counters, especially if the costs outweigh the benefits.

“Sustainable business practices’ is the nice terminology for the costs imposed by government through environmental regulation,” said SBE Council’s Keating. “Where new practices make sense from an economic standpoint, they obviously will be demanded and implemented. Why not? But when it comes to demands from special interest groups imposed via government, that’s a very different story. Keep in mind that, as confirmed once again in a from the SBA’s Office of Advocacy, the costs of environmental regulations fall far more heavily on small firms. On a per-employee cost basis, environmental regulations are four-and-a-half times more costly for firms with fewer than 20 employees compared to businesses with more than 500 workers.”

Traditional employment will fade 

Both for worker and owner, traditional employment will no longer be the norm. The “new normal” of 2020 will embrace the concept of contingent work by, temps, contractors, specialists and part timers. From the owners’ point of view, these contract workers increase efficiency, agility and flexibility; employment expense becomes a variable cost.

The report predicts contingent workers will make up more than 40 percent of the U.S. work force by 2020, up from its current 25-30 percent. Small business will develop its own collaborative networks of contingent workers, minimizing fixed labor costs and expanding the available talent pool.

Scott Shane, a professor of entrepreneurial studies at Case Western Reserve University, agrees with this notion.

“We have a lot of data now that show trends toward these independent contractor types of businesses,” he told BusinessNewsDaily. “They are an increasing share of small businesses and their share has been rising for over the past 15 years. I don’t see any reason for this trend to change.”

More niches will open up

Forget normal bell-shaped distribution curves. Industry is moving toward a barbell-like structure, with a few global giants on one end, a narrow middle made of up mid-size firms and large group of small, micro- and one-person operations balancing on the other end.

This will increasingly open up niches for small and personal businesses that the giants can’t touch. We will also see increasing collaboration between large and small firms to build on each other’s strengths to better serve these micro-markets. As they become more agile and make greater use of contingent workers, the average small business will become smaller by 2020, the study concluded.

“There is no doubt that the next decade will dramatically change the way we all live and operate, which we have already seen in play over the past year as economic, social and demographic shifts alter the shape of consumer and small businesses,” said Steve King at Emergent Research. “Particularly exciting are the opportunities for small business creation and success in a global market as businesses become easier to start and manage.

“As far as this trend goes, the U.S. culture of being pro-entrepreneur will be a huge positive,”  Keating said.  “However, there are limits. Not everyone is cut out to be an entrepreneur. So, the overall trend towards micro-markets will make the true entrepreneurs even more valuable in the marketplace.”


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