News About Small Business

by Shari Lifland

There is no question that small businesses continue to make up a vital portion of the U.S. economy.

According to a 1999 report by the Small Business Administration (SBA), small businesses (defined as having fewer than 500 workers):

Employ 53 percent of the private non-farm workforce. Contribute 47 percent of all U.S. sales. Make up 51 percent of the private gross domestic product. Accounted for 76.2 percent of the new jobs created from 1990-1995. According to Bureau of Labor Statistics projections, small-firm dominated sectors will contribute about 60 percent of new jobs from 1994-2005. About 88 percent of these new jobs will be in retail trade or services. Jobs in high-paying service sectors, including offices of physicians and architectural and engineering services, will rise about 30 percent. The restaurant industry is projected to add 1.02 million new jobs from 1994-2005.

Interestingly, about 21 million Americans -- or about 17 percent of all non-farm workers -- are involved in some entrepreneurial activity, either full- or part-time.

In light of the role of small business in the U.S. as a major contributor to the economy, Advantage Payroll Services recently commissioned McBain Associates to conduct a study of small businesses (in this case, limited to businesses with 100 or fewer employees) to explore two areas of profound change for small businesses: the employer/employee relationship and the role of the Internet on business. The study was conducted by mail during April 2000, and is based on 141 respondents.

Respondents acknowledged that in the competition for employees, small businesses have distinct advantages and disadvantages:

Advantages:

Can move faster in making a decision (97%)

Can offer better and faster employee growth as a result of employee merit" (91%)

Can tailor our offer to the candidate more easily than a large company" (89%)

Are better able to make allowances for employees with Íoff-beat' employment records (80%)

Disadvantages:

Larger Companies:

Can offer better benefits (93%) Are usually better known (91%) Can offer better salaries for equivalent positions (89%) Can provide stronger employee training programs (81%)

Section 1: The Employer/Employee Relationship

The substantial majority of small businesses believe that the employer/employee relationship is more difficult today than it was 5 years ago.

Compared to 5 years ago, respondents rated as much more or somewhat more difficult:

Overall employer/employee relationship (70%) Hiring (79%) Retaining employees (69%) Motivating employees (65%)

87% felt that recruiting employees takes more time than every before. 86% felt that employee loyalty is becoming weaker. 82% felt that it costs substantially more to recruit an employee than ever before.

Top Rated Factors Important in Hiring (percentage who chose much more/more important):

Health Care Benefits (88%) Opportunity for Advancement (84%) Performance Incentives/Bonuses (83%) Flexible Hours (76%) Stake in the company (stock options/profit sharing) (71%)

Section II: Small Business Perceptions of E-Commerce

Small business has yet to move into the Internet in a big way. A surprising 65% agree with the statement, The Internet is perceived as being more important in business than it really is.

71 percent say that 20 percent or less of their business is conducted over the Internet.

Almost half (42 percent) expected the Internet portion of their business to increase only 20 percent or less. 28 percent expect it to grow 21-40 percent.

How small businesses use the Internet: Marketing (80%) Purchasing (69%) Recruiting (57%)

25 percent do not have a company website.

61percent who do have company websites say they are essentially corporate brochures describing our company and what it does.

24 percent feel that Our website is a bona fide e-commerce site.

Only 13 percent say that We ask our customers to order from us over the Internet as much as possible.

While 73 percent believe that E-commerce has dramatically changed the way most companies do business, 65 percent agree with the statement, The Internet is perceived as being more important in business than it really is.

Shari Lifland is a New York-based writer.