moving to the cloud

How the small business market has changed in ten years

Part 1 in the SMB 3.0 series

In the introduction to this series, I explored the concept of version 3.0 of the Small / Medium Business (SMB).  Version 2.0 is generally regarded as coming to terms with the social customer in a digital marketplace.  Version 3.0 then is al about being a global, omnichannel business. There is no doubt that running a small or medium-sized business (SMB) today is very different than it was ten years ago.  For example, there was no GL line item for “Social Media” in 2007 and “International Sales” was not a revenue line item for most SMBs.

In December 2006, an SMB was easy to describe.  You were a service provider, manufacturer, distributor or retailer, and most businesses had a “brick and mortar” presence.  In fact, the phrase “Brick and Mortar” was not widely used, as there was nothing to distinguish those businesses from!

Facebook had been publicly accessible for 3 months.  Most folks were wondering why anyone would communicate using Twitter at 140 characters at a time. While at a conference I was asked if LinkedIn had any relevance to business.  

While LinkedIn’s relevance was questioned by a few, practically no one saw any business relevance for Facebook and Twitter.

While most of us did not see them,  there were real signs that a significant shift in the SMB business model was occurring.  eBay continued its customer acquisition growth adding 10 million active users making 82 million in total, while Paypal added 49 new countries it could receive payments from, for 103 in total

These sets of events meant that the accessible population of consumers was about to explode, and the means to communicate with them were developing rapidly.

Ten years later, at the end of last year, PayPal could receive funds from over 200 countries, Facebook had over 1.2 billion daily active users, and Microsoft validated LinkedIn’s relevance with a $26.2 billion check!

SMB’s now have access to a global market of consumers through a multitude of channels, from eBay to Amazon and Etsy, and a plethora of ways to reach them.

So, SMB 3.0 is partly about the rise of the omnichannel global small business.  But there is a lot more to SMB 3.0 than that.

Today’s SMB is much harder to describe than their 2006 counterpart.  The Gravity Cartel in Portland Oregon is the new typical SMB.  They are a master North American distributor for a Taiwan manufacturer of mountain bike parts and protective equipment.  But…. they have an online store… And sell to bicycle stores in the US.  Are they a distributor, retailer, or wholesaler?  Import or exporter?

Yes, yes, and yes…

And then there is the changing global manufacturing dynamic.

So far this decade, over 800,000 manufacturing jobs have been added in the US, while output per hour for all workers in the manufacturing sector has increased by more than 2.5 times since 1987.  Significantly, 73% of all US manufacturing companies have less than 20 employees. These small shops are capitalizing on new technologies such as 3D printing to build highly efficient low volume manufacturing operations.  Not only do these manufacturers enjoy the multi-channel flexibility described above to sell and distribute their products, they also provide new sourcing options for SMB’s to complement or expand their product catalog.

Finally, the same eCommerce facilities that exist as sales channels, also facilitate sourcing low volume production runs from overseas manufacturers.

For providers of non-tangible goods, the increasingly reliable and ubiquitous internet allows for staffing their organization and supporting customers without regards to geography.  By way of example, at VersAccounts, we have engineers in three countries on two continents and support customers across the globe.  We rarely need to visit a prospect’s premises during the sales process.

On the face of it then, the world is a single market of easily accessible consumers, for any product or service you choose to manufacture, source, import, or resell.  That’s the good news!

But there is another side of that coin.  To paraphrase Stan Lee –  with great choice, comes great responsibility.  The question of defining your business has never been harder.  What products do you sell? Where do you source them from? Who do you sell to, and how do you sell to them?

Each of these decisions has implications that may be new, complex, and interrelated. If off-shoring short run manufacturing, you are now an importer and must deal with duties, customs delays and losing some control over product quality.  If selling internationally, you are now an exporter, with similar concerns.  If selling through Amazon’s Fulfilled By Amazon (FBA) program, you may now have stock in out of state and international locations, creating tax complications.

In the remainder of this series, I will be exploring these and other issues in detail.  Next up: The Rise of the Omnichannel SMB.

 

 

 

 

 

David van Toor

I have worked in and around ERP software for much of my (long) career from roles in Sage, Epicor and Avalara from New Zealand to Brazil. I am passionate about Customer Experience, oceans and mountains. I prefer personality over policy or process, and local companies over chains. I may write on any of the above...

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