While popular stereotype depicts small-business owners as inveterate optimists, a new batch of surveys shows them feeling the effects of the economy's long downturn. As such, anyone wishing to sell goods and services to this important market needs a more nuanced approach than ever. But it's not as if owners are simply hunkered down, as one can gather from their growing engagement with social media as a way to build their business.
It's a sign of how tough things have been for small-business owners that the latest Discover Small Business Watch report speaks of their confidence having "rebounded" in October. Indeed, the polling did find owners less glum than they had been in recent months. But still, those who said they see economic conditions for their own business getting better in the next six months (28 percent) were easily outnumbered by those thinking conditions will worsen (43 percent, with most of the rest saying things will stay as is). The pattern was similarly downbeat when owners were asked about the direction of the overall economy: 31 percent said it's getting better, but 48 percent said it's getting worse.
Polling last month for MerchantCircle, an online network of local-business owners, found an especially telling sign of the strains its constituents are feeling as they wait and wait for the economy to strengthen: 50 percent of respondents to its member poll said they "would not start their business again in today's economic climate." And little wonder, as 46 percent also said their business has slowed since the supposed end of the recession last June, vs. 25 percent saying it has picked up. Fifty-six percent disagreed with the statement, "The worst effects of the recession are behind us," while just 19 percent agreed (with the rest neither agreeing nor disagreeing).
THE CASH-FLOW FACTOR
Small-business owners have not been immune to a sense that the economy has been drifting toward a double-dip recession. In last month's release by American Express Open of its latest semi-annual Small Business Monitor polling (fielded in August and September), 45 percent of owners expressed a positive outlook on the economy, down from 51 percent in spring's survey and from 55 percent last fall. The good news in this report was a decline in the incidence of cash-flow problems, with 53 percent experiencing those, down from 60 percent in the spring.
Even amid such modest improvement, though, cash is tight enough that 28 percent of the American Express Open respondents said they're dealing with the matter by putting off purchases. The Discover Small Business Watch polling found 22 percent of owners planning to increase their spending on "business development," but 46 percent planning to decrease such outlays. "They're delaying buying that new truck or making that new hire or opening that new branch," says Darren Waddell, vp at MerchantCircle.
Given owners' view of the economy and the tightness of their own budgets, marketers who aim to sell goods and services to that market have their work cut out for them. But this doesn't mean a somber tone would be suitable for marketing messages aimed at this audience. "Even when small-business owners perceive that economic conditions are poor, they're still very bullish about their own businesses," says Waddell. "I think there's still room to be aspirational when you talk to them. They've been through a lot in the last three years. But that's something that should be celebrated. You can't be over-the-top about it, though, saying there's going to be milk and honey tomorrow."
NOT PRONE TO SELF-CONGRATULATION
Nor is it prudent to be over-the-top in congratulating owners for having managed to stay afloat through the Great Recession. Asked whether this audience would respond positively to ads that lauded them as "survivors," Ryan Scully, director of Discover's small-business credit card, dismissed the notion. "Small business owners don't tend to be self-congratulatory," he notes. "They're focused on making the next sale."
Scully also suggests that the mood of owners -- and, hence, the best tone with which to address them -- is partly a function of how long they've been in business. "Newer owners tend to be more optimistic," he says. "If you're selling accounting services that a new business would need, for instance, they're going to be a bit more optimistic" in comparison to a longer-established company that's taken some hard knocks. He also sees more optimism among small businesses whose focus is business to business. The business-to-consumer operations are the ones that have had the toughest time lately, he says, since many of their potential customers "are looking at the unemployment numbers, or they're underwater on their mortgage."
Moreover, many small businesses and consumers have a problem in common: access to credit. In the American Express Open polling, a non-landslide 57 percent of owners said they're confident that "they can access the capital they need to grow their business." In the MerchantCircle poll, 53 percent of respondents said the availability of credit for small business has worsened during the past three months, while 6 percent said it has improved.
BAD TIME FOR A CREDIT SQUEEZE
Tight credit is especially troublesome for small retailers this time of year, with the holiday-shopping season approaching. Waddell notes that many merchants use their credit cards to finance inventory for the holidays, but are squeezed in doing so by tighter credit conditions.
All of these struggles add to the urgency for small-business owners of finding new customers and getting more revenue from customers they've already got. And this is prompting increasing numbers of them to make use of social media. Thirty-nine percent of the American Express Open respondents said they're using social media to attract new customers, up from one in 10 saying the same a year ago. In the MerchantCircle survey, 56 percent of respondents said they've created a social-networking profile (aside from the one they have with MerchantCircle itself).
Asked by American Express Open to identify the primary benefit they get from using social media, those who've taken the plunge were most likely to cite "increases the exposure of my business" (39 percent), with "increases traffic to my Web site" a distant second (15 percent).
EXPERIMENTING WITH SOCIAL MEDIA
The report notes that social media provide "a lower-cost marketing channel through which business owners can talk directly to consumers." But is it popular with owners mainly because it's cheap? Alice Bredin, small-business advisor to American Express Open, thinks not. "I think they believe it's really a great way to get customers," she says. Time is a precious commodity for owners, who often work heroically long hours, so they're unlikely to spend time on doing something they don't think will be effective, no matter how cheap it is. But the relatively low cost does mean they feel more free to experiment with social media. "They can try it inexpensively, so if it's a bust, it's not a big investment," says Bredin.
For better or worse, few small-business owners have the sort of expertise with social media that a big corporation is apt to have nowadays. So they need to do a certain amount of trial and error -- something to which social media lend themselves at this stage. "There's a little room to play around and create your own approach," says Bredin. It's not as if consumers have already arrived at fixed ideas of how they want to be marketed to in that environment, she notes, which leaves all the more leeway for small businesses to experiment.