Paul Saffo's excellent Havard Business Review article on forecasting points out that "The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present." Keeping this goal in mind, below is a list of 10 trends that we think will impact small business in 2008. The trends are in no particular order.
1. The declining dollar accelerates the long-term trend towards small business globalization: Several long-term trends are driving the growth of small business cross-border trade and the globalization of small business. These include increased global economic growth, reduced trade barriers and the growth of the Internet and other connective technologies. Adding to these longer term trends is the decline of the US dollar versus almost all free-floating currencies. The dollar's decline is creating broad, new cross-border trade opportunities for small businesses and 2008 will see substantial growth in small business exports.
2. Economic uncertainty leads to increased small business formation: 2008 is likely going to be a year of economic instability. The combination of the sub-prime loan problems, housing price declines and high oil prices have most economists suggesting 2008 will be a year of sluggish growth, and many are forecasting a recession. Economic downturns and periods of economic uncertainty often lead to increased small business formation as workers turn to entrepreneurship as an alternative to a traditional job. With technology making it easier and cheaper to start a small or personal business, many will choose to do so in 2008.
3. Mobile computing takes off: Mobile computing is the #1 forecast in our consensus 2008 technology forecast. The impact of the iPhone on the cell phone industry coupled with Google's Android annoucement and 2008 shipment plans have most technology forecasters predicting 2008 will be the year mobile computing breaks out in the US. Adding the impact of the rapid growth in navigation systems, location-based services and mobile search, and mobile computing should have a banner year in 2008.
4. Online social networking becomes mainstream: This is the #2 forecast in our consensus 2008 technology forecast. While most discussions of online social networks focus on Facebook and MySpace, small businesses are increasingly using and being impacted by a wide range of social networking forums. These include small business community sites where enterpreneurs exchange information and knowledge (Intuit's JumpUp site is a good example), review sites where customers talk about small businesses, and sites where small businesses use networking to find customers or business partners (eLance, for example). So while is may or may not make sense for a specific small business to be on Facebook, the majority of small businesses will be impacted by online social networks in 2008.
5. The emerging "buy local" coalition expands and gains momentum: We first posted on the the emerging "buy local" coalition last year. This group includes a range of consumers who are looking to buy locally made, handcrafted and/or highly customized or unque products. This group includes consumers who are choosing to buy locally produced goods because of concerns about the environment; concerns about US jobs; concerns about the safety of foreign produced goods; and/or a strong interest in buying unique or highly customized goods.
2008 will see this trend gain momentum as product customization expands, more US consumers become aware of online shopping sites likes Etsy, and more foreign buyers take advantage of the weak dollar and online access to buy goods handcrafted or customized in the US. Small and personal businesses are ideally suited to fill the demand for these types of products, and will greatly benefit from this trend.
6. Small manufacturing expands and gets redefined: We've posted in the past on small manufacturing growing in the US. Despite the economic uncertainty, we think 2008 will see this sector expand. Technology will continue to make it cheaper and easier to manufacture in the US, the weak dollar will lead to strong export markets and raise the price of competitive imported products, and online marketing will improve the ability of small manufacturers to reach customers and sell products. The rise of small automotive companies is a good example.
Also driving this market is growth of highly customized goods that members of the buy local coalition are seeking out. The small artisans or specialist manufacturers that produce these products are redefining manufacturing. Instead of requiring large plants to make things, technology has advanced to the point that small firms and even home-based businesses can build sophisticated products. There are hundreds of thousands of artisan manufacturers in the US, and their number will increase substantially in 2008.
7. Large corporations focus more on small businesses: Generating over half of the economic output of the US - and growing faster than the overall economy - the small business sector has become too important a market for large corporations to ignore. Also, large corporations are increasingly looking to small business for innovation and demand and supply chain partnerships. 2008 will see large corporations increase their small business activity across all aspects of their operations.
8. The greening of small business: The trends driving large corporations to adopt sustainable business practices also impact small businesses. 2008 will see small business customers and employees focusing on sustainable business practices. Small businesses will need to respond both in how they run their businesses and how they create, produce and deliver their products. Many small businesses will also find new market opportunities in delivering innovative "green" product solutions to the marketplace.
9. Media and entertainment continues to fragment: 2008 will see the continuation of media fragmentation and the growth of small media companies. Small online publishers and bloggers will continue to thrive as their highly targeted niche audiences grow and monetization via advertising and affiliate product sales becomes easier.
10. Demographics continue to drive small business growth: The demographic drivers of small business growth we discussed in our forecast report last year - aging baby boomers, Gen Y entrepreneurs, immigrant entrepreneurs and women entrepreneurs - gain strength in 2008.