***Update: our Top 10 Small Business Trends for 2012 is now available.***
Our overall economic outlook is for continued moderate growth with U.S. GDP increasing 3%-3.5%. While we expect hiring and the job market to improve, unemployment will remain stubbornly high, finishing the year around 9.2%.
1. The Small Business Economy Recovers from the Great Recession: Despite the Great Recession officially ending in 2009, and moderate overall U.S. economic growth in 2010, the small business sector of the U.S. was still in recession last year. We're optimistic the economy will continue to improve in 2011 and economic growth will be more widespread. In 2011 small businesses will see stronger demand and better business conditions, resulting in the small business economy emerging from the Great Recession.
2. Variable Cost Business Models: Small businesses will continue to focus on cost containment, bootstrapping and business flexibility in 2011. More small businesses will shift from fixed cost to variable cost business models, adopting a pay-as-you-go approach to minimize cash requirements and increase business agility. Fixed costs and fixed assets will increasingly be avoided. Small business outsourcing and the use of contingent workers in place of full time employees will increase substantially.
3. Small Firms Reinvent U.S. Manufacturing: The recovering economy and 4 key trends are driving the growth of small and micro manufacturing, redefining how we think about manufacturing: (1) technology and variable cost business models are making it cheaper and easier for small and micro businesses to manufacture niche and customized products; (2) the weak dollar and rising overseas costs are making U.S. manufacturing cost competitive; (3) developing world economic growth is leading to stronger export opportunities; and (4) the Internet and online systems are improving the ability of small manufacturers to find, sell and support customers.
4. Alternative Financing: While the improving economy is leading to increased small business access to financing from banks and other traditional sources, capital will still be tight in 2011. This will lead to increased use of alternative credit sources - merchant advances, micro-lending, community lending, crowd funding, factoring, etc. Online micro-lending in particular will see a substantial increase in 2011.
Social and Social Media
5. Social Media Moves to the Small Business Mainstream: Despite the hype, the vast majority of small businesses haven't used social media on a regular basis for business purposes. This is changing as small business users become more comfortable with social media, its benefits become clearer, and social media's positive results become more obvious. The growth of social commerce (see 6 below) and Facebook (see 7 below) are key drivers of the growing interest in and use of social media by small businesses.
6. Social Commerce:The amazing growth of Groupon and other social commerce sites in 2010 heralded the shift towards the integration of social media and sales. 2011 will see this this field continue to explode as small businesses see clear, measurable, positive results from their social commerce/media efforts.
7. Small Businesses Friend Facebook: The epic growth of Facebook is hard to overstate. With over 500 million active users, including 200 million mobile users, Facebook has passed Google and become the Web's most visited site. Small businesses are embracing and adopting Facebook as a key part of their web presence, and in growing numbers using Facebook as their primary website.
8. New Localism Continues to Flourish: Driven by changing demographics, new technology, economic pressures and growing concerns about the environment, more Americans are focusing on their families, friends and local communities. Small businesses benefit from the growing number of locally-oriented customers and the opportunities created through "Buy Local" campaigns. New localism was on our list last year. It is a long-term trend whose impact has been accelerated by the recession and makes the list again this year because of its growing importance.
9. Freelancers Realize They're Small Business Owners: The last few years have seen strong growth in the number of contingent workers - freelancers, part-timers, temps and contractors. Many of these new contingent workers are embracing freelancing and choosing to stay contingent. Others will stay contingent due to a lack of options. Both groups will increasingly see themselves as long term freelancers and realize to be successful they will need to view themselves as small business owners. This shift in thinking will improve their businesses and result in a stronger, more successful freelance community.
We see 2011 being a year of technology maturation and consolidation. By that we mean a number of technologies that have been impacting small businesses for several years are becoming mature and mainstream. Because of this, we are going to limit our technology trends to one broad trend.
10. Working in the Cloud: No trends list would be complete without mentioning mobile, cloud, local and social computing. While each of these trends is important, the growing convergence of these trends and technologies is amplifying their impact and fundamentally changing how business is done. Work is moving to the cloud, and small businesses are embracing this shift and related technologies.