Small Business Labs

Benefit Declines Makes Self-Employment More Attractive

It's no surprise that companies continue to cut workplace benefits.  According to a U.S. News article: "Employers have significantly cut many of the benefits they offer to workers over the past five years."

The article goes on to list 21 workplace benefits that are going away, with reductions in retirement and health care benefits leading the way.

Most people looking at becoming self-employed or starting a small business go through a risk/reward analysis of their choices.  This process is based on their views of the advantages and disadvantages of traditional employment versus self-employment.

We've found that corporate benefits tend to be overvalued in this analysis.  

People think employer benefit replacement costs are higher than they are, or that certain benefits can't be replaced when they can.  We've also found employer retirement and health benefits tend to be the most valued - and overvalued - in the evaluation process. 

There are a lot of other factors people include in their analysis - work/life balance, job security, advancement potential, social factors, etc. - but benefits matter. 

So when corporations cut benefits - and in particular cut health and retirement benefits - they increase the attractiveness of self-employment or starting a business. 

We don't see the trend towards lower benefits changings.  This means more people are likely to find self-employment or starting a small business more attractive. 

Three of Our Favorite Trend Sources

Our job is tracking and forecasting small business trends. As part of this task, we keep up with a lot of trends which at first glance don't seem directly related to small business. 

We do this for two reasons.  First, a lot of trends that don't look important to small businesses right now end up being very important in the future.  We've also found cross discipline trend analysis is much more powerful and accurate than focusing on a single or small set of trend areas. 

Keeping up with all these trends is hard.  But fortunately there are good sources covering different trend areas we can turn to for help.

Three of our favorites are:

1.  The Center for the Future of Museums:  Their Dispatches from the Future of Museums is a weekly, curated mix of article summaries and links highlighting trends likely to impact society and business in the future.  It's my favorite newsletter on the future and a must read for anyone interested in trends. 

2.  The Sloan Work and Family Research Network blog:  I like the blog, but I love their weekly What's New in Work and Family blog post.  It's a curated list of article summaries and links.  If you're interested in work/life balance, flexible work or other issues related work and its impact on families, this is the place to go.

3.   JWT Intelligence:  JWT is a large marketing communications agency (what used to be called an ad agency) serving many of the world's biggest consumer brands.  Not surprisingly, their focus is consumer trends.  They produce an excellent weekly roundup of curated article summaries and links on consumer trends.  They also produce interesting reports, some of which are free.

Strong curation skills is what these three sites have in common.  Their weekly summaries allow us to cover a lot of ground in a short amount of time.

Water, Water Not Everywhere

Water, or more accurately the lack of water, is becoming a big deal. 

For most Americans access to clean, safe water is a given. Water is so cheap we give it little thought.  For example, despite living in an area with high water rates, until today I had no idea how much a gallon of water costs (it's about a penny, which seems really, really cheap). 

This is starting to change.  The Week's The Revenge of Water provides a good summary of the potential water problems the world may face in the coming years.  Key quote:

"Climate-change models predict more water problems—droughts and floods that will literally encircle the globe in those years. Add to that the economic rise of India and China—modernization dramatically increases water use—and it’s clear that we are entering a new era of water scarcity, not just in traditionally dry places like the U.S. Southwest and the Middle East, but in places we think of as water-wealthy, like Atlanta and Melbourne."

The New York Times Drought: A Creeping Disaster provides a more ominous look at potential water problems.  It talks about the aridification of the U.S. Southwest.  The key quote comes from Columbia University's Richard Seager, who explains:

"You don’t say, ‘The Sahara is in drought.’ It’s a desert. If the models are right, then the Southwest will face a permanent drying out.”

But there's also good news.  One amazing statistic is that the U.S. uses less water today than it did in 1980.  This is not per capita, but in absolute terms.  Again from The Week:

"U.S. water use peaked in 1980, at 440 billion gallons a day for all purposes. Today, the country uses less than 410 billion gallons a day .... Most of the change has come in water use by power plants and farms. Farmers today use 15 percent less water than they did in 1980, and produce a 70 percent larger harvest."

Another amazing stat is about 16% of water pumped into mains in the U.S. leaks away.  Fixing these leaks seem like a relatively easy way to improve our water use efficiency. 

Water is not an important issue for most small businesses today.  But water is going to get more expensive, which means efforts to conserve and use water more efficiently will increase.  Like the broader opportunities being created in clean tech, it's likely there will be more water related small business opportunities in the future. 

Pet Humanization Fueling Opportunities for Pet-preneurs

Regular readers of this blog know that pet trends is one of my favorite topics.  The key reason, beyond the fact that I'm a life long dog owner, is the fascinating trend towards "pet humanization."

More and more pet owners are seeing their pets as full fledged family members - and themselves as "pet parents."  Because of this, spending on pets is skyrocketing.  Last year, for example, Americans spent almost $50 billion on their pets. 

This is creating opportunities for pet-preneurs - entrepreneurs creating businesses to serve this growing and increasingly diverse goods and services market.  The Intuit Small Business blog article Grooming and Booming has a nice infographic on this topic. 

Of course my favorite humanized pet is Chico, my brother and sister-in-law's dog.  Chico visited recently and for the first time was allowed in the backyard with our dogs.  Chico's parents have always considered our dogs too unruly and "dog like" for Chico to interact with. 

Much to the surprise of his parents, Chico had fun and at times actually acted like a dog - or at least sort of like a dog.  Nature, in this case, won out over nurture. (BTW, I have to be careful what I say about Chico.  His parents warned me his lawyers are bulldogs.) 

For those interested in pet trends, Euromonitor is hosting a free webinar on this topic this week.  Global Pet Care – What is Driving Growth in 2011 and Beyond? is on July 27th at 10:00am eastern. 

Knowledge Work, Corporate Profits and Jobs

State Street CIO Defends IT Job Cuts from Bank Technology News is a really interesting interview with State Street's CIO. 

The article covers State Street announcing the elimination of 850 IT jobs on the same day it reported strong earnings.  I was struck that this article nicely illustrates several employment trends we're watching:

1.  Corporate earnings are much less linked to U.S. employment than in the past:  In the good old days, if a company was doing well it hired more people and didn't lay people off.  While it's still true that strong performing companies are more likely to hire and retain their employees, the linkage is not as strong.  Today's successful companies - like State Street -  are looking to cut costs and heads while they churn out strong profits. 

Even if a successful U.S. company is adding employees, it no longer means it's adding employees in the U.S.  According to the Commerce Department via the WSJ, over the last decade large U.S. companies cut their U.S. work forces by 2.9 million.  During the same time period, they expanded their overseas employment by 2.3 million. 

2.  Lower value jobs, even if they are knowledge jobs, are going away:  Great quote from the CIO:

"At the end of the day, we want a larger percentage of our dollars and State Street personnel working on things that differentiate us with our customers."

In other words, we want our people working on high value assignments.  Lower value work is going to be automated or outsourced. 

Another great quote is on what happens to State Street IT employees who don't have the skills to do higher value work:

"That individual may not have the right skill sets to apply on the development side. There's dislocation and it's unfortunate."

"Dislocation" has always been one of my favorite buzzwords, and it's being used a lot these days.

Long Term Earnings Trends for Women (and Men)

Brookings has an interesting article on the long term earnings trends for women.  Since 1963 the median, inflation adjusted income for a women who works full-time has increased by 56%. 

Also interesting is the median income for all women has gone from $0 in 1963 to roughly $20,000 in 2009 (chart from Brookings). 

  

The reason the median is $0 for all women in 1963 is less than half of adult women participated in the workforce back then.  Today the workforce participation rate for adult women in near 70%.

Although the median earnings for men is higher than women, during this period men have seen an overall decline in earnings.  As the chart below shows, men's inflation adjusted median earnings peaked in the mid-1970s.

   

The charts also show the Great Recession hit men much harder than women, which is why many refer to it as a "mancession". 

One of the key drivers of the the long term growth of women's earnings (and the decline in men's) is education.  Over the last couple of decades women have passed men in most measures of educational achievement. 

This advantage in education is a key reaon we expect women's wages to continue to grow relative to men.  It is also one reason we are forecasting the next decade to be a she-conomy. 

Retirement 3.0 Includes Working, But With Lots of Flexibility

The Retirement Reset study is a joint effort by the Sun Financial Group and Age Wave.  Their key study finding is we are entering a new phase of retirement they call Retirement 3.0, which they define as:

"A productive, purposeful and challenging new chapter in life - blending work and leisure - with opportunities for personal reinvention and continued social engagement."

A big part of this new retirement is the inclusion of work.  Their survey showed 65% Americans aged 55+ plan on working in retirement. 

But most people don't want traditional jobs.  They want very flexible work.  According to the study, only 4% want full-time work and only 25% want part-time work.  Key quote on the the largest group, 36% of respondents:

"...want to go back and forth between periods of work and leisure to suit their new lifestyle needs"

This is a degree of flexibility not often found in today's workplace.  But we've seen examples of people creating this type of work.  It will be interesting to watch this trend and see if it takes off. 

The other interesting finding is the expected age of retirement has increased substantially over the last decade.  According to the study, the respondents expect to work to age 69.  This is up 5 years from a similar study done by Age Wave in 2001. 

Aging baby boomers choosing to work for or start small businesses instead of pursuing traditional retirement is topic we've written a lot about over the years.  This study shows this trend continues to gain strength.

China's Rising Cities

Newgeography's A Guide to China's Rising Urban Areas lists the Middle Kingdom's 20 largest cities and provides a brief description of the 16 you've likely never heard of.  Below are the top 10.

   
To put this list in perspective, the 20th largest Chinese city - Taiyuan - is slightly larger than our 3rd largest city, Chicago (pop 2.8 million).  New York (pop 8.4 million) would be 6th and LA (pop 3.8 million) 13th on this list. 

My favorite on the list is Shenzhen, China's 2nd largest city.  I first visited Shenzhen in the late 1980s.  It had been named a special economic zone a few years earlier, but in the late 80s it felt more like a fishing village than a city.  The population at that time was around 100,000 (yes, 100k). 

The size, scale and rapid population growth of China's cities is hard to comprehend.  We simply have nothing in the U.S. to compare this to. 

And it's not just China.  For the first time in history, more than half of world's population lives in urban environments and each day about 180,000 people move to a city.  By 2020 there will be more than 20 global megacities, each teeming with more than 10 million residents. 

Urbanization is changing how the world lives and works, and is covered in more detail in the Intuit 2020 Report. 

Hire an Intern

We have 4 interns working with us this summer.  Interns, of course, are a challenge to manage.  They tend to be inexperienced and have limited traditional work skills.  They need help and guidance, and it takes time to keep them on track. 

Because of this, many people don't want them. 

But we think the good of interns way outweighs the bad.  The key is to find jobs they can do without a lot of supervision.

Our interns, being college students, are natural Internet users.  With just a bit of guidance they can find pretty much everything on anything.  Since we are in the research business, this is very useful.

They're also natural users of social media.  One of our interns is working on several social media related projects for us. 

They also tend to be good with technology.  Several of our interns are doing the filming and editing for one of our online video projects.   

Interns also force to us focus.  Our projects plans need to be more detailed and we need to stay on top of things a bit more than we usually do.  These are good things. 

Because of the good things, our productivity with interns is higher than when we don't have them. 

So hire an intern (yes, we pay our interns and you should too if you can).  The unemployment rate for teens and young adults is well above 20% - they need jobs.  And they need to learn workplace skills and have experiences they can exaggerate on their resumes and in their full-time job interviews. 

It's not too late this summer.  Many colleges don't start again until mid to late September.  But if not this summer, think about the school year (many colleges have school year intern programs) and next summer.

It's definitly worth it.  in addition to productivity gains, you get to feel good about yourself because you are helping them out. 

Is Small Business Ownership the Great Equalizer?

I recently posted on a study we did comparing the demographic and motivational differences between traditional small business owners and high growth-entrepreneurs. 

Another part of that study looked at the competitiveness and success differences between different types of small business. 

Our focus was to better understand how women and minority owned small businesses compared with small businesses owned by white men.  We also looked at how education correlated with small business success. 

The analysis was based on data from the Small Business Success Index (SBSI) produced by the University of Maryland and Network Solutions. 

The SBSI data comes from a survey of existing small businesses with relatively long operating histories.  The median survey respondent's company has been in business roughly 9 years.  The data is collected from firms with 2-99 employees.   

Our analysis of the SBSI data shows that established small businesses owned by women and minorities perform roughly the same (no statistically significant difference) in terms of competitiveness as small businesses owned by white men. 

That's not to say that women and minorities don't face significantly more hurdles than white men when trying to start a business - a wide variety of research shows they do.  What's more, small business failure rates during the early years of operation are also higher than average for these demographic groups. 

But the SBSI data shows that once the initial startup hurdles are overcome and the business becomes established, women and minority owned small businesses are on equal competitiveness footing with firms owned by white men. 

We also found that there were no statistically significant differences between small business competitiveness and the education level of the small business owner. 

So why are firms owned by women, minorities and those with lesser levels of education able to compete so effectively? 

Our belief is once a business owner gets past the challenging early and mid-stage years and builds a viable company, educational background, ethnicity, race and gender differences have little impact on their firm's ability to compete.  These factors are outweighed by the inherent difficulties of running a small business and the core abilities of the owner. 

For policy makers this data shows that small businesses run by underrepresented demographic groups are equally competitive once they survive the early startup stages.  Programs and policies that provide early and especially mid-stage stage support and education could improve small business ownership outcomes for these groups.

And for existing and potential small business owners, the data shows something else: that small business ownership provides a potential path to career success regardless of of formal educational attainment, gender or ethnic background.