US Insights

10 predictions for small business

Bobbie Martin

Senior Consultant

Economy 02.03.2016 / 11:00

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Women to own half of them within 5 years, crowdfunding and video to become more prevalent

Our 2016 forecast includes the following "Top 10" categories we see strongly influencing small business owners' decisions and behaviors in the coming year.

#1 The political effect: The 2016 elections will influence small businesses owners, regardless of their affiliation, especially with regard to top issues - health care, taxes, and minimum wages. This year's imminent presidential and legislative elections cast uncertainty on the direction of these issues, each of which is intricately linked to the outcomes. Healthcare tops the list for many business owners. In fact, more than one-third of small businesses consider healthcare one of their most important business goals.

#2 Cybersecurity: Due to the ever-expanding digitized environment, cybersecurity matters more than ever. As more small businesses use cloud-based services and increase their support of online and mobile access for their customers, there will be a stronger emphasis on privacy protection and data security. Small businesses will also focus more attention on developing transparent customer communications which reflect their commitment to security policies and privacy rights. In the coming year, investments in security-related software are likely to rise as small businesses become more embedded in the digitized world and more mindful of the risks of not protecting sensitive data.

#3 Lending options: An increase in online lending and crowdfunding are providing small businesses with more options than ever to shop for rates and find new investors. Traditional lenders are pressed to streamline their processes to remain competitive with online lenders' heavier focus on automation and quick approvals. With the passage of Title III of the Jobs Act late in 2015, small businesses will now have the ability to raise capital through crowdfunding from non-accredited, small-time investors. The percentage of small businesses using crowdfunding doubled between 2014 and 2015 (from 6% to 12%), and we expect to see a rise in the number of entrepreneurs and start-ups using this type of funding.

Key Numbers

  • 67% increase in use of mobile for financial services over 2 years

#4 Payment technology: Mobile payments will advance more broadly in 2016, facilitated by the stronger growth in online shopping. Omni-commerce will be more common as the purchasing trend of "anywhere, any way" becomes more entrenched. Currently, 23% of small businesses use mobile for payments - and even more among higher revenue companies. Business credit cards remain the payment of choice for online and mobile, and we expect this pattern to continue in 2016. As digital wallets gain traction, more small business retailers will be equipped this year to accept not only EMV-chipped cards, but also Apple Pay, Samsung Pay, and Android Pay. Nonetheless, customers are taking their time adopting these POS-mobile payments. While more small businesses adopt mobile and online payments or applications, we will see demand build for payment solutions which encompass choices and flexibility.

#5 Mobile solutions: Mobile continues to be a dominating force. Small business use of mobile devices is widespread - 91% have a mobile device, and of this group, 77% have a smartphone. The upward trend for small businesses' use of mobile for financial services activities is compelling, with a 67% increase over a two-year period. Most notably, the evolution of mobile has generated an increasingly tech-savvy segment of small businesses who are integrating the technology into their day-to-day operations. While we expect to see more companies use mobile this year, we will also see more companies highlight mobile strategies which focus on customers' overall digital experiences.

#6 Social media: A growing percentage of small business owners are adding social media to their business plan. Nearly 1 in 6 businesses use social media as a marketing tool - mainly Facebook, LinkedIn or both. Most importantly, more business owners are seeing noticeable improvements in customer sales and engagement, which may account for the77% of small businesses who say they plan to increase their social media brand presence over the coming year.Social media is adding greater functionality, including buy buttons, video capabilities, paid advertising, and ways to share and search content. Going forward, small businesses will need to be creative in utilizing social media tools to build powerful, shareable content, especially through DIY video content marketing. With Facebook's growing video views, small businesses have validation to include video content as part of their social media strategy.

#7 Cloud-based services: In 2015, one-fourth of small businesses used cloud services, primarily for data backup and file storage. Higher revenue companies had the greatest use, with nearly 4 out of 10 utilizing the services. Cloud services are opening the door for small businesses to compete more effectively and to expand their customer base, improve productivity, and reduce capital spending. Despite the greater opportunities the cloud presents, small businesses must be aware of their increased exposure to security breaches, which, in turn, may boost the adoption of private cloud hosting. In the coming year, look for use of cloud-based services to fast-track among small businesses and for private and hybrid hosting to become more widely accepted.

#8 The generational wave effect: In the next year and beyond, the effect from retirement-ready baby boomers and maturing Millennials will create waves in the business life cycle. Baby boomers and older generations are entering a stage of monumental decisions related to future business ownership, such as whether to retain their current role, plan for succession, or sell the business. Currently, 11% of business owners are preparing for management succession and 9% plan to sell their company over the next year. At the same time, Millennials are in the early stages of the business life cycle and Gen Y members are looking for ways to continue growing their established businesses. As the generational wave effect becomes more pervasive, Millennials will lead the generation of business owners whose preferences lean toward everything digital, from mobile banking to cloud-based solutions to electronic payments.

#9 Woman-owned businesses: The gender gap for small business owners is slowly diminishing. The percentage of woman-owned businesses continues to increase, effectively shrinking the gap between the genders. In 2015, according to TNS' Small Business Study, 4 out of 10 small businesses had a woman at the helm - a 12% increase from two years earlier. Based on the average growth rate for this segment over the past five years, we expect woman-owned businesses to comprise half of all small businesses in the next 5 years. In addition, look for woman-owned businesses to also encompass a wider span of trades and business categories.

#10 Location-based marketing: While location-based marketing has been around for awhile, we expect this approach to pick up stronger interest among brick-and-mortar small businesses this year as social media and mobile platforms roll out better capabilities and new functions. For instance, with Facebook Bluetooth Beacons, businesses are able to send promotions and messages to potential customers who are within range of the business, assuming they have opted in and have mobile services which allow location access. Despite the greater interest, this select segment of small businesses will need to ensure that their digital marketing does not result in unintended clutter at the expense of a personal relationship.

 

 

Source: Kantar TNS

Editor's Notes

Journalists, to speak with the author or for more information about the TNS Small Business Forecast or the 2016 Small Business study, contact us. Follow us @Kantar and sign up for our alerts.

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