Study: SMB sector upbeat about prospects for new year

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Small and midsize business owners active in e-commerce expect a better economy this year, according to a recently released survey.

The survey was conducted by Avalara, a provider of online sales tax assistance, and generated 110 responses. In addition to gauging how SMB owners view the economic outlook this year, the study also examined SMB use of-and attitudes toward-Web-based on-demand services.

Seventy-two percent of the respondents said they expect the economy to be better this year than last. Perhaps more important for b-to-b marketers, SMB owners indicated they were more confident about their own businesses' performance than they were about the national economy.

Eighty-four percent said their own businesses did better in 2005 than in 2004, and an equal percentage saw their business improving in 2006 compared with 2005. Only 12% said their business did not improve in 2005, and just 7% said they didn't expect their business to improve this year.

Confidence confirmed

The SMB sector's confidence in the economy is reflected in other national surveys of business and investor confidence levels. For example, Scott Rasmussen of polling firm Rasmussen Reports said in late December that the firm's latest investor confidence rating, 145.9, was the highest in 17 months and only five points off the index's highest rating ever.

Avalara also polled SMB owners about their appetite for e-commerce. About 83% said their business' e-commerce operations did better in 2005 than in 2004, while 81% saw their e-commerce improving this year.

B-to-b marketers have stepped up their efforts to reach the growing SMB sector. Total nonpayroll spending by small businesses in the U.S. was expected to jump 5.4% in 2005 to $4.7 billion, according to a forecast released last March by Visa USA. That report found that spending among small businesses, defined as those with less than $25 million in annual sales, accounts for one-third of all expenditures by businesses in the U.S.

Notriously hard to reach

The challenge for b-to-b marketers is getting through to a market that's notoriously hard to reach. "They're mammoth to walk around, and as large companies develop down-market strategies, that's what they find most daunting," said Rick Segal, CEO of ad agency HSR Business to Business, whose clients include Kodak Professional and foodservice equipment maker Hobart.

Segal added that advances in data and list management have made it much easier to target SMB owners and operators. The growing reach of the Internet is also helping in the process, he said.

"Most of the productivity online is coming from SMB owners using information technology through which they're gaining utilities that previously would have taken generations to capitalize on," Segal said.

Segal is also seeing an increased use of broadcast television to reach SMB owners. "You have business brands like Staples and Home Depot leveraging broadcast TV because they're in it for both scale and character, in that it's hard to distinguish between consumers and business people."

Al Paul Lefton Jr., president-CEO of ad agency Al Paul Lefton Co., offered a competing view, saying it has become more difficult to target the SMB sector. "Corporate America is going down-market, yes, but it's getting harder because of all the thinning trade journals," he said.

Lefton said he is increasingly turning to city business journals as well as local technology councils to help his clients, such as Leviton Manufacturing Co. and Tyco Electronics, get in front of small and midsize businesses.

Avalara Chairman-CEO Jared Vogt, who is a small-business owner himself, said the best way to reach the SMB market is by partnering with resellers serving their niche. "Piggybacking with a business or an organization that already has an existing relationship is the way to go," he said.

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