Trend: Small Businesses Pick Niches

Business specialization and niche markets will grow in importance as small businesses first identify and then scurry to serve narrower slices of traditional markets. Outsourcing, the Internet, and customer demand, will help shape niche markets and dramatically change the business landscape.

Outsourcing will fuel the drive to specialization. A new PR firm, for example, will be unlikely to start out as a full-service practice. Instead, specialization in a niche such as investor relations will be seen as the way to gain entry to lucrative markets.

The Internet's global reach will enable wider acquisition of customers. Small businesses will find taking their specialized strengths further a field to be a more viable growth strategy than broadening their offerings in a geographic market.

Customers will continue to ask for more as small businesses proliferate. When there is a Mexican restaurant every five miles, outstanding burritos and tacos won't be enough to assure success. Instead, the menu will offer "secret" recipes from a small mountain village where early Mexican food is prepared as it was hundreds of years ago. The center of the restaurant will be a plaza where the dishes are prepared over open fires using authentic cooking stones. Diners will stroll the plaza sampling the dishes of their choice.

New niches will grow out of existing specializations that are sliced and diced into ever finer segments. Few small businesses are the first entrants in their markets. Studies show that the vast majority of small businesses are not started with a new invention or unique idea. They are far more likely to put a different spin on an existing product or service.

Impact:

Specialization will increasingly be the name of the game in small business, and specialization begets more specialization. Service providers and vendors will need to be able to show how they'll deliver superior results for each niche market into which they are selling.

The effort to reach narrower and narrower targets will make channel partners more important than ever. Cross-referral relationships will become critical in many markets.

For those selling in the small business marketplace, recognizing the impact of greater specialization and narrower niches will be a make-or-break process. The fast changing small business market of tomorrow will require increasingly rapid responses to customer needs and wants.

For more on this trend, see:

• Corn, Politics and Competing Against Wal-Mart


• The Garden Center Experience


• Lessons from Spirit of America


• PowerBlog Review: re:invention




• Internet Increases Demand for Niche Stuff


• A Business Trend in the Making


• Small Businesses Using Pay-Per-Click Ads

Trend: Small Business Market Goes Global

The world is shrinking, and small businesses have noticed.

Taking advantage of instant communication, product delivery measured in days, and falling trade barriers, small businesses will become more global. The Internet and the proliferation of cheap, easy communications technology (cell phones, lower long distance rates, email, instant messaging, VOIP) are a big part of the enabling of small business in the global marketplace. Worldwide delivery services have contributed by lowering shipping time and costs.

Cross-border markets that were once the domain of only the largest corporations will be open to any size enterprise. National boundaries and oceans will no longer hem in the ambitions of small businesses.

The U.S. Small Business Administration reports that 97% of U.S. exporters qualify as small businesses. But the influence of globalization will be felt on more than sales. Suppliers to U.S. small businesses will increasingly be located in other countries. Small businesses are already outsourcing software development, preparation of tax returns, and the manufacture of goods. Look for all of these to increase and for new areas to open up.

Impact:

Expect a huge increase in translation services, import/export specialists, and other services to help smaller enterprises find partners and do business across borders. English will continue to be the lingua franca of business around the globe. But the ability to communicate in the languages of the markets into which you sell will be as sought-after competitive edge.

International outsourcing has become common in larger companies. But in tomorrow's world, U.S. small businesses will become important users of offshore outsourcing.

Capital markets will open up. Technology developed in one country increasingly will be funded by investors in other countries. Look for this to increase the investment of the U.S. and other first-world countries in developing nations. Also, look for a rise in the number of facilitators of investment and other transnational business activities.

For more on this trend, see:

• Information is King ...and Other Trends


• Global Trend Toward Freer Economies


• It's an eBay World


• Cotton Candy Out, Sushi In




• Global Confidence Remains Positive


• Snapshot of China's Small Business Marketplace


• PowerBlog Review: Antoine's Blog on Business and Technology

Trend: Graying of Small Business

Not too long ago when we thought of entrepreneurs an image of 20-somethings came to mind. Entrepreneurs we thought came from the ranks of the young. But in the future that won't be the case for many of the small businesses that form the backbone of the U.S. economy.

Small business is graying. And that should come as no surprise. That great bulge of population known as the Baby Boomers has changed everything it has touched in its generational march, and Boomers are getting pretty gray.

Fortified with corporate buyouts, early retirement, stock options, and severance packages, people who once would have been thought of as being in the twilight of their working lives will be carving out second or even third careers as small businesses owners.

The Boomers in their fifties, sixties, and seventies will be a different species from their parents. They'll be more likely to take on new challenges than to look for a place in the sun. For many, owning their own business will be a long sought dream, a chance to cap a lifetime of work with a more personal and individual accomplishment.

Impact:

Vendors will have to be ready to respond to older, savvier business owners, many of whom will have worked for companies very much like those trying to sell to them. These new small business owners will be more sophisticated and knowledgeable than earlier, younger first-time entrepreneurs.

Expect them to have well-honed negotiating skills and acumen out of proportion to the size of their businesses. Don't be surprised if they are better versed in procurement procedures and marketing tactics than the people selling to them.

This will be a new breed of entrepreneur. They won't be the young, high flyers of the 1990s dreaming of IPOs and constantly recurring triple-digit growth. Many will be going into business with an expectation of establishing moderate but steady revenue streams.

They will have established strong reputations. Many will be acknowledged experts in their fields, and they are likely to have contacts at high levels within some of the world's largest corporations.

In short, the graying of entrepreneurs will change the way organizations large and small do business with smaller enterprises. Small business is trending older. The way in which individuals and companies respond to that trend will play a large role in determining their success or failure in the small business marketplace.

For more, see:

• Boomers Retire Early


• Seasoned Executives Become Entrepreneurs


• It's Not a Small "Big Business"


• When Your Office Weighs 5 Pounds


• Optimizing Your Google Personality