Small Business Slowly Adjusts to an Expensive and Complex New Economy
Kade Twist
Benton Foundation

Digital opportunity "The Internet has created the ability for businesses to streamline processes and make those processes more efficient, and that's driven competition and productivity further than we've seen in the past," said Melissa Shore, a research analyst at Jupiter Communications in New York. Efficiency and increased productivity are two variables that can improve any small business equation, regardless of whether or not a particular business' market focus is local or international. In the very least, the Internet provides small businesses with the unique ability to market goods and services, provide consumers with timely information and an additional means of guiding consumers to their doors. The Internet also allows small businesses to manage their finances and expenses online and place orders online through business-to-business portals where distributors compete for the best price -- basic tasks that improve profitability.

More small businesses are going online everyday, but a huge number have yet to make the transition. International Data Corp's "1999 Small Business Survey" revealed that only 52% of small businesses used the Internet and only 8-to-9 % of small businesses had broadband access. Furthermore, only 27 percent of those companies with Internet connections have their own Web sites -- even fewer are set up to offer direct e-commerce services. --It should be noted that these numbers were projected to more than double by the end of 2001. -- These statistics point to a wash of missed opportunities when considering the survey's most significant finding: online businesses showed faster growth than those without a presence on the Web.

An old Workhorse Faces New Challenges
It is no secret that the American economy depends upon the success of small businesses -- those that employ fewer than 500 -- for innovation, productivity, job growth and stability. According to the Small Business Administration (SBA), small businesses represent more than 99% of all employers, employ 51% of private-sector workers, employ 38% of workers in high-tech occupations, provide about 75% of new jobs, provide 51% of the private sector output and represent 96% of all exporters of goods.

Yet, in spite of their historical success and productivity, many small business are struggling to capitalize on the emerging opportunities of the New Economy because they lack the time, money, expertise and broadband access needed to develop their IT capacity in a timely and strategic manner. For instance, how does a small business owner that employs 5 or 10 people find the time to develop a technology plan and an Internet strategy? How can small businesses, which the SBA contends are primarily financed by loans and credit cards, commit to building their IT capacity if they are barely meeting the demands of payroll and basic operating costs? How can a small business manager plan and develop an Internet strategy if that manager lacks e-business expertise and knowledge of the related services available? How can a small business implement its Internet strategy without access to broadband connectivity?

Furthermore, many small businesses still question the relevancy of New Economy tools, and global market rhetoric because the vast majority of their business is conducted locally -- in the real world. Small businesses, especially those employing 20 or less, find themselves at a self-imposed philosophical crossroads of sorts, where two seemingly opposing business paradigms -- the brick and mortar store front, which is grounded in time and place vs. the virtual store front, which is grounded in speed and virtual space -- when in fact both paradigms must be embraced simultaneously. Therefore, small businesses not only face time, capital, knowledge/expertise and capacity barriers, they also face philosophical barriers.

Community Technology Centers offer small businesses access and training in rural and under-served communities
Small businesses in under-served rural and urban communities often face additional challenges in the New Economy for many of the same reasons they faced additional challenges in the old economy: limited public resources, limited access to capital, inadequate telecommunications and utilities services and an undereducated workforce with limited skills. The lack of access to relevant information, training and technical expertise hinders the adoption of new technologies for these small businesses. In many cases, getting an appropriate broadband connection is either an impossibility, or prohibitively expensive. But perhaps the greatest barrier is the lack of access to capital -- after all, under-served rural and urban communities are under-served because, first and foremost, there is a lack of existing capital and a lack of outside capital investment.

The availability of public access to broadband Internet access combined with training and technical assistance is critical for helping small businesses in under-served rural and urban communities get a handle on e-business tools and expedite the rate in which small businesses adapt themselves to New Economy. The establishment of Community Technology Centers (CTCs) is critical to the future success of these small businesses. Fortunately, many CTCs originally established through the Department of Education's CTC program during the Clinton Administration also serve as Small Business Technology Centers (SBTCs). SBTCs are capable of providing small businesses with access to advanced office, networking and e-business software, certified hardware and software training, employee recruitment and contracting/outsourcing opportunities. But unfortunately, the Department of Education's CTC program faces many uncertainties under the Bush Administration, one of which is elimination. Federal policies clearly need to be refocused to ensure that small businesses are provided with the tools, training and resources necessary to ensure their successful transition from the old economy to the New Economy. Establishing and sustaining high-quality CTCs is one of the most cost-effective means of achieving this end.

SBA provides help for small businesses attempting to succeed in the New Economy
One of the best sources of information for small business managers attempting to lead their business into the New Economy is the SBA. The SBA has a number of excellent resources to help small businesses become Internet enabled. Here, small business managers can find helpful tips for operating in the digital economy, such as: Web site development and hosting; marketing; a guide to application service providers that help businesses purchase off-the-shelf operating applications (everything from finance to human resource management) at a much lower cost, as well as have someone else manage and host the data; partnering strategies (finding similar organizations that can share resources and expenses can help you achieve your goals); and, strategies for automating and streamlining traditional organizational processes and daily routines through the Internet

Perhaps the best place to start at the SBA is the Small Business Classroom (, which is an online resource designed to inform and assist entrepreneurs in the development and implementation of successful Internet strategies. The Small Business Classroom provides a wide variety of online classes: How to Raise Capital for a Small Business; The Internet Economy; Basics of the Internet; Growing Your Business on the Web; Basics of E-Commerce; and, Building Your Business with Web Marketing.

The SBA also provides free Internet access and computer training to small businesses through 58 regional Small Business Development Centers ( The SBDC program is designed to provide counseling, training and technical assistance in all aspects of small business management -- including e-business management. SBDC services include, assisting small businesses with financial, marketing, production, organization, engineering and technical problems and feasibility studies. Special SBDC programs and economic development activities include international trade assistance, technical assistance, procurement assistance, venture capital formation and rural development.

In addition to SBDCs, the SBA and the Department of Education in May, 2000 established a strategic relationship to better coordinate federal resources in disadvantaged urban and rural areas so that existing CTCs could meet the needs of small businesses more effectively. This relationship between the SBA and Department of Education had been useful in helping CTCs adopt more practical and relevant services and resources for small businesses. However, the Bush administration has failed to build upon this relationship. Instead, much of the progress that this relationship had made during the final months of the Clinton administration has been impeded by the Bush administration's lack of leadership and commitment to community technology access issues. Small businesses would benefit greatly if the Bush administration refocused its policies and began supporting strategic relationships -- like the SBA and the Department of Education - that contribute to making CTCs more relevant, effective and readily available for small businesses.

A workhorse in E-business clothing America's economy depends upon small business. Yet, small businesses, especially those in under-served rural and urban communities, are struggling to adapt to the complex demands of the Internet-driven New Economy. The Internet provides small businesses with the opportunity to market goods and services and improve efficiency and productivity. However, many small businesses lack the time, money, expertise and broadband connectivity to take full advantage of New Economy opportunities. Fortunately, the SBA and CTCs provide the information, technical assistance, tools, training and resources that small businesses need to begin their transition. But unless small business owners and managers do their homework and actively seek out relevant and timely information and resources their transition will be a slow and difficult one.

Related Web Resources
Net Information and resources concerning Community Technology Centers

Small Business Administration Information and online classes
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