Propelled by access to new technology, a changing workforce and easier opportunities to reach a larger audience, small business growth is expected to skyrocket in the coming years, new research finds.
According to a study from Intuit and Emergent Research, the number of small businesses are projected to increase to 42 million by 2026, up from this year's 30 million. The 3.3 percent annual growth rate over the next decade is significantly higher than the 2 percent average growth between 2004 and 2014, the most recent data available.
While the number of small businesses will grow over the next decade, their size is actually getting smaller. The research found that the average size of small businesses dropped by 20 percent between 2001 and 2014. Specifically, in 2001, the average small business started with 6.5 employees. In 2014, the number shrank to just four employees. [See Related Story: How to Start a Business: A Step-by-Step Guide]
"The next few years will see an acceleration in the number of small and micro businesses, thanks in large part to new technologies that reduce the costs and risks of operating a small business and open up access to customers around the world," Steve King, a partner at Emergent Research, said in a statement. "While running a business is always going to be tough work, economic and technological changes are making it easier and cheaper to start and operate a successful small business."
The study's authors highlight five key reasons that will not only fuel the growth of small businesses, but will allow them to compete with big businesses like never before.
- Top-notch technology: Small businesses now have the ability to build sophisticated business and technology infrastructures that previously were only available to large companies. Cloud computing and manufacturing and distributing capabilities are now available with a cost structure that allows small businesses to scale up and down and only pay for what they use.
- Deeper insight: Access to insightful data is giving small businesses the capability of gaining deeper customer and business insights. Access to machine learning has taken away much of the complexity of data analysis, which allows small businesses to make faster and better decisions.
- The on-demand workforce: By the year 2020, freelance workers are projected to represent 43 percent of the workforce. This gives small businesses access to the right people at the right time in a flexible way, without the responsibility of hiring traditional employees.
- Online marketplaces: Online outlets are giving small businesses the ability to not only sell more niche products and services, but also to extend their reach to millions of customers that they previously never had access to.
- Affordable advertising: Online advertising has made it cost-effective to connect with customers worldwide. For a fairly low cost, small businesses can deliver their targeted messages, whether it be a sponsored photo or in-stream video ad, to a whole new audience.
"This next decade will be the decade of the small business," said Karen Peacock, senior vice president of small business at Intuit. "Industry-shifting trends like lower-cost, scalable infrastructure to start and grow your business, the ability to build a team with amazing on-demand talent, and data that helps you fuel your business and delight your customers are game changers."