Small Businesses to 'Net' Greater Profits

Wednesday Mar 24th 2004 by SmallBusinessComputing.com Staff
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What does using the Internet have in common with small business profitability and near-term expansion? eBay wanted to know, so it commissioned a study to determine how Internet usage impacts small-business growth plans for 2004.

Does the Internet play a part in the way you operate your small business? According to a new study, the Net is playing an increasing role in driving profitability for smaller businesses. Results from a recent study of small businesses, prepared by ACNielsen and commissioned by eBay, finds that 51 percent of small businesses using the Internet believe that it has helped their businesses become more profitable.

Furthermore, 58 percent of small businesses report that using the Internet has helped their businesses grow or expand, and 15 percent feel that using the Internet is necessary for their business' very survival.

The study, based on feedback from approximately 400 small businesses with less than 100 employees, also indicates that many small businesses view the Internet as a powerful sales tool. Thirty-three percent of small business owners use the Internet to sell goods and services online, and 43 percent find sales prospects online.

Additionally, many small businesses that use the Internet say they make business purchases online. Fifty-four percent procure computers and office technology and 48 percent buy capital equipment and supplies on the Web. Thirty-three percent buy inventory for resale and more than 21 percent of small businesses purchase office furnishings online. Fifty-nine percent make online purchases of other business-related goods.

Jordan Glazier, eBay Business general manager, said clearly the Internet is helping fuel the success of many small businesses.

"The Internet helps small business owners acquire new customers, expand into new geographies, and purchase the goods and services needed to successfully run a business," Glazier said.

The survey also provides evidence that many small businesses have a positive outlook on the year ahead. Seventy-six percent of small businesses anticipate stronger revenues in 2004, and 74 percent of the respondents expect to grow their customer bases. Despite these positive forecasts, the survey reveals a moderate outlook on hiring, with only 27 percent of small businesses anticipating that they will add full-time employees this year.

"I was interested to see the notable contrast between the percentage of small businesses that expect revenue to increase in 2004 [76 percent] versus those that expect to hire full time employees [24 percent], Glazier said. "I would have expected that these would be more similar statistics."

The data further suggests that many small businesses are focused on improving their bottom line so they can increase their personal income. The survey supports that 31 percent of small business owners say increasing their personal income is the single biggest objective in running their businesses. Other personal goals include achieving an early retirement (9 percent), greater personal security (9 percent), independence, freedom and flexibility (8 percent), and making a living doing what they like (8 percent).

Results from the survey also show that small businesses are utilizing eBay as a resource for increasing their sales. Glazier estimates that there are over 430,000 small businesses and individuals making a living selling on eBay. Among the small businesses that tap into eBay as a purchasing channel, 70 percent say that eBay has helped their businesses become more profitable.

What's more, the study also provides evidence that small business owners who use eBay have a more optimistic outlook and are more likely to hire new employees. The results reveal that 70 percent of small businesses that use eBay have a positive company outlook in 2004, compared to 58 percent for non-eBay small businesses. In addition, 36 percent of small businesses that use eBay anticipate adding full-time employees, compared to 24 percent for non-eBay small businesses.

The telephone survey was conducted among 400 U.S. based business owners and decision makers with less than 100 full-time employees. There were two sampling pools used to prepare the study. The first was composed of a random sample of 200 small businesses, and the second was made up 200 small businesses had made a purchase on eBay over the past 12 months.

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