Starting something from scratch. Creating something of value and selling it. Making your own rules, setting your own hours and working on your own terms is one of the most empowering and enriching things a person can achieve in life.
Small businesses historically have been the gateway to achieving this lifestyle and escaping the old 9-5.
Small businesses are also a fundamental part of our society. They embody the idea of community, culture, creativity – and are the backbone of our economy.
Unfortunately many small businesses have struggled over the years as large companies have monopolized markets and have made it difficult to compete. On top of that the coronavirus pandemic has only accelerated this, forcing over 100,000 small businesses to shut their doors for good.
Although it seems like it’s the end for small businesses, it’s not. Instead it’s the start of a new generation of small businesses.
Out With the Physical — In With the Digital
It used to be that in order to start a business you needed some form of a physical location.
Whether you had a studio, office space or retail storefront — you needed some place to interact with employees and customers.
Startup and overhead costs were high, often you needed a staff, and it required you to quit your job and commit full-time.
This created a very high barrier to entry to start a business, and for that reason many people opted for stable jobs and more risk averse paths — never taking a shot on the business they always wanted to start.
The internet, and technologies surrounding it, have made it possible for new small businesses to exist digitally rather than physically. This has made it significantly easier and cheaper to start a small business.
Additionally, the internet has democratized antiquated markets historically controlled by large companies, allowing small businesses to be built where they couldn’t before.
A Changing Dynamic
Large companies have historically held talent in a vacuum.
They hire the best people to do the work, while the money gets funneled upwards to the top of the company. An employee that produces a million dollars worth of business might only get paid $75,000 a year.
Doesn’t make sense right? Well actually it does. Although these employees are the ones that hold all the talent, they are nothing without the infrastructure of the company.
Without a company, the employees don’t have access to the tools/resources they need to be effective and the sales channels to access customers.
Large companies generally have many different departments including Design, Sales, Marketing, Accounting, Finance, Operations, HR, etc.
Online platforms and tools have allowed entrepreneurs to take these departments into their own hands. By piecing together the right suite of tools, digital small businesses can replicate the function of these departments without the infrastructure and manpower of a large company.
With advances in technology and a more globalized economy it has never been easier to design, source, manufacture and sell products online.
Below are examples of the digital tools that have made it easier.
These tools and services have democratized the product market and made it accessible to the average person, leading to a major influx of what are known as Microbrands — small businesses run by 1-5 people that sell a specific niche product online.
Microbrands don’t need to open up stores or rely on retailers to access customers.
They operate on the DTC (direct to consumer) model, using a website as their storefront and social media to build and engage their customer base.
They can access the global market instantly without a retail middle man.
Historically, there were several large product brands in any given industry. This meant the majority of consumers were spread out amongst only a few companies.
As more microbrands are started, this is going to change. Instead of a few companies owning the entire market, there will be tons of microbrands each owning a little piece.
Microbrands can connect with and build products for hyper-specific audiences — as opposed to big brands that build for the masses. This will allow microbrands to carve out small pieces of the market and together disrupt large incumbent brands.
Services and Creators
Two key small business categories that will also benefit from this digital revolution are Services and Creators.
First, it’s important that we distinguish the two:
Services require unique live interactions between buyers and sellers. Creators make content once that can be monetized again and again.
Sometimes there is overlap between the two.
For instance a marketing professional doing work for a business (Service), also might create and sell a marketing course on Udemy (Creator). Or a yoga instructor doing one-on-one coaching or live classes (Service), could also create instructional videos on YouTube (Creator).
The service industry can be broken up into two sub-categories including professional and non- professional services.
Professional services: Accountants, Financial advisors, Lawyers, Doctors, Consultants, Writers, Marketers , Software developers, SEO experts, Designers etc.
Historically, if you wanted to have a career in one of these fields you would have to join a company. You had no access to customers and lacked the resources/tools to run your own business.
This however has changed. New tools and resources allow individuals to run scaled down versions of the companies they used to work for.
Additionally, there was a lack of consumer trust. If you didn’t work at a large firm or company, customers didn’t have confidence in the quality of your work. However, that stigma is disappearing.
Digital presence and reputation is becoming more important than company size and pedigree. You don’t need an office space and tons of employees to be considered legitimate anymore — a professional website and good reviews is enough.
Customers are figuring out they can hire an individual, as opposed to an entire agency, and get the same results for a fraction of the price.
Non-professional services: Fitness trainers, Nutritionists, Therapists, Meditation leaders, Yoga instructors, Life/Professional coaches, etc.
Unlike professional services, most people in these fields already work independently.
What’s different about non-professional services is that by their nature they are very physically interactive.
Historically fields like yoga, fitness and therapy have required two parties to meet and interact in person.
However, this is becoming less true as the technology driving these interactions improves.
Currently, many of these services are taking place via Zoom and other video conferencing tools.
Some emerging technologies that are going to explode this market include the likes of AR (artificial reality) and VR (virtual reality). These technologies and others in the future, will make services we once thought were impossible to be done online, a reality.
Additionally, when you operate your business in a physical location, your TAM (Total Addressable Market) is restricted to a 20/30 mile radius of your location.
When businesses transform from physical to digital, this changes. Your TAM goes from local to global, immediately.
This dynamic shift in market size will allow individuals to reach clients all around the world, creating a massive opportunity for digital small businesses to thrive.
It used to be that entertainment and media came in a few different formats. You had radio, newspapers and television — all of which were completely controlled by a handful of companies. In order to produce and bring your content to market, you had to work for one of these companies.
Again just like the service industry, companies were able to hold all the talent because the talent was nothing without the company.
In media especially, creators didn’t have the tools/technology to produce their content and had no method of distribution.
The internet has completely changed this. Now creators have tools and resources to develop and produce content on their own and have access to a global audience.
Incumbent companies in media and entertainment are being seriously disrupted as online platforms and technology provide the talent with the resources they need to be successful on their own.
New technologies and online platforms will continue to make it easier to produce and distribute professional content on your own; also new forms of media and entertainment will emerge in the future that currently don’t exist.
This will create tons of opportunities for individuals to monetize their talent, who were not able to before.
As technology and the internet advance, certain markets will continue to become more evenly distributed.
Power will shift from large companies to online platforms and individuals, leading to a new generation of digital small businesses and independent workers.