PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Business and the Digital Economy: Online Advertising Fuels Startups and Boosts Small Business Growth

By at 12 September, 2019, 11:01 am

by Raymond J. Keating-

Entrepreneurship matters … a lot.

If you’re concerned about economic, income, and job growth, then you better be in favor of policies that reduce the governmental burdens on starting up and operating businesses, as well as on financing those businesses. After all, entrepreneurs operating within a free enterprise system serve as fonts of the innovation, creativity, productivity growth, and competition that drive the economy and prosperity forward – with investors (including venture capitalists and angel investors) and banks providing the necessary financial capital for such entrepreneurship to flourish.

But there’s more. Innovation fuels even broader innovation, entrepreneurship and growth. In recent times, that’s most clearly been the case with the advancements in internet, digital, computer and broadband technologies. These breathtaking innovations have become vital tools of entrepreneurship.

A new study from the Small Business & Entrepreneurship Council – The Digital Boost to Startups and Small Business: Online Advertising Delivers BIG Benefits – focuses on the impact of online advertising on small businesses. This survey/study captures the importance of online advertising in saving time and dollars, and creating new opportunities.

Significant time and labor time saved

For example, based on survey responses, it is estimated that online advertising saves an average of 10.93 employee hours per week in small businesses and 9.28 hours each week on average for business owners.

That translates into a conservative estimate of saving U.S. small businesses $162.8 billion annually. In turn, entrepreneurs reported channeling these savings into the businesses, with, for example, 42 percent searching for or investing in new growth opportunities, 31percent investing in new equipment to improve competitiveness, 29 percent increasing wages or benefits for employees, and 22 percent increasing the size of their staff.

Small business growth and success dependent on online advertising

Indeed, it was striking to see that 73 percent of small businesses stated that without online advertising “it would impact my ability to effectively market my products and services and to grow my business.” This was especially the case for the smallest of businesses.

But what about startups? Yes, online advertising options have played a clear role in entrepreneurs starting up businesses. Consider the following findings regarding startup businesses (i.e., firms in business less than four years):

● “Nearly three-quarters (73 percent) of startups consider online advertising as a factor in starting their business, and in their confidence with regards to reaching potential customers once the business was launched.”

● “Small businesses less than four years old widely agree that online advertising provides an affordable means for launching and growing their businesses, with 9 in 10 startups acquiescing to this point of view.”

● “More than four in five (86 percent) startups depend on the targeting capabilities of online advertising for their continued survival. In fact, two in five (44 percent) strongly agree that the ability to target customers through online advertising is a feature that is important to the survival and growth of their businesses.”

● “Four in five (80 percent) startup companies consider the ability to reach customers via online advertising as a key factor in starting their business.”

As noted in this report, a variety of measures point to a recent decline in the level of entrepreneurship in the United States. That’s deeply troubling. Thankfully, though, the survey results in our report serve as real-world illustrations of how technological advancements – in this case, digital marketing and advertising – work favorably by reducing the barriers to entry for entrepreneurship. Indeed, reduced costs and improved efficiency when it comes to reaching customers are vital to startup activity and small business growth.

Again, innovation fuels even broader innovation, entrepreneurship and growth. And, as SBE Council president & CEO Karen Kerrigan noted in a media release about the report and its policy implications for encouraging such innovation:

“…it is important that regulators and lawmakers understand the benefits of the digital ecosystem to the growth of small business and entrepreneurship in general. In the end, lawmakers and regulators must understand how the new digital ecosystem works and who may be impacted by regulatory efforts. Given the significant benefits to entrepreneurs, the customers they serve, and the U.S. economy, it is vital that policies continue to encourage the innovation and investment that creates the tools and opportunities for entrepreneurs and small businesses to compete and thrive in the marketplace.”

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

 

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