Some stunningly bad data points are starting to emerge in the small business market. To wit, roughly 40 percent of SMBs have seen their profits decline this year and 31 percent say profits are flat. Translation: Fewer than 30 percent of SMBs are growing their profits from 2010 to 2011. The stats come from the latest Office Depot Small Business Index. I’m an eternal optimist so I’m not ready to press the panic button. But I wonder if it’s time for MSPs to adjust their sales strategies and customer guidance.
Instead of selling your customers the “dream” of IT as a growth driver, perhaps you should simply accept the economy for what it is: SMBs need to keep their IT networks humming along. But they won’t be hiring full-time IT staffers to keep the lights on. Indeed, 79 percent of SMBs have no plans to hire or add staff. You can fill that void with your virtual CIO services.
In some ways I’m stating the obvious (don’t I always)? But the Office Depot survey really caught my attention. Among the other disappointing stats:
- only 42 percent of small business owners expect economic improvement over the next six months. This is down from an October 2010 high when 58 percent of small businesses expected economic improvement over the coming six months.
- 66 percent of the SMBs surveyed indicated that the economic slump has impacted their business, with 37 percent of respondents saying that business has been either “much worse” or “a little worse.”
- In a prepared statement, Neil Austrian, chairman and CEO for Office Depot said small businesses are also worried about inflation, interest rates and qualifying for a bank loan.
Let’s pause right there: I believe interest rates remain at all-time lows. Did I miss something? Has the economy gotten so bad that SMBs now overlook record-low interest rates?
Either way, the survey results depressed me just a bit. The survey was conducted July 13 through July 20, 2011. IT covered more 1,000 small and midsize businesses.
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Posted In: Finance | Sales | SMB Technology
Tags: Office Depot | Office Depot Small Business Index | Small Business Profit Forecast | Small Business Profits 2011 | SMB Profit Forecast | SMB Profits 2011
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Joe:
While the results of the survey are a bit sobering, I think there is some positive news in the message for the MSP. Clearly, as you point out, if the SMB is not hiring they may be looking for more IT support from their friendly local MSP. What might be a bigger opportunity is to focus the technology discussion on efficiency rather than growth. If an MSP can show their customers how to save costs by better leveraging technology, then their customer will create more profit from their flat revenues.
Mitchell Cipriano
http://www.demandbydesign.com
Mitch: Agreed. I’m reminded of ConnectWise CEO Arnie Bellini’s advice — manage all of your customers’ IT vendor contracts. Then, you can review the contracts (broadband, phone, mobile, etc.) to see if there are costs that you can help to squeeze out of the total bill…
Best
-jp
The big issue for most SMBs is QUALIFYING for credit and new loans. Interest rates are at all time lows. Banks appear to be ready to lend, with plenty of reserves on hand. The reality is different I believe. While everyone says the commercial banks are ready to lend, credit remains tight because lending standards are tight. The commercial loan officers, not the bank PR departments, are making the lending decisions. And only top credits need apply.
Therefore, yes, the market remains well primed for managed services. MSPs with solid balance sheets; full portfolios of managed offerings; and access to credit/affordable bank lines/leases – can really help the average SMB client afford the technology they need through monthly and managed service offerings.
Ted@3: My dad always told me “borrow money before you need it.” He was basically telling me to get a line of credit because they day you truly need it for an emergency you likely won’t qualify for it… Side note: Kept us posted as you make new moves at eFolder.
-jp
There are plenty of SMB’s out there with strong balance sheets holding on to cash just like the big guys are. I agree, a strong, flexible portfolio of managed service offerings ceates an opportunity for the MSP to at least get a foot in the door during these uncertain times. Afterall, the SMB’s running good businesses need CIO services and access to tools that will help them stay ahead of their competitors and become more efficient.