Tech and Small Biz: Attitudes, Uses, and a Geographic Divide?

Tech and Small Biz:Attitudes, Uses, and a Geographic Divide? Andrew Langer Phoenix Center Retreat Presentation October 19, 2007

Areas of Focus • NFIB and the Small Business Reality • Paperwork and Technology • General Small Biz Tech Attitudes • Looking More In Depth • Some General Policy Conclusions

Nation’s Largest Small Business Trade Association Great Breadth of Membership and Scope of Outreach Members Representing All Manner of Trades Average size is 5 Employees Who is NFIB? NFIB’s Constituents Provide 60% of New Jobs!

Figuring Out What Needs to Be Done Sheer Amount of Paperwork Time Spent Filling Out Paperwork Environmental Concerns are of Paramount importance to our members. But not one reg in particular…. Member Regulatory Concerns Our Members See Regulation as “Death by a Thousand Pinpricks”

An Appraisal of the Problem • The Current Regulatory Burden • Small Businesses Are Different Than Big Businesses • Regulations Aren’t Taken in Context

The Current Regulatory Burden • Scope of Regulations Impacting Small Business Is Vast • Cannot Even Assess Number of Criminal Statutes on the Books • Costs Calculated by SBA’s Office of Advocacy as nearly $8,000 per employee PER YEAR!

Regulatory Burden: Macro Costs • $1.14 Trillion Annual Regulatory Costs (CEI) • 8.2 Billion Hour Annual Paperwork Cost (OMB) • Which Translates Into Roughly $400 Billion Annually (NFIB Research Found.)

Small Businesses Are Different Than Big Businesses • Regulatory Costs Are Higher • Don’t Have the Personnel of larger firms • Don’t Have Access to State-of-The-Art Equipment • Cannot Readily Hire Expertise

Electronic Assistance • E-Rulemaking (Regulations.Gov) • Business Gateway: Compliance One-Stop Eliminating Paperwork is of Maximum Import

Constraints For Small Entities: Time And Energy NFIB Research Foundation Paperwork Survey • Conducted In 2003 • Survey of Small Business Owners Generally

Findings • Owners Most Frequently Do Paperwork • Average Cost Per Hour is $48.72 • Most Use Both Computers and Paper for Recordkeeping and Filing • Computer Use is Growing, now at 92%

Problems With Paperwork • Unclear and Confusing Instructions • Volume Itself • Duplicative Requests • Maintenance of Records • Requests for Non-Existent or Inaccessible Information

Thus An Economic Problem • Already Spending Considerable Amounts of Time Doing Paperwork • Therefore An Opportunity Cost Situation Arises Which is where use of technology comes in…

Use of Computers to Reduce Burden:The NFIB 2004 Survey on Tech use • 82% Have Internet Capabilities; • About half use it to find out regulatory information; • 57% of regular users have a high speed internet connection, mostly at home; • Smaller business more likely to use the internet to educate themselves; • Use it for specific searches and to sift through information;

Use of the Internet Generally • 57% Use The Internet for Business-Related Purposes They use it to: • E-mail Customers and Suppliers • Gather information about the field

Websites? • 2/3 of Businesses that use the internet have websites; • Income from Websites Generated Indirectly • Customers Are Driven From Web to More Traditional Sales (face to face or by phone) • Lifespan of Websites is approx. 2 years. • Negligible cost to the small business owner.

High Speed Net Access • Initially Found in Homes Rather than Businesses; • Most Common Access in Business is DSL; • High Speed Internet Access Is An Enabler (More Later); • Number Who View It As A Necessary Competitive Advantage Is Growing;

Other Tech Issues • Considerable Competition for Small Firms’ telecom biz; • 40% shopped for new local phone service in previous three years, 71% switched; • 78% Use a Cell Phone. 57% shopped for new service and 63% switched; Poor Service Biggest Issue for Cell Phones 70% of Owners Take Responsibility for Choosing Telecom Options

Home Internet Access – Special Issues • Convenience Factor in Ability to Do Business-Related Work Away From Office; • Problems Created When Sharing Computer Among Family Members; • Creates Its Own Special Set of Security Problems

What Divides Tech Today? • 2007 Study by NFIB Research Foundation • Focused on Tech, Banking, and Small Biz • Built Upon Previous Research That Didn’t Examine Small Businesses • Identified Some Areas of General Applicability

Earlier Studies • Petersen and Rajan (2002) – Tyranny of Distance remedied by tech access, • But only if players have internet access (especially broadband) • SBA’s Pociask Study (2005) – Broadband Investment can stimulate productivity and output • But Significant Differences in Broadband Use between Urban and Rural Areas

Differences in Age of Owners/Age of Businesses… • Younger Firms with Younger Owners More Likely to Use Internet for Banking Transactions • 63% of owners under 35 • 63% of firms younger than 6 years • 30% of owners older than 65 • 36% of firms older than 30 years

Other Divisions… • Home-Based Businesses More Likely to Use Technology for Banking • Bank’s websites are important drivers to their use • Higher Education Credentials Indicative of Tech use

Technology As An “Enabler” • 53% of Survey Respondents Found technology increasingly “helpful” when it comes to banking; • When broken out for internet users, percentage rose to 76% • Younger Owners and Firms More Frequently Report Technology as “helpful” • As do home-based businesses

A Geographic Divide? • Firms in Less-densely populated zip codes less frequently used the internet for banking; • Website Importance also increased with population density; BROADBAND ACCESS MORE LIKELY IN URBAN AREAS!!!!

Conclusions – Part 1 • Small Business Owners are like many other consumers in their tech use; • Cost and Service Conscious; • They View Technology as an “Enabler” • Use Is Growing, But Some Business Owners Will Never Be On Web or Tech Savvy

Conclusions: Part 2 • Age of Owners and Age of Business Important Factors • Population Density, and Therefore Geography, Also Important • Broadband Access important as well There is A Geographic Digital Divide

Thank You! Andrew M. Langer (202) 314-2032 Andrew.Langer@NFIB.org www.411smallbusinessfacts.com

Tech and Small Biz: Attitudes, Uses, and a Geographic Divide?