Tomorrow's Entrepreneur

Getting a handle on the state of small business at any point in time -- right now, say -- requires answers to three sets of questions. The first set relates to the companies that are already in operation. You'd like to understand what they do, where they are, who runs them, and so on -- all questions taken up in the first section of this issue. The second set pertains to start-ups, the cutting edge of small business, the companies that are in gestation. On that score you wonder just how many start-up entrepreneurs there are, what they're planning, and where they hope to get money. The start-up world is the subject of the second section.

The third set of questions has to do not so much with small business itself as with the circumstances in which small companies must operate. What are the demographic, technological, and economic trends? What are the biggest threats and opportunities entrepreneurs face in the marketplace? Not to put too fine a point on it, but what does the future hold?

In a way, that last area is the most important. Small companies can be excruciatingly vulnerable to turbulence in the marketplace -- just ask the proprietors of all those hardware stores that were blown away by the arrival of Home Depot. At the same time, entrepreneurs are usually first off the blocks in spotting the opportunities opened up by some sort of change, whether or not they see it as part of a trend. Twenty years ago not many people in the business world were familiar with the term outsourcing. As large companies began farming out more and more of the work they had once done themselves, however, they created huge new market niches. Tens of thousands of start-ups rushed to fill them.

Granted, prognostication of any sort is chancy -- "especially," noted the physicist Niels Bohr, "about the future." In the 1940s an IBM executive famously esti- mated the worldwide market for computers at no more than five. In the 1960s a variety of eminent economists pronounced the business cycle dead. Go far enough out on a limb, and it's a good bet that somebody will saw it off behind you. Still, there are ways to reduce the uncertainty of forecasts. For example, some of what the future holds is already in place. We can say with a fair degree of certainty how many employees will be retiring in the next several years, because we know how many people will be reaching retirement age. Then, too, barring an asteroid's striking the earth, there are some key trends that won't reverse themselves. The Internet isn't going away. The increase in international trade won't come to a sudden halt.

So what follows is our attempt to identify some of the most important trends and forces that will buffet and shape the small-business landscape during the next few years. Since we have no crystal ball here at Inc., we rely on three sets of indicators:

  • Statistics. In particular, we rely on those indicating what has happened in recent years and those we can use to extrapolate about the future. The number crunchers don't always know where we're headed, but often they can make a pretty good guess.
  • Expert opinion. As we've seen, professors and researchers study just about everything these days. The trick is to find the ones who know what they're talking about.
  • Entrepreneurial companies. Every new company is in effect a high-stakes bet on the future: somebody is investing a lot of time and money on the gamble that there will be a market for whatever he or she is selling. If you see a cluster of companies exploring some new business niche, it's reasonable to think that their founders know something the rest of us don't.

Even with all these data, of course, it's tough to outline the future -- too much remains unpredictable. How many forecasters a decade ago, say, foresaw the impact that the Internet would have? Still, no assessment of the state of small business would be complete without a glance ahead. The world of small companies is constantly changing. The job of the entrepreneur is to figure out what might be around the next bend in the road.

The 2001 State of Small Business issue

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