Entrepreneurs by nature want to know what they can do to guarantee the success of their fledgling business. While there are no silver bullets, some practical things (you know, for Practically Friday) can be done to increase a new enterprise’s odds of success and growth, at least online.
Alicia Robb and E.J. Reedy highlight a few of these in their paper, "Casting a Wide Net: Online Activities of Small and New Businesses in the United States" using data from the Kauffman Firm Survey. (If you don’t have time to read the full report, there’s a handy factsheet available with the key findings.)
It should come as no surprise that businesses in this age of at-your-fingertips information need a website, especially if they want to grow and thrive. At the most basic level, they need to be findable. In terms of a measure of future success, having a website made the most difference of all the online tools examined. Robb and Reedy showed that young firms with a website usually started start bigger and grew faster than firms without one. These firms also had a larger survival rate and larger financial assets and revenue. Companies should ideally also have email, and, if engaged in sales, a way for consumers to purchase their goods online, though these tools had much less of an effect on growth and overall success.
Speaking from personal experience, I once looked for language schools in my neighborhood and found a reference to only one. When I went to its listed website, the site was no longer active, so I assumed the school had gone out of business. A friend referred me to what I thought was another language school in the area; he didn’t know the name, but knew where it was. When I went to check it out, I was very surprised to find it was the same school; it had just let its website lapse for some reason. How many others assumed the school was no longer there based on its lack of a website? This assumption is a very dangerous for any company trying to grow. (I’ve encouraged the school’s owners to reinstate their website for this very reason – while they haven’t yet done that, at least the school now has a Facebook page, which gives it some online presence.)
Looking at other online tools for businesses, social media options are newer and as-of-yet less studied in this respect. One organization, the Center for Marketing Research at the University of Massachusetts Dartmouth, has been tracking the use of social media tools by companies in the Inc. 500 since 2007. In its fifth annual study from January 2012, 91 percent of the Inc. 500 companies currently use social media for brand marketing, increased exposure, and a means to have a dialogue with customers. Most use Facebook, Twitter, and LinkedIn. The new kids to the party, Google+ and Pinterest, were not a part of the study, while MySpace use has all but vanished for everyone except musicians (a group not in the Inc. 500). Blog use declined for the first time in 2012 as companies experiment with these still-newish and ever-changing tools to find what works best for them.
It remains to be seen how social media use affects the performance of startup companies. Even though they’re free, good use of these tools may be difficult for new companies with limited time and financial resources. Social media, as we all are well aware, can be a complete time-suck, often requiring a dedicated person to really do it right. The companies in the CMR study did feel that the tools were effective in terms of spreading awareness about their brand and interacting with customers, something future studies will hopefully examine in greater detail.
While our tech-savvy Growthology readers surely have websites for their businesses already, this research provides evidence for those startups and entrepreneurs you know who have been on the fence about or just slow in getting a website up and running. Technologically speaking, it’s the best thing they could do for the health of their new business.