Monday, December 21, 2009

2010 Trends for Entrepreneurs

With 2009 coming to a close, we look ahead to what we can expect and should plan for in 2010.  Here is my list of the top ten trends founders, CEOs, and entrepreneurs of start-up, emerging, and medium-sized businesses should consider as they prepare for the new year.

1.     The recession will not end, regardless what anyone says - There are just too many issues that still need resolution before this economy can rebound, like the write-down of ALL of the bad assets on the books of the financial institutions.  The fact that they are still not lending much to existing or new customers should be a sign that they know they still have a lot to lose before they can begin to gain again.  In addition, the new business models that are emerging in this recession are leaner and meaner than we have seen in a long time, meaning they aren't going to help unemployment any time soon.  The effects of this recession could last quite a while.

[Author's Note:I realize I will take some heat for this prediction, but please know that I am only bearish on a macro-economic level.  There are and will continue to be many businesses that grow and thrive through this time, and I applaud them all for it!  If more businesses were like them I would be much more optimistic about an economic recovery.]

2.     Bootstrapping will be king! - Usually you will hear me say that cash is king.  In 2010 the entrepreneurs that have learned to boot-strap will be king - because boot strapping is the best chance for cash generation.  Many of their competitors have gone out of business or are in some sort of a death spiral.  Those who made changes early and are continuing to adapt to the changing economic market are going to win.  I hear lots of businesses take the mentality of: "If we can make it through the recession will be poised to do well."  That attitude is just not going to cut it.  Survival cannot be the only goal - those that can figure out how to generate positive cash flow in the tough times are the ones that will win when things turn around.

3.     Solving lots of customers' needs will raise capital - If you are starting a business and your whole focus is on raising capital, you will not get any in 2010.  If, on the other hand, your focus is on getting and satisfying customers with a great product or service, then you have a much better chance to get the money you need (if you even need it).  Ben Peterson, a successful entrepreneur and angel investor, identified one of the major sources of this problem.  He said that the focus in business schools and entrepreneurial education is on teaching how to raise money, not how to grow a successful company that is actually worthy of investment capital.  Get to work, and the money will follow you if you can take care of lots of customers and your need for capital will really add value to your efforts to serve your target market.

4.     Business Lending requirements will increase - It got a lot tougher to borrow money in 2009, and it will continue to become more difficult in terms of requirements and complexity.  For example, a business just obtained a small $125,000 line of credit and the legal documents the bank sent to their customer were over 150-pages in length.  Even though the mean credit score in the US is on the decline, banks have raised their requirements on business owner credit scores and they are mandating more collateral (as a secondary source of repayment) than before, especially if it is real estate.

5.     The cloud will continue to gain a share of all things computer - We are seeing more and more companies abandon traditional software and convert their operations to the cloud.  This is a great trend for entrepreneurs who can accomplish just as much as big businesses for a lot less expensive cloud-driven solutions.  Here is just one example: 2 years ago almost every business used Outlook or some other computer-based email client for its employees.  Today we are seeing some companies, especially those with entrepreneurs under the age of 40, switch to web-based and SaaS applications.  Google Apps seems to be the most popular for now, but the point is clear - the practices of purchasing expensive software to load on each computer and servers to host all of the company's data are becoming antiquated and cumbersome.

6.     Social media overload will drive users to the best content sources and filters - Even status updates in LinkedIn are tough to keep up with anymore.  The flow of information through social media tools has grown so dramatically that most feel like they are on overload and like it is impossible to keep up.  While providers are trying to figure this out, we are all going to be driven to the sources of the best and most reliable content, especially if it allows us to filter it quickly and effectively.

7.     Health insurance will continue towards high deductibles and consumer-driven care - I have long been an advocate for high deductible health insurance plans with HSAs or other medical savings accounts.  Yet such plans represent such a stretch from traditional health insurance that adoption rates have been very low.  It seems like employers and employees alike are warming up to this idea and the popularity of these plans will continue to increase.

8.     Being big will become less advantageous to being small - Big will no longer necessarily be better.  There are many reasons for this, but here are the main two - small and medium-sized companies are often more flexible and more hungry to satisfy their customers and big-company economies of scale are becoming less relevant.  For example, with its use of remote, flexible, and contract workers, Jet Blue is able to do more for its customers than any of its larger rivals - and that is in a very capital-intensive business.  Service businesses may find even greater advantages as compared to their larger competitors.

9.     Focus on relationships will pay- Relationships have been and will always be the key to building a successful business - mainly because they help us establish trust.  I've included this on my trend list because it seems like to some the practice of building trust is a lost and fallen art.  Obtaining more followers on Twitter and increasing your pool of friends of FaceBook are only relevant if we build relationships in the process.  We will see relationships and trust-building come back to the forefront of business as filtering tools allow us to connect with those who matter most and with whom we want to foster and strengthen our relationships.

10.    Knowledge workers will take more contract and less full-time work - This recession is helping to accelerate our economy to more of a knowledge-based worker model.  These knowledge workers are finding more benefits in contract and part-time work.  Some appreciate the flexibility, while others feel their value-added to and sustainability in these roles are more secure and potentially more profitable.