Entrepreneurship, On Campus

What We Learned from 100 Small Businesses

A few months ago, we had the idea to connect small and medium sized businesses with students from the top MBA programs in the world and launched HourlyNerd. The basic premise was simple: MBAs need money, have significant business acumen from previous jobs and school, want real-world experience, and have plenty of spare time. Meanwhile, small businesses, we assumed, could benefit from short-term, highly skilled labor from MBAs.

So far we have helped companies find students to market to new customers, assess ideal capital structures, evaluate deal opportunities and vet potential suppliers. All of these tasks were competitively bid in a market with more than 375 MBAs, at no upfront cost or obligation to the business owners.

To test our original hypothesis, and to begin generating tasks for our site, we first met with more than 100 small companies from Colorado to Florida, from a cupcake store in Cincinnati to a private equity firm in New York. This is what we heard:

– Hiring a full time employee is a significant risk.  Nearly every business we met with is desperate to build its team, but almost an equal number are hesitant to take on the fixed cost and government-enforced burdens of a full-time employee. In many cases we’ve been able to help a business address critical needs (especially marketing) with a flexible hourly labor force.

– At some point every successful small business must formulate a transition plan, but how? For those without an obvious family member to take over, we’ll be guiding owners to a thoughtful and value-protecting sale. Most of the businesses we’ve spoken with had planned to accept the first or second offer that came in the door. Leveraging the work of former investment bankers and private equity investors, currently under-employed at business school, we are helping these owners to assess value and plan a competitive sale process. And we are going to be helping several businesses manage their rent renegotiations over the next year.

– Particularly among retailers, we have found many owners concerned about threats from big box and online. We study concepts like this every day at HBS and are helping business owners (florist, deli) upgrade their websites to offer a user experience more comparable to those available from national chains or web-based retailers. Competing with online is a difficult question for even the largest businesses (Circuit City and Borders come to mind), but having an effective web presence is certainly a first step.

– Everyone wants to get involved in social media, but nobody seems to know how.  While virtually all of these businesses have Twitter accounts and Facebook pages, few felt that they were using them to their full advantage, and all struggled with what to do next.  The owner of a large hardware store, for example, told us he had continuously posted to the store’s Twitter account but found it futile and eventually gave up.  He wanted to refocus on viral marketing, but did not know how.

– Just having a website isn’t enough.  It needs to drive traffic.  And that’s harder than it sounds.  Most of the businesses we met with have websites, but not one of them was satisfied.  While any company can put up a template-based website, it is extremely difficult to create one that ensures a positive user experience and can actually increase sales.  While the resources are out there, few businesses know where to start.

The challenges facing small businesses seem to be consistent across industry and geography.  Still, perhaps the biggest issue is that many owners do not even have the time to stop and consider what challenges and opportunities they actually have.  We have found that when businesses do take the time to step back and consider their competitive positioning and most pressing needs, they find real opportunities to improve their bottom lines.  We look forward to being an important part of that conversation.

March 25, 2013
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