Small Firms Find Home on 'Net

While larger businesses tend to make more frequent use of the Internet, smaller firms are more likely to have their own Web sites. This was one finding in a recent national study of the Internet usage by very small businesses, or those with fewer than 50 employees.

The limited past research has begun to consider the ways that small firms participate in e-commerce, but has not looked in depth at very small firms, says Tom Dandridge, director of the Center for Entrepreneurship at Grand Valley State University. Dandridge conducted the study with Nancy Levenburg, a professor in the Marketing Department in GVSU's Seidman School of Business. While some research has looked at small business--defined by the U.S. Small Business Administration as 500 or fewer employees--very little is known about truly small firms with 50 employees or fewer.

The median size of businesses in the study was 3.5 full-time equivalent employees.

Dandridge and Levenburg conducted a national study of such firms in August. They wanted to explore how small business owners currently use the Internet and the extent of use by types of business. Their study, sponsored by the Padgett Business Services Foundation, included a two-page questionnaire to Padgett clients who indicated they used the Internet. A total of 198 responses were returned from 12 cities across the country.

E-mail is Still the Most Popular Use

Nearly 84 percent of respondents said they used the Internet for e-mail, the largest category of use. Other uses included:

• 66.7% Find information about new sources of supply
• 53.5% General administrative uses
• 45.5% Find information about competitors
• 42.4% Find new markets or customers
• 35% Online advertising
• 23.4% Education and training
• 9.6% Participate in discussion groups

Intelleectual Services Most Frequent Users of InternetThe study also ranked frequency of use by the type of business in the study. Small businesses categorized as intellectual services reported using the Internet with the greatest frequency. Nearly 70 percent of such firms use the Internet at least once a day, compared with once a week or once a month. The other five small business categories, and the percent that use the Internet once a day are:

• Non-durable retail 58.8%
• Durable retail 51.7%
• Manufacturing and Construction 50%
• Transportation and Wholesale 50%
• Manual services 39.2%

Dandridge says he doesn't expect small firms to use the Internet any less in the future. With Web revenues estimated at $74 billion in 1998, and expected to reach $1.2 trillion by 2002, he says it's imperative for small business owners to consider how and when they invest in the Internet.

For all sizes and types of firms, it appears that the Internet is having an impact on how business is conducted, Dandridge points out. For micro-enterprizes, especially those that provide some type of intellectual service, it may well be a key to achieving a competitive advantage in an increasingly competitive and high-tech marketplace.