Some 93 percent to 95 percent of all companies in the U.S. are privately held. That”™s a huge percentage. And it”™s been that way for most of our country”™s history. Why is it that now is the time for an explosion of growth, profit and stability for privately held entrepreneurial business?
The U.S. enjoys a rich history and culture of entrepreneurship. While many of the first settlers arrived here compliments of large, public trading companies (Dutch East India, Hudson Bay), many of the settlers quickly established themselves as shopkeepers, farmers, fishermen, merchants and anything else that would provide independence and opportunity.
Fast forward to the last third of the 20th century. The advent of microcomputing led to another revolution. The Industrial Age was coming to an end, the Information Age was dawning, as computers were about to become the great leveler for small business competition.
Microsoft’s BASIC program, cheap read-only and random access memory, and inexpensive circuitry that enabled keyboards and other tools, were a few of the world-changing innovations. The computer could finally be operated by everyday people, without computer programming staff to handle input and output. The size was reduced from a room to a desktop.
The culture of entrepreneurship joined forces with automation tools. Small businesses could finally access, assemble, analyze and distribute massive amounts of information with limited human capital. From 1980 to 2010, the proliferation of computer-based tools, targeted to the needs of small business owners, was astounding. Today, the pace of innovation and offerings continues to multiply geometrically.
In the 1990s, finance and accounting tools came down in price from 100s of thousands, to 10s of thousands, to a few hundred dollars. Between 2000 and 2010, marketing programs that used to rely on five-, six- and seven-figure advertising budgets were replaced by individuals learning to use available free- and nearly-free Internet-based tools.
Communication with the world now happens in seconds on a computer that costs a few hundred dollars. The door has been blown wide open for entrepreneurs to build sophisticated, profit-making businesses, going head to head with their large sister companies, the major corporations of the Industrial Age. The race is on to see who can build what fastest, who can provide the best innovations, and who can best meet marketplace needs in the most innovative and customer-oriented ways.
The grand experiment has only just begun. In the mid 1970s and early 1980s, the Information Age was just getting off the ground. Analysis shows that the most profitable and successful privately held companies are those that have been around at least 20 years. And many companies fall by the wayside as the leaders emerge as only one business out of four makes it through each 10-year cycle.
The first generation of computer enabled businesses started around 1980. The early adopters, companies that grew because of technology starting in the 1980s and 1990s, are now only 20 to 30 years old ”“ the point at which they show real traction, stability and profit. Even the industries that entered the Information Age already well established ”“ construction and related trades, manufacturing, medicine and financial services ”“ have only had the benefit of 1.5 cycles of 20-year development with computer enabling tools.
Tools that enable computers, such as GoToMeeting (2004 – 2009), LinkedIn (2002), Facebook (2004), Constant Contact (1995), none of them have been around 20 years. Wait until their leverage kicks in with the companies they enable also being around for 20 years, sometime around 2015 to 2029.
For the first time, we are seeing small, privately held companies, fully enabled with the tools they need, up and running with those tools for 20-plus years. Many examples of companies thriving, despite the economy, are here in our own backyard. And this is the tip of the iceberg.
Sure, some of those companies will be snapped up by large corporations. And the majority will be gone in under 10 years, out of ideas, mismanaged or just plain out of luck as a result out of business conditions. But if ever the time was right to chance it, to seek to become a strong and fierce competitor, to carve out a profit niche and fuel an ever expanding portfolio of products and services, it”™s here and now.
Looking for a good book? Try “Jacquard’s Web: How a Hand-Loom Led to the Birth of the Information Age” by James Essinger.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at (877) 238-3535. Do you have a question for Andi? Please send it to her, via email at AskAndi@StrategyLeaders.com or by mail to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514.Â
