No. 220

October 2002

SMALL BUSINESS

RESEARCH

SUMMARY

E-Biz.com: Strategies for Small Business Success

by Joanne H. Pratt, 2002. [61] pages.

Joanne H. Pratt Associates. Dallas, Texas 75219

under contract SBAHQ-00-C-0004

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

Technology, telecommunications, and the Internet

are changing the way businesses market and provide

products and services. The purpose of this study was

to examine the ways these forces create new opportunities for entrepreneurs and offer new means for

small businesses to compete effectively.

Overall Findings

The Internet stimulates business owners to rethink

their business strategy. The more innovative entrepreneurs—the early adopters—see the Internet as a

way to market niche products and reach distant customers in ways that were not available in the past.

Their pioneering innovations foretell a structural

change in industrial organization for both small and

large firms.

The smallest firms gain the most by reorganizing

as an e-business. For a small business, revenues

cover the costs of setting up and operating a website.

The power of the keyword search means that a business can target customers who need niche products

without the wasteful expense of mass mailings.

Instead, customers find them. Finally, small business

owners can live in isolated locations and reach customers worldwide.

Highlights

The Internet offers unparalleled new opportunities

for small businesses:

• 57 percent of small firms use the Internet.

• 61 percent of those have a website.

A website gives entrepreneurs access to markets 

at low cost:

• 67 percent gained new customers.

• 62 percent improved their competitive position.

• 56 percent increased total sales.

• 56 percent attracted new types of customers.

Websites are cost-effective tools for small niche

businesses: 65 percent of firms make a profit or

cover their website costs. The expense to set up and

maintain a small business website is minimal and

can be covered by revenues.

Small businesses that market through the Internet

sell primarily to consumers. Less than 10 percent of

small businesses’online commerce is businessto-business. 

The smallest firms (with fewer than 10 employees) benefit the most from being online: 35 percent

gain 10 to 99 percent of current sales directly or

indirectly from their websites.

Time favors e-business growth. Upcoming generations accept technology and telecommunications as a

given. Meanwhile, small business owners are seizing

the new opportunities the Internet offers:

• 35 percent sell through a website.

• 61 percent purchase goods and services.

• 80 percent gather information.

• 83 percent use e-mail.

Entrepreneurs who have chosen to be players are

excited about e-business as a new way of 

doing business.
Websites are a growing trend:

• 65 percent of businesses have been online for 

one year or less.

• 32 percent of firms not yet online expect to use 

the Internet within the next year.

Scope and Methodology

The data supporting this report are from two surveys

sponsored by the National Federation of Independent

Business (NFIB) and the Center for Women’s

Business Research (CWBR). Case histories reported

in current periodicals were used as well. The study

hypothesizes that e-business affords new opportunities for success for small firms and particularly for

niche businesses.

The report is organized in two sections. Section I

provides an overview of small e-businesses with key

points highlighted. Interested readers can find additional detail in Section II.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available on the Internet at www.sba.gov/advo/research.

Printed copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

Tel. (800) 553-6847

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2003-100131

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