SAN FRANCISCO--()--As we begin the New Year, the U.S. economy continues to exhibit resilience, despite the many challenges that threatened to derail the world economy and private company growth in 2012. With the elections behind us, economic growth seems likely to continue, despite political, regulatory and capital market volatility.
Over the last decade, the U.S. has seen unprecedented growth in the private sector as compared to large companies. The number of smaller companies grew 79% from 2000 to 2010. The number of larger companies decreased 2% for the same period.
In order to continue and expand job and economic growth in 2013, federal and state governments will need to establish tax policies intended to promote smaller company growth; capital will need to be accessible; and the political and regulatory structure will need to help new startups and expanding middle market companies.
Listed below are 5 predictions for the entrepreneurial growth economy, as it navigates challenges and opportunities in 2013.
1. Capital Availability
A confluence of trends will contribute to making financing more available to promising private companies:
- Small Business (SBA) lending will increase.
- Bank capital requirements will be loosened to push cash out of the banks.
- The role of alternative lenders (factoring, credit unions and micro-lenders) will grow.
- Interest rates will remain low through the 2014 elections.
- Crowd funding (for example, Kickstarter.com) will go from fad to accepted method of funding ventures and product development.
Innovation will accelerate, producing fast growing upstarts that overturn industry landscapes and creating new winners and losers:
- The "cloud" will enable private companies to achieve greater scale and reach, with fewer employees.
- Private companies will continue to go global at an earlier stage, by adopting technology not previously available to mid- sized companies.
- Explosion of real time, on-demand business video— especially on tablets
- On-line customer relationship management (CRM) and customer care will allow savvy companies to "re-personalize" their customers’ experience.
3. New Business Models
New, better ways for companies to create, deliver and capture value to its target segments will continue to proliferate:
- Nimbleness to adapt will be a key driver of success.
- Companies that keep a larger share of their costs variable will tend to be faster to adapt.
- Smart companies will be open to re-configuring their activities – replacing their full time sales force with contract resources and “virtual sales models.”
- “Think globally, Act globally” will become an even more important principle– to create new markets for your products.
- Social media will become a mainstream, pragmatic marketing strategy.
4. New Opportunities—and Threats
Staying ahead of the competition will require ever more relentless focus on what differentiates you and creates value for your target segments:
- Private companies will need to segment their market more precisely, by demographics and products.
- Unexpected competition from your suppliers looking to “dis-intermediate” you will intensify.
- Generational reversal (high unemployment among the young, lower for older workers) will be a growing trend.
- Demand for branded consumer goods by expanding middle class in developing-market countries will surge.
- Growing demand and shrinking supply of housing will increase homeowner’s household wealth and consumer confidence.
5. Low Energy Costs
A new world of American energy exploration and production is creating widespread opportunity:
- Continuing concern about global warming boosts renewable energy and other low-carbon technologies.
- Abundance of U.S. natural gas and significant cost advantage over oil will turn the U.S. into an exporter of oil resulting in continued low energy costs for industry.
Time will tell as to which predictions will come true for 2013, but being forewarned is being forearmed. Smart, nimble companies that can seize fast moving opportunities will prosper in 2013.
Michael Evans is the Managing Director of the Newport Board Group