A group of about 50 small-business people gathered in Center City last week for a “think tank” session sponsored by Dell Computer. I was hired to moderate. The point of the session was to discuss issues facing the region’s small-business owners, particularly the need for financing, better technology and talent.
Prior to the session, Dell hired a company to survey more than 100 businesses in the area. The survey found that more than half of the Philadelphia business owners questioned planned on growing their businesses in 2013, yet fewer than one in four is looking to hire people. The survey results closely mirrored the sentiment of the attendees in the room last week. There’s optimism, but it’s not promising.
The Federal Reserve of Philadelphia’s Business Outlook, released in mid-January, isn’t very promising either. In it, the Fed reports a decline in business activity in the region for the prior month with decreases reported in overall activity, new orders and employment. Unemployment, by the way, continues to hover around eight percent (it’s 9.6 percent in Jersey).
Does this surprise you? Not me. My company has been stuck at 10 people since 2008. We’re not planning to hire this year. There are too many reasons not to.
For starters, Philadelphia’s economy is growing, but not very fast. Our Gross Domestic Product, as the rest of the nation’s, is under three percent (and will probably be registering less considering our national GDP contracted last quarter). This is compared to 9.1 percent in China and 6.9 percent in India.No matter how many incentives the government may offer, most small businesses in the Philadelphia region aren’t going to increase their payrolls unless there’s a return on investment. I would be more than happy to employ 20 people if I knew that I could make money from them. But the fact is, I don’t need 20 people. In fact, I have to hustle to make sure I’m finding enough work for the 10 I have.
The “think tank” revealed that there’s some fear among local businesses to bring on more people because of health-care reform, and there’s a reluctance to enter into any long-term commitments as employee costs rise. And some of these fears are justified. But the pending health-care reform requirements do not keep me from hiring; I have fewer than 50 employees, which means I’m completely excluded from the requirements of the law (I actually get a tax credit if I provide health-care insurance).
But it’s not just slow growth and rising employee costs that are keeping firms in Philadelphia from hiring. The biggest reason I’ve found is technology. Smart business owners are using technology to keep the costs of employment down. This is what people do in a slow economy.
There’s the rise in self-service. There are the self-checkout machines at the Acme and the kiosks where you can order a hoagie at Wawa. There are the devices on your table at Uno’s where you can place and pay for your order with zero human interaction. You can buy movie tickets at home on Fandango.com. Smart businesses are investing in inexpensive technologies to help customers get more work done on their own, like Zendesk (an online service and support system), Zopim (provides chat on your website), and Wikispaces (a free Wikipedia for customers to search for their problems and solutions).
Some people may complain that technology is taking jobs away, and they are 100 percent correct. But the businesses using self-service technology are 100 percent correct in doing so, because their purpose is not to provide jobs where jobs aren’t necessary, but to generate profits for owners and shareholders and hopefully grow and create more opportunities for others.
Technology has fueled the rise in outsourcing too. “Outsourcing is having a big impact on small businesses,” Steve Felice, Dell’s president and chief commercial officer told me. “And today there are many great technologies available for small businesses to manage their environment without adding people.”
I have a client in Cherry Hill that outsources quality control to a firm in Denver. I have another client in Conshohocken that outsources its entire phone system to a virtual provider. I do this too. I also make use of developers in Ukraine and a marketing professional in White Plains. My friend’s bookkeeper is located in Seattle. Businesses are outsourcing more and more tasks instead of hiring employees. And they can do this because technology has made it so easy for them.
There are great sites to find outsourced help like Elance (if you want to find someone to work on a project), Guru (if you want to find someone more technical), or even Craigslist (if you want to find someone to do work on a project who may be a homicidal maniac). These sites have millions of visitors. And, in the case of Elance, contractors can submit bids for your work, and you can put money up in “escrow” so you don’t even have to pay them until the work is satisfactorily done. They’re communities. They’re popular. And they have great people who don’t require health insurance.
Getting outsourced freelancers connected to your office has never been easier. You can setup inexpensive (or free) services like GoToMyPC or LogMeIn for remote work. You can conduct conference calls on FreeConferenceCall. You can save shared files in the cloud. You can collaborate on projects using services like Basecamp and Box. You can talk on Skype and share your desktop with Glance. Using all of these tools in the right way makes it like your outsourced person who lives in Seattle is no farther away than your own office.
In Philadelphia, the economy is slow. High unemployment is stubborn. And most business owners aren’t planning on hiring much this year. But, God bless these optimistic souls, most still plan to grow. It’s just that they plan to grow without adding more people. And they’ll do this with technology. Good news for them. Bad news for the unemployed.