Small Businesses seek more Business-to-Business and Government Sales

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On-lines sales during the holiday season are 15% higher than they were this time last year. Nevertheless, the majority of small, minority and women business owners say increasing business-to-business sales is their number one priority; rather than increasing on-line sales. CEOs of small businesses say growing B2B sales is also more important than is increasing sales to the government sector or spending more on marketing and advertising. These results are based on the 4th Quarter Gazelle Index, a new national survey of small, minority and women business owners. The survey found that 60.3% of minority CEOs and 53.8% of non-minority CEOs indicated that increasing B2B sales is their most important objective.

The percentages of CEOs who stated that increasing B2B sales is “very important” differed somewhat by race, ethnic and gender group. However, it was the most important objective for each group. For example, while 64.2% of black CEOs indicated it was very important, the same sentiment was expressed by 54.2% of whites, 57.3% of Hispanics/Latinos, and 54.7% women.  In contrast, not more than 26.7% of the business owners within any group stated that increasing on-lines sales was very important. When asked about the importance of government sales, there were distinct differences among the groups. Specifically, 64.2% of black CEOs and 57.3% of Hispanics/Latino CEOs stated that increasing government sales is very important; while only 20.8% of businesses owned by whites and 37.4% of those owned by women expressed the same sentiment. The Gazelle Index is a random survey of 631 CEOs of businesses with 10 to 100 employees. The survey was conducted during the month of November, and it has a 5% margin of error.

The desire among small business owners to increase B2B sales is attributable in part to how global competition has forced corporations to transform their supply-chain practices. Specifically, rather than using hundreds or sometimes even thousands of small suppliers, corporations now use fewer suppliers, and each must have bigger scale and capacity. The new approach to supply-chain management requires corporate suppliers to be capable of providing a greater variety of products, responding more quickly to changes in market demand, and operating efficiently within a just-in-time environment. Perhaps the automobile industry best illustrates this latest supply chain transformation. Within that industry, thousands of suppliers and auto dealerships have been eliminated in a move to consolidate operations, reduce costs and improve global competitiveness.

Historically, public sector contracting has been very important to black and Hispanic/Latino business owners. Starting in the late 1970s and early 80s, they were attracted increasingly to government contracting as a way to get around discriminatory barriers they sometimes encountered in the private market. Since that time, they have remained much more heavily dependent upon public sector revenue than have nonminority small business owners. However, just as global competition transformed supply-chain management practices in the corporate sector, the “Great Recession” has radically altered government purchasing practices. Faced with an increasing threat of default, state and local government agencies have implemented austerity programs and made drastic cuts in their procurement budgets. Like corporations, they have also resulted to cost-saving measures such as bundling contracts and soliciting design-build awards– both of which require small businesses to be much larger than before.

The current drive among small businesses to increase B2B and government sales is a reflection of new market forces. To respond prosperously small business owners must think and act more strategically in the future than they have in the past. One thing is certain; the new challenges cannot be met successfully without focusing on ways to achieve greater small business scale and capacity.

Last modified: December 22, 2011

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