Small business marketing increases may be slow to arrive

Business expectations are improving for large well established firms. A glance at the I.P.O. market trends confirms this sentiment. For example, in 547914_business_timing2007, 272 companies went public. In 2008, 43 companies entered the IPO market and up until mid-​September in 2009, only 22 companies had entered the market. But a report on the New York Times Dealbook blog notes that up to 8 companies are expected to go public in the next week or two with close to 80 more firms hoping to enter the capital markets in the next few months. The companies that are going public are those with solid earnings records so this trend does not mark a return to the ‘irrational exuberance’ that characterized the IPO market in year 2000.

However, the positive feelings do not necessarily extend to small business owners and entrepreneurs according to the Kauffman Foundation. The most recent survey by this organization finds that:

  • 6 in 10 believe the economy is on the wrong track
  • Nearly 6 in 10 believe the economy is getting worse
  • Nearly 7 in 10 believe the recession will last another year or two

This generally gloomy sentiment is echoed by the number of new businesses that have started during the recession. According to Bureau of Labor Statistics figures, new business starts dropped 14% between the 3rd quarter of 2007 and the 3rd quarter of 2008. While new businesses account for a good deal of employment in the U.S. economy, this general slowdown points to another possible trend, reduced marketing expenditures.

It’s reasonable to expect that companies with successful I.P.O.’s will launch marketing campaigns as they use their new wealth to fund expansions but that’s only one piece of the puzzle. Until entrepreneurs feel more positive about starting new businesses and hiring, marketing expenses in this sector may stay subdued.

[Sources: Sorkin, Andrew. As Stocks Keep Rallying, I.P.O.’s Return, New York Times DealBook, 9.18.09; Kauffman Foundation Survey of Entrepreneurs, Fall 2009; Tuna, Cari, Sharp Drop in Start-​Ups Bodes Ill, Wall Street Journal, 9.28.09]
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.