Obvious targets are the small businesses with the highest profits. Those businesses typically have the highest free cash flows, too. In other words, they have money to spend.

According to Sageworks Inc., here are the 20 industries with the highest EBITDA (earnings before interest, taxes, depreciation and amortization) in the past 12 months, for the period starting 2/16/2008 and ending 2/16/2009. (EBITDA is a proxy for cash flow from operations.)

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Small business with highest EBITDA, 2/16/2008 to 2/16/2009

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And which businesses have the least spending cushion after the long recession?  Here are the 20 industries with the lowest EBITDA:

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Small business with lowest EBITDA, 2/16/2008 to 2/16/2009

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Over at the Groundswell blog, Forrester has published some research suggesting that B2B decision-makers are extremely active participants in social sites.  They surveyed 1,200 IT (information technology) buyers and discovered:

91% of these technology decision-makers were Spectators — the highest number I’ve ever seen in a Social Technographics Profile. This means you can count on the fact that your buyers are reading blogs, watching user generated video, and participating in other social media. Note that 69% of them said they were using this technology for business purposes.

Only 5% are non-participants (Inactives).

55% of these decision-makers were in social networks (Joiners) — despite as mature businesspeople and not college students, you’d think they’d be participating a lot less.

43% are creating media (blogs, uploading videos or articles, etc.) and 58% are Critics, reacting to content they see in social formats. Again the numbers are very high compared to other groups we’ve surveyed, and again the level of participation for business purposes is also very high.

I bolded the last sentence in the above quote because I thought it was significant.

Based on my own experience running a small business blog for over 5 years, a small business audience is like an iceberg. You only see the tip of it on the surface.

Small business people are engaged in social sites more than they let on.  They tend to be silent readers. They read and digest, but don’t comment very frequently. They tend to email articles to colleagues, even more so than they comment publicly. They will also email you privately to comment, rather than leaving comments on the site itself.

Note: this research did not focus on small businesses that are IT buyers. It consisted of decision-makers in company sizes of 100 employees or higher. So, on the one hand, I think we have to be careful not to draw faulty conclusions, since the survey did not cover decision-makers in small businesses. 

On the other hand, the Forrester research results are on point with everything I know about a small business audience.

I’ll end this article with another point made in the Forrester article: “If you’re a B2B marketer and you’re not using social technologies in your marketing, it means you’re late.”

I wasn’t surprised by over 90% buying books and other low-cost media online.  I wasn’t even surprised that nearly 86% bank online and pay bills.

But I was surprised that almost 2% don’t buy anything online.  These days that is a rarity.

The survey was of small businesses ranging from solo business owners with no employees, all the way up to businesses with 20 or more employees.  Revenue size was under $100,000 to over $1 Million annually,

The survey was about business insurance, and was sponsored by TechInsurance Group, LLC, America’s leading online provider of insurance to IT businesses and a wide range of solo professionals — www.techinsurance.com and www.businessinsurancenow.com.

Download the survey results here (Word .doc).

The larger the size of a small business, the more likely it is to have a website. The smaller the business, the less likely it is to have a website.

According to a survey conducted in September 2008 by Barlow Research of 680 small businesses, drawn from the Dun & Bradstreet list, ranging in size from $100,000 to $10 Million in annual revenues, here is the overall breakdown:

49% of small businesses - currently have a Web site

13% of small businesses - do not have a Web site but plan to within the next 12 months

38% of small businesses - do not plan to have a Web site within the next 12 months

However, averages can mask the true picture.  If you break down the Barlow Research numbers by size of business, the data gets really interesting.

Percent of businesses that have a website, by annual sales size: 

45% - Revenues of $100,000 to $499,000
49% - Revenues of $500,000 to $999,000
69% - Revenues of $1.0 Million to $2.49 Million
67% - Revenues of $2.5 Million to $4.9 Million
73% - Revenues of $5.0 Million to $10 Million

And what about midsize businesses? For businesses with revenues of $10 Million to $500 Million in size, 84% have websites.

This data brings me to several insights I’d like to share:

(1) When marketing Web-related services to small business prospects, one size does not fit all. It’s tempting to lump all small businesses together, but as the data shows, you will want to make distinctions based on size of the business. There are huge differences between a business with $120,000 in annual revenues, and one with $5 Million in annual revenues — even though both are called “small businesses.” There are differences in how big their expense budgets are; the benefit to be derived from having an online presence; and so on.

(2) Consider the needs of the business. If we had industry data, I bet we would see patterns among industries, because some industries and lines of business have a bigger need for websites than others.

I know all of us proponents of the Web would like to think that EVERY small business NEEDS a website. However, as a practical matter, some need a website more than others.

For some small businesses — say a local plumber who serves a handful of established commercial accounts and works through referrals from builders — a website may not help him get more business or serve customers better. Over the next few years that will change as Yellow Pages books completely disappear and being online is like breathing air. But that won’t happen before you make that sales pitch next week.

Here’s another example:  a solo marketing professional with under $300,000 in annual revenues probably values a website as a business tool far more than a $9.0 Million manufacturing shop which may still be in the “why do we need a website?” mode.

(3) Segment, segment, segment! Define who your ideal small business customer is with great specificity as to size, industry, Web sophistication, online needs, and similar attributes. This will help you to:

• Better match your offerings with customer needs — If you are offering “starter” websites, you’d be better served to go after the smallest businesses. More advanced services, such as PPC campaign management, are better suited toward larger businesses.  You have probably figured this out already, but it pays to regularly cross-check to make sure your offerings are still aligned with your target customer — and that your sales team understands this.  It is easy to stray off track.
• Charge a price point that will fly with your target customer — Your customers’ budgets have a marked effect on what they are willing to spend, obviously. Offer small businesses choices, i.e., stratified pricing options and possibly a menu of ala carte offerings that add more functionality or service for a higher price.
• Offer differentiated products and services to provide a migration path to upsell as your target customer grows.  Small business customers do not stay stagnant.  Their needs will change over time.  Are you positioned with the right products to continue serving them as they grow and become more Web-savvy and prosperous? If you can’t provide the migration path directly, what about partnerships that will give your customers what they need even if you can’t?
• Tailor your marketing to hit the mark more closely — For instance, don’t do mass direct mailings to every small business within a 50-mile radius, using the same marketing message. It will be a waste. Try to break your targets down by size and, if possible, industries and business types that need a web presence and/or the kind of Web services you are offering. And tailor your messages accordingly.

Linda O’Connell, Managing Director, Small Business Banking, of Barlow Research adds: “As we remind our financial services clients, beware of small business averages.  With small businesses characterized as a large and diverse market based on many demographic elements, it is important to understand the niche that you are trying to attract.  Fortunately, research resources are available to help the small business marketer drill down into the data to design the product and direct the message to the appropriate segment.”

I am skeptical.

Before blindly accepting that as gospel truth, I suggest we examine this statistic more closely.

(1) No one really knows how many small businesses have websites –  This is not something for which you can find hard external evidence.  The U.S. Census doesn’t cover it.  There are no databases of information that will give you a good answer to this question.  So the best that can be done is to take a survey and extrapolate based on that.

(2) Sample size is key in a survey –  The survey referenced above was based on 261 SMBs.  Now, that’s a mere fraction of the 27 million small businesses in the United States.  While I think this survey is an interesting data point, it’s just one data point.  Don’t stake your life or reputation on it, because the sample size is pretty small. 

(3) There’s not enough data about the businesses to make that statistic meaningful – The survey doesn’t say what size of small businesses were surveyed.  It doesn’t break down the responses by age of the business.  Nor does it tell you what industry the respondents are in. 

Those are critical factors that drive a small business’s need for a website and the value the website can deliver. 

In other words, some small businesses need a website more than others.

Let’s take size of the small business, for instance, and examine that for a moment.

If you’re talking about single-person businesses — the consultant or freelancer who just got laid off 6 months ago and decided to start a business, or the small landscaper who plows snow in the winter and cuts lawns in the summer – then I find it a lot easier to buy that 44% figure. Business owners in that situation tend to have tiny marketing budgets anyway — zero to perhaps a few hundred dollars a month. 

Plus, a micobusiness that small only has the capacity to handle a limited number of clients or customers at a time.  Many times the owners don’t plan to or even want to grow.  Growth would require substantial expenses to hire employees, add trucks and equipment, get insurance, etc. — eating into their profits short term.  For a business of that size, it’s hard to justify a website in the midst of a long laundry list of pressing  needs, including their need to feed and clothe their family from their earnings.

On the other hand, if you’re talking about larger small businesses — say with at least a couple of employees or revenues over a half million – that 44% figure is nonsense. A much higher percentage have websites. 

There’s another reason I am skeptical.  That 44% figure, as a blanket statement, just doesn’t square with my own experience. It’s a rarity these days for me to meet an established business owner of a substantial-sized small-business at a networking event who doesn’t have a website.  In fact, it almost never happens any more.  Five years ago that happened – but not today. 

To make a statistic like this valuable, it needs to be broken down into smaller chunks … segmented.  I think that if another survey were done that asked the right questions, it would have value for us all:

• size of business (by annual revenues, and by number of employees)
• age of the business (startup vs established)
• industry the business is in (some industries are entirely local and prospective customers do not yet go on the Web in large numbers as their main way to find a vendor, for customer service information,  etc.) 

As it stands, trying to lump all 27 million small businesses into one homogenous whole with one statistic, doesn’t really tell you much of anything useful.  But break it down, and suddenly the information becomes meaningful to those selling Web design, marketing services, and other Web-related products and services to small businesses.

According to Instapundit, the business model wasn’t working:

YEAH, the PJM ad-network model isn’t working. I don’t have much to do with the PJM business side, but online ads just aren’t producing revenue like they were a few years ago, and the blog-network thing was apparently a tough sell.

The past five years have seen an influx of entrepreneurs and people looking to make big money or just side income from selling advertising on their blogs (among the 70 million blogs out there). For some independent bloggers this will mean the loss of a nice income stream as one notes:

Damn. I was finally starting to make an amount of money I wasn’t utterly embarrassed by, too.

For another, whose sole source of employment is his blog, the news is worse.  He says he will be out of a job come April.

The downturn in the economy has hit the advertising industry.  Mostly you hear about big media, with  newspapers laying off staff and even eliminating paper editions in favor of online-only. Or you hear about venture-backed startups and their trials and tribulations with ad revenue.

What doesn’t get talked about as much is the impact on independent bloggers — the entrepreneurs or wannabe entrepreneurs who are trying to create a revenue stream from their blogs. Sometimes it’s only a small side line — moonlighting — but still important to them.

Most bloggers underestimate the amount of work it takes to make money from a blog. I’ve found that like most business ventures, your revenue from a blog tends to be in lock step with the amount of time you put into it.  If you only spend a couple of hours a week at it, it’s tough to make more than a couple bucks.  But for those who work at it and build an audience, there is some money to be made.

But in times like these, it’s harder this year to make money than it was last year or the year before.

Google AdSense is one alternative that some will turn to, although I’ve never been able to make much from it myself. (There are plenty of entrepreneurs making money primarily from AdSense, but I’ve found that a site has to be optimized a certain way to maximize AdSense revenue and/or you have to have to a lot of sites.)  Some political blogs and free-wheeling blogs may be rejected by Google anyway, due to the language they use and the topics they cover. 

Perhaps a more viable option for some sites will be affiliate offers. 

Affiliate networks and vendors that sell through affiliates might find opportunity by targeting select blogs from defunct or discontinued ad networks.  Just saying ….

The idea is to provide information and strike up a conversation with small business owners, on a special conversational site that American Express OPEN has set up (separate and apart from its corporate website).  Among the benefits to American Express OPEN from the OPEN Forum initiative are: building brand equity, acquiring new customers, and building loyalty of existing customers.

Of course, I am one of the people involved with the OPEN Forum — yep, that’s me on that slide of the presentation. I was one of the original blogger-commentators in the blog portion of the site, from the very beginning. After a while, American Express OPEN gave approval and even encouraged me to involve the talented network of contributing Experts from Small Business Trends in writing at the site — widening the circle of conversation.

It’s a fun project and a testament to the open-mindedness and creativity of the American Express OPEN staff, their agency Digitas, and Federated Media. Collectively they all had the vision to see what the OPEN Forum could become. 

But the best part for me is that American Express OPEN is totally hands-off when it comes to the conversational element. They have had the guts to let the conversation happen … to let the conversation be directed by small business owners and entrepreneurs, and not try to control it.

For instance, they’ve never once said anything about the topics covered on the blog, even when a few of the topics have been controversial or unpopular in certain circles. There was the time I spoke out against reclassification of independent contractors as employees and ticked off some union activists. And there was the time I suggested that RFID technology was unfairly maligned and got the conspiracy-theorist posse on my tail. And a few of the other authors, such as Guy Kawasaki, have written some controversial things, too. But American Express OPEN does not try to squelch free speech.

If you’re looking to develop a vibrant social media community for small business owners, the OPEN Forum is an excellent case study.  It’s the kind of project to feel proud of.

It’s kind of a bland name.  Kinko’s was such a … distinctive …. name that you didn’t have trouble remembering it.  But I guess they’re banking on the FedEx brand being able to draw in small business owners, with Office being secondary. 

Up until now their website was just as bland, too…  sort of a plain-Jane corporate site.  Here it is:

Luckily they’re launching a new website and it’s got more excitement to it. One of the highlights:  it has a horizontal scroll of the main products and services that FedEx Office offers.  Now, a horizontal scroll of images is quite the website design trend at the moment.  But this one is different — it  actually scrolls in a horizontal circle, like a circular carousel.  Neat.  

I bring this up to point out how they’re launching their new website.  To make sure people don’t miss the launch and to get as much juice out of it as possible, they’ve sent out direct email inviting to take a sneak peek. 

Also, on the current home page they have a little section inviting you to look at the new website design.  They don’t just take you over to the new page, but to a special landing page that highlights  features of the new site and lets test drive a few of them with an Ajaxy type of interface.

This way you get more mileage out of a website re-launch.  Create anticipation for something new and better coming.  Might be a handy technique the next time you launch a new website design.

When I arrived at my door, I examined the key more closely so that I could see which end to insert in the door lock.  It was then I noticed something different.

It turns out, it was a key branded with the logo of one of the sponsors of the Affiliate Summit event, which is being held in the Rio’s convention center.  But I’ve actually seen that before.  So while I was impressed with the sponsor’s marketing savvy, I wasn’t exactly surprised.

No, what REALLY surprised me was that the sponsor’s Twitter address was also printed on the key.  I was so taken with this, that I actually snapped a photograph:

In the photograph, you see both the front side of the room key, and the back side. (I received 2 keycards, so I was able to show front and back in one photo.)  At the bottom you see where it says “Follow us on Twitter.com/ShareASale.”

Now any of you wondering what all the hubbub is about with Twitter, need to recognize this for the watershed moment it is.

Here you have a sponsor  — ShareASale — paying considerable money, I’m sure, for the branding rights to the hotel room key.  A room key is something that attendees will look at and use dozens of times over the course of a 3- or 4- day stay.  So ShareaSale should get lots of visibility from it.

But what’s most interesting to me is how wisely they’ve used the space on the key. There’s room to print stuff on it, such as the vendor’s logo, Web address and booth number at the show.  Of course, ShareASale took advantage of that opportunity and printed all of those on the key.

But they also printed their Twitter address (@shareasale) on the card, recognizing perhaps that building a community on Twitter is not only a way to build buzz at the event, but a way to extend interest following the event.  Get people who are using Twitter to follow you and you now have a way to communicate with them ongoing.

I’d go so far as to say that Twitter is on its way to becoming the latest type of permission marketing.  Just like with an email list, a person on Twitter must first voluntarily sign up (follow) and agree to receive communications from you.  Just like with email, where a person can withdraw permission by unsubscribing, so the person on Twitter can choose to “unfollow” at any time.

Like with email, Twitter can be updated quickly.  In fact, Twitter can be updated more quickly than just about any vehicle out there — blog, podcast or email message included.  So it doesn’t take a lot of time to execute.

I have 4 take-aways from this for vendors that exhibit at or sponsor events:

(1) Get on Twitter — like yesterday — if you are not already on it. Don’t underestimate the value of Twitter.  It’s where many of the online conversations are taking place today. The fast uptake is unprecedented.  I’ve seen nothing adopted so quickly!

(2) Make sure you have a Twitter strategy for any events you sponsor or exhibit at.  You can widen visibility and extend your visibility past the event by getting people to sign up for your Twitter feed.  That means you’ll need to publicize your Twitter address on event collateral and swag.

(3) If you advertise a Twitter address, then be sure to use your Twitter account to full advantage. For all its savvy in sponsoring with the room key, I am surprised that Sharesale is not using its Twitter account to full advantage.  For instance, I see the last tweet was from several weeks ago.  Sharesale could have been tweeting about upcoming preparations for Affiliate Summit and generating excitement and anticipation to visit them at their booth.  Even more importantly, ShareASale doesn’t even have a link to its website on its Twitter page (as I write this)!  Opportunities missed.

(4) Get used to using “hash tags” if you are exhibiting, sponsoring or attending events. Hash tags are a method whereby you place a designated code beginning with a hash tag (#) on Twitter messages.  Others searching to see who else is writing about the event can locate the other messages.  The hash tag for Affiliate Summit West is #ASW09.  Affiliate Summit is even importing Twitter messages that use that code onto its event home page.

* * * * *

Affiliate Summit is the big convention for the affiliate marketing industry, bringing together companies that sell online through affiliate websites, and the proprietors of those affiliate websites.

Affiliate marketing is a multi-billion dollar industry and attracts a lot of small businesses and Internet entrepreneurs who become affiliates, which is why I follow the industry.  Many vendors who sell through online affiliate channels rely heavily on the small businesses that become affiliates and promote the vendor’s products and services on their websites.

Note that small businesses have not lost as many jobs as larger companies. As the above chart shows, in December some 693,000 jobs were lost at all company sizes.  Roughly 60% of the job losses were at medium to large businesses (the green line) as compared with job losses in small businesses (the blue line).

This is why I think small businesses have a good shot at getting ahead during this slow economic period compared with their larger brethren (assuming they have the free cash flows to get through it). 

The big companies are reeling from job losses and expense reductions.  Positions are being cut and corporate employees are distracted and fearful they will be next.  Employees will be afraid to step out of line and takes risks on anything unproven or new in that kind of environment.

The money is no longer as free flowing in larger businesses for skunk-works projects and new innovation.  If something doesn’t hold the promise of near term ROI … managers certainly aren’t going to devote their already reduced budgets to it.  A perfect example of this is Google, which in the past was known for its employees having time to work on pet projects –well, not so much anymore.

For purposes of the report ADP defines small businesses as having fewer than 50 employees.  ADP’s data is based on about 400,000 businesses (of all sizes) covering 24 million employees.  It’s not full data on the entire workforce, but it is a significant sampling and therefore I put stock in the numbers.