SAN FRANCISCO -- Thirty-eight percent of convenience-store owners and 31% of gas-station owners surveyed by business-for-sale online marketplace BizBuySell.com believe that "disruptive technology" companies represent a threat to the value of small businesses.
The new study surveyed more than 1,400 small-business owners and potential buyers to see how each would value a business in today's increasingly competitive market, specifically in regards to emerging competition from companies leveraging disruptive technology or direct-to-consumer business models.
The findings revealed that while most small-business owners believe there is still great value in what they provide, new competition--specifically disruptive technology platforms like Uber, Airbrb and even Amazon--is affecting small-business values.
Nearly 40% of small-business owners surveyed believe these new technologies are affecting the value of their business. New web-based software and mobile app offerings are able to aggregate supply of a product or service and bring it directly to the consumer.
Perhaps no industry has been affected by these new business models more than the retail space, as small-business shops must now compete with online giants like Amazon and delivery services like Google Shopping Express.
While the majority of retail business owners do not believe their value is affected by these new business models, 39% did indicate that online options are lowering their business value compared to just 10% who said they are raising value. As direct-to-consumer online shopping options make things easier for customers, some retail business owners said it's necessary to adapt to stay competitive and maintain the value of their small business.
Also, 78% of restaurant owners said delivery apps like GrubHub have no effect on their business value.
"It's hard to replace the experience of going to a restaurant," one owner said.
Industries like auto repair shops and dry-cleaning services also appear to be comfortable with their position in the market as just 26% of auto shop owners and 23% of drycleaner owners said new technologies are affecting their business value.
"While there will always be a place for small businesses, it's important that owners keep themselves up to date on their evolving competition," Bob House, group general manager of BizBuySell.com and BizQuest.com said. "As new technologies make the sales cycle easier than ever, it will be up to small-business owners to differentiate themselves, grow revenue and ultimately prove their value to potential buyers."
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Smartphones
Small-business owners and prospective buyers agreed on the benefit of having information about surrounding businesses available on the go through smartphones and tablets.
In fact, 50% of owners believe that smartphones, tablets and the overall availability of mobile information is raising their business value compared to just 10% who believe it is hurting values. The remaining 40% believe the mobile technology has no effect on their business value. Buyers held a similar stance as 51% said mobile technologies raise value while only 14% believe they could hurt value.
Forty-four percent of convenience-store owners and 23% of gas-station owners surveyed believe that mobile phones raise the value of a business; 41% and 69%, respectively, believe they have no effect; and 15% and 8%, respectively, believe they lower value.
"Easy access to information helps businesses reach more customers, even as it allows customers to shop around. In the end, the businesses that offer what the customers want will be successful," one small business owner said.
Younger business owners were more likely to realize the benefits of mobile technology; 74% of owners 18 to 29 believe the availability of mobile information raises small-business values compared to just 45% of owners 65 and older. Of course, no matter what their age, it's up to the small business owners to use the mobile technology to their advantage by listing helpful and current information online.
Online Reviews
With the rise of mobile technology comes the ability for customers to review small businesses anytime, anywhere. As a result, small-business owners are quickly realizing the effect online reviews have on business value. When asked what non-financial aspect of their business is most important to maintain a high value, 62% answered high customer satisfaction.
Nearly three out of four small-business owners believed that the tone of their online reviews will ultimately change the value of their business, some more significantly than others; 41% beleive online reviews could raise or lower their business value by between 5% and 10%. Another 35% went a step further, saying online reviews could change a business' value by between 10% and 20%.
Exactly 50%of convenience-store owners surveyed believe online reviews affect their business values.
Restaurant owners were extremely sensitive to online reviews as 88% agreed that they could help or hinder their restaurant value.
And many small-businesses might not be doing enough to encourage a better online reputation, BizBuySell said. Just 27% of surveyed owners said they encouraged customers to post reviews, 25% attempted to fix poor reviews and 24% promoted positive reviews though their website or social media. The low percentage on each option shows small-business owners could be doing a better job of encouraging and promoting positive reviews for their product or service.
One of the top reasons small-business owners should be more proactive in this regard is that their prospective buyers do value online reviews highly, the report said. A much higher overall percentage of buyers (89% compared to 75% of owners) believe online reviews affect the value of a business, meaning it's something they will consider when making an offer. Buyers are also more trusting of online reviews--72% believe online reviews are a good indication of products/services compared to 58% of the owners.
"Small-business buyers are often coming from a younger generation than sellers and may be more perceptive to how technology will affect the future of the business," House said. "Owners should be aware of how new innovations, business models and online reviews are affecting their value and be ready to address the issue during negotiations."
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