Why SMEs Will Continue to Grow.

The current state of the economy has driven many to entrepreneurship. In the wake of massive lay-offs in the manufacturing sector, downsizing across all industries and renewed vows to create sustainability, SME’s are a powerful to create diverse, real, and sustainable communities. Although entrepreneurship is not all rewards, here are 5 reasons why SMEs will continue to grow.

1. Generation Y

Brought up to value their own individuality, talents and skills, research has shown that as this generation matures they are more entrepreneurial than those before them . They value the flexibility of entrepreneurship and bring passion and tech skills that allow them to work anywhere at anytime.  In addition, this generation has lived at home longer, and has been less likely to purchase major assets (from cars to homes) permitting them to bootstrap and live on less income than generations before. In pure numbers, they represent a major “wave” of demographics, and the impact of their generation is just beginning to be felt.

2. 3-D Printing and Changing Nature of Manufacturing

These changes quietly started over 50 years ago with the advent of the CNC machine, and within a decade you may have 3D printer in your home.  Imagine printing up toys that your children have designed, jewelry, chocolates, medical supplies, circuits, a new component for a broken piece of equipment or a piece of art for your home. The possibilities are endless. Greater still, is the impact that this will bring to the nature of manufacturing. No longer will massive warehouses dot the landscape, but a manufacturing facility could sit on 2500 square feet or less, producing made to order components, warehousing only enough to fill a small truck. The revolution of desktop manufacturing is near.

3. Increased Environmentalism & Sustainability Awareness

Environmentalism over the last hundred years has come and gone. Over the last two decades, the awareness and trend towards  “green” has not diminished, but rather increased in importance, diversified, and increased in scope. Corporations are adopting “sustainability” as a way of life, incorporating these concepts into their Strategy Maps and Balanced Score cards. Consumers are demanding that the companies they do business with be environmentally aware and sustainable.  It is far easier to develop a sustainable operation with a low carbon footprint as an SME owner.  Many small businesses start off as home based businesses. This makes for businesses with shorter (or no) commutes, lower utility consumption, less or smaller equipment, and growth in Internet communications technology (email and social media) permit SMEs to connect to the world from a smartphone.

Beyond this, there is growing dissatisfaction with the income that CEOs earn. The erosion of our middle class has created calls for egalitarian pay distribution which recognizes the value that all bring to our workplaces and society. Generally speaking, most founders are not making millions, but earn incomes far more modest than the CEO of Goldman Sachs or Citibank.

4. Increased Social Responsibility

SMEs are connected to their local communities. Many times entrepreneurs are involved community leaders and advocates, volunteers for local charities/non-profits, and catalysts for local change. SMEs are tied to their local communities because these communities support them and are where they work and live.  Large corporations stay connected to the public via social media, howeverthese cannot replace local, human ties.

Add to this, the enormous growth in social entrepreneurship over the last decade and the awareness that you can do good, while earning a living.  The social innovation landscape domain is currently dominated by the non-profit sector and SMEs, but as the continued demand for Corporate Social responsibility (CSR)grows, so will SMEs.

5. Worsening Financial State of Western Governments

From the USA and Canada to Europe, governments are increasingly facing fiscal pressures and inabilities to manage their own budgets. In Canada, government funding for social programs and welfare are decreasing. Cuts further erode the quality of life of individuals caught in cycles of poverty. Social justice advocates will always work to secure funding for those most in need, but many will fall between the cracks. Consider the role of microenterprise and SMEs can play in alleviating poverty.

Studies show that median household income of self-employed microenterprisers increases 78% in two years, and 91% over five years. In another guided program (Welfare to Work) participants’ business assets and their net worth grew by nearly 250% during a two year period, and home ownership increased from 14% to 22%. Finally, in Washington State a study by the Center for Economic Opportunity showed that over 50% of microenterprises moved toward self-sufficiency by completely reducing all forms of public assistance over 3 years. This reduced reliance on government programs has a significant impact on the burden the state carries to support low-income families. In this study participant unemployment decreased by 24% in the first year. Strong local economies can be created by fostering microenterprise in low income communities and encouraging the break from the cycle of poverty.  Given that governments have less and less money to give, the growth of microenterprise and SMEs is predicted to grow at increasing rates in the coming years.