Dr. Winslow Sargeant is the sixth Chief Counsel for Advocacy of the U.S. Small Business Administration’s Office of Advocacy, appointed by President Obama August 19, 2010. The Office of...
How Small Businesses Learn
United States Small Business Administration
Office of Advocacy
The Office of Advocacy of the U.S. Small Business Administration has long recognized the need for government agencies and others to be more efficient and effective conveyers of information to small businesses. Similarly, the need to more effectively gather and use information is often a high priority for small business owners and managers.
This project was designed to illuminate the processes by which small business owners and managers acquire information needed for making strategic decisions for their businesses and planning for the future. Specifically, the research focused on four areas: (1)from which sources did small businesses receive information, (2) why was the information needed, (3) how useful was the information they received, and (4) what was important to the small business owner or manager among the sources of information.
Scope and Methodology
Data was collected from a sample of 1,247 small business owners or managers. Computer-assisted telephone interviews (CATI) were conducted between Feb. 22 and March 30, 1994.
The sampling procedure yielded a size-industry mix that differs from the universe of small business in several respects: companies with no employees or with more than 100 employees were excluded, and firms were sampled from only five selected industries. These procedures allowed a slightly more equal spread across industry-size categories than a simple random sample would produce.
Data were obtained on company characteristics such as size, industry, revenue and number of years in business, as well as information-gathering and -using practices. The survey data are available on diskette. All data were subjected to descriptive analyses (univariate frequencies and cross-tabulations) and hypothesis testing (Chi Square) procedures.
- Informal business contacts such as customers, suppliers and competitors were the sources of information most frequently used by small businesses. Other important sources were newsletters and magazines published by trade or professional associations, and meetings of these groups. Direct mail advertising and newspapers and magazines were more important than television and radio.
- Unlike the findings of earlier studies, this survey found that family members were not considered particularly important as information sources - nearly two-thirds of the respondents reported rarely or never receiving information from family members.
- Variation among the use of sources was related to the out-of-pocket cost of obtaining the information and to the nature of the industry's products and services. While finance, insurance and real estate companies tended to be the heaviest users of government information, construction and retail firms had the strongest links to their suppliers. Manufacturing firms were the most heavily dependent on customers.
- Managing the business was the primary motivation for acquiring information. The types of information most frequently sought were related to technology, computers, management skills and purchasing decisions. Nearly three-fourths of respondents reported actively seeking information about regulations - such as employment and safety laws - that affected their business operations.
- Ease of understanding, timeliness, accuracy and relevance are all elements of useful information. Accountants and trade and professional associations are the providers of the most useful business information for small businesses.
- Governments, especially the federal government, are comparatively remote from daily business operations. Their information is rarely industry-specific or relevant to local circumstances; relatively few respondents deem governments to be sources of useful information. Government officials and government reports were among the least cited sources of business information.
- Small business owners and managers most frequently use - and respond best to - information provided by sources they already know and trust. The most important, prevalent and useful information sources were those who knew a lot about the "consumers" of the information, the business conditions they face and their immediate local context, and who could tailor information to meet specific needs. These information sources had the strongest incentives to be responsive to the needs of individual information consumers.
- Accountants, suppliers, customers, and trade and professional associations all have a business interest in strengthening their relationship with small businesses. The federal government must expand its work with these industries and take advantage of their existing routes of communication with small business owners and managers.
The complete report is available from:
National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4639 (TDD)
Order Number: PB95-100293
Cost: A06; A02 Microf.
*Last Modified 6-11-01