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How Broadband Reduces Small Business Expenses

May 4, 2012 - 0 Comments

By Howard Baldwin, Contributing Columnist

When it comes to proving the benefits of broadband deployment, we frequently focus on the macroeconomic issues – the big-picture impact of infrastructure and access to high-speed networking. But the Internet Innovation Alliance and the Small Business Entrepreneurship Council (SBEC) recently looked at broadband from a microeconomic standpoint.

In their report, Start-Up Savings: Boosting Entrepreneurship through Broadband Internet, jointly issued last month, they calculated how much small businesses can save by conducting their administrative activities online. The answer: a  substantial $16,550.52.

Note that they’re not talking about starting an e-commerce business. These activities are frequently, if not always, required as part of doing business. For instance, the ability to use mobile apps on a smartphone rather than purchasing PC applications saved approximately $3,500, a differential of about 10 percent.

But the ability to do videoconferencing in lieu of actual travel represented a savings of $1,000, or almost 95 percent. The same applies to telecommunications (using VoIP  instead of  traditional phone lines), office space (working at home rather than renting), printing services, and more.

The IIA/SBEC report breaks down savings with an extensive amount of quantitative detail, looking at how much business cards and envelopes cost to print (though online businesses certainly need fewer of those than they used to), how much it costs on average to incorporate a business, or have a logo designed.

Arguably, these costs vary in certain parts of the country, but the Internet widens the sphere of opportunity there as well by opening up options for finding services in low-overhead regions. Even so, the report only assumed use of the most basic services, and still the benefits blossomed.

Broadband Benefits for New Ventures

“When you look at broadband and the Internet,” says Ray Keating, Chief Economist for the Washington, D.C.-based SBEC, “I would argue that entrepreneurs and small businesses have benefited the most.” Not only is their potential market bigger thanks to the Internet, but based on these results, it’s easier to get a business started. “It’s risky to get a business off the ground, and $16,000 is a darn significant amount of money for an entrepreneur,” says Keating. “To save that much money creates new opportunities and opens new doors.”

Some of the savings come from entrepreneurs spending their own time rather than money, Keating notes. “Online tax services make it easier to do your taxes, but you’re doing them versus an accountant doing them. As an economist, I know that’s a real cost, but some entrepreneurs are willing to spend that time, and get an accountant later. It’s what they have to do to get the business off the ground.”

Broadband-Enabled Options

Keating acknowledges that sometimes entrepreneurs like to do business face-to-face, especially when they may be able to offer some reciprocity. But that doesn’t apply everywhere. One of the values of broadband is its ability to let someone start a business almost anywhere. If entrepreneurs are in a rural area, without some of the basic business services (or they’ve had problems with them in the past), broadband opens up  a world of new online options.

The implications of these start-up savings through broadband on a macroeconomic basis are potentially staggering. As the report notes, the Kauffman Foundation has attributed nearly all the net job creation in the United States between 1980 and 2005 to start-ups, with new firms creating approximately three million jobs each year. And that’s only in the United States. Multiply that broadband-enabled boost for entrepreneurs around the world, and you have a real potential uptick in the economy.

The same, of course, applies on a microeconomic basis. When it takes fewer financial resources to start a business, it’s more likely that entrepreneurs will make that leap to secure their future, and use broadband to do it. Says Keating, “With broadband deployment, there are going to be entrepreneurs on both sides finding ways to take advantage of it. You’ll not only have entrepreneurs buying services, but other entrepreneurs offering them as well.”

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