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8/16/2010
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SMB Business Challenges: Survival of the Fittest

The economic downturn has taken its toll on companies of all sizes, but there is no question that the nation's smaller businesses have been the hardest hit. At last count, there were about 30 million companies in the U.S. - and 99.9 percent of them are small to midsize businesses (SMBs), according to the U.S. Small Business Administration.

The economic downturn has taken its toll on companies of all sizes, but there is no question that the nation's smaller businesses have been the hardest hit. At last count, there were about 30 million companies in the U.S. - and 99.9 percent of them are small to midsize businesses (SMBs), according to the U.S. Small Business Administration.These companies employ about 40 percent of all tech workers in the U.S., account for 44 percent of all private payrolls - and they fail at an alarming rate. Only about half of all SMBs are able to survive for five years. In 2008 alone, the most recent year for which data has been released by the government, about 627,000 new SMBs were created, while 595,600 SMBs closed their doors for good.

What makes SMB survival such a precarious proposition? According to the Small Business Administration's SBA.gov website, "Research indicates that poor planning is responsible for most business failures. Good organization - of financials, inventory, schedules and production - can help you avoid many pitfalls." Unfortunately, many - if not most - small businesses lack the resources or the foresight to invest in backend planning systems capable of efficiently managing these core business processes. That's beginning to change, however. Business software companies such as SAP, which have traditionally catered primarily to large enterprises, have begun to recognize the potential of the smaller-business sector. In response, they have created scaled-down versions of their enterprise resource planning (ERP) offerings that are specifically tailored to the SMB marketplace.

Can "right-sized" ERP offerings make a measurable difference, and truly put a dent in the fearsome failure rate of the country's imperiled SMBs? InformationWeek and SAP have created this series in hopes of finding out. Over the next several weeks, we will watch as one small business gets the technology makeover of a lifetime. With the help of business technology from SAP, and the on-site efforts of SAP implementation specialist Navigator Business Solutions, InformationWeek's SMB On Location Makeover Team will be on hand to document what happens when a little company with big dreams gets the opportunity to reinvent itself, and transform the way it does business from the inside out. Stay tuned!

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