Welcome to The SMB Cohort

Hey there,

My name is Brian Burch, and I’ve been a marketer my entire career.  I have a BS in Journalism/Advertising and a BGS in Psychology from The University of Kansas. 

Since 2009, I’ve spent much of my time focused on serving the highest growth portion of the SMB Market – companies born of The Great Recession which I named “The Accidental Entrepreneurs.” I’m ready to publish what I’ve learned, how you can capitalize and what I predict will happen next.  I’m also going to put a stake in the ground and predict what I see as the next high-growth SMB cohort – “The Artificial Entrepreneur.”

When you subscribe via email address, this free newsletter is delivered to your inbox every Tuesday at 6:30a ET — except for four weeks around Thanksgiving and Christmas.

This issue and the next three build the foundation for you to capitalize on what happens in Issue 005-Issue 048. The type of assets that I plan to provide with every weekly release — proprietary and secondary research, data workbooks and access to slide presentations — will also be free for the first four issues. This will allow you to sample what I plan to provide my paid subscribers. After the first four issues, access to the assets will be gated as will the newsletter archive (Issue 005-Issue 048).

Anyone is welcome, but this publication is written for four audiences: marketing executives selling to SMB; bankers, investors, PE and search fund operators, CEPAs and fractional CFOs who advise SMB; Boomerpreneurs planning their business exit; and the analysts, journalists, podcast hosts, and academics covering what I believe is the most dynamic large market in the U.S.

The first 100 paid subscribers get Anchor 100 Cohort Pro pricing for as long as you subscribe: $19/mo. or $190/yr. Upgrade to Paid —>

After a few issues establishing the foundation and history of the SMB market as I see it — informed by data that isn’t easy to find, is challenging to interpret or requires some assembly, I’ll begin to braid the two topics that can help you succeed in your SMB mission.

1.    Why The Accidental Entrepreneurs have been historically successful and how to be a relevant part of the journey for this critical SMB cohort as they prepare to successfully exit their companies.

2.    How AI is eliminating entry-level U.S. jobs and how young company founders are using AI to fight back.  Let’s “skate where the puck is going” and prepare for what I believe The Artificial Entrepreneurs will become.

But to earn your trust — and your time — I owe you the evidence that proves that I've read the SMB market correctly for a long time.

In the next three Tuesdays, you’ll get:

·      Issue 002 – my pre-Great Recession understanding of the SMB market and the research that deepened my understanding of the post-recession SMB market.

·      Issue 003 – how the Great Undercount by the U.S. Census data materially misses the true scale of SMB cohort formation and the release of my SMB Cohort Formation Index 2006-2014.

·      Issue 004 – the peer-reviewed academic paper that finally explains why recession-born cohorts persistently outperformed baseline.  Spoiler:  it’s not what everyone thinks.  In fact, it’s not what I thought in 2009.  It even shocked me.

But in order to go forward, we have to go back — but first, a shared understanding:

The SMB Cohort publishes independent analysis of the U.S. small and midsize business market, drawing on primary research, secondary and licensed data sources (including but not limited to U.S. Census Bureau, Bureau of Labor Statistics, the Kauffman Foundation, and other publicly available or licensed datasets), and the professional experience and opinions of its author, Brian D. Burch.

This content is provided for informational and educational purposes only. While each issue is professionally developed and grounded in significant research, the analysis, forecasts, and commentary it contains are often opinions, not facts, and can be wrong. Nothing published by The SMB Cohort constitutes investment, financial, legal, tax, or other professional advice, and nothing in this publication should be relied upon or acted on — for investment, business, or any other decision — without independent verification and validation from other qualified sources.

Brian D. Burch and The SMB Cohort accept no responsibility or liability for any decision made, or action taken, by any individual or organization in reliance on this publication's primary research, secondary research, or personal opinions.

The “Econoquake” Unleashed Them in Fall 2008

It was late September 2008 and I had recently been appointed as the marketing executive at HP responsible for the U.S. SMB market. And the warning lights were flashing.  Fannie Mae and Freddie Mac had been taken over by the U.S. government.  Lehman Brothers had filed for Chapter 11.  AIG had been rescued via an $85 billion Fed bailout.  The House had just rejected the TARP bill causing the Dow to drop a record 777 points in a single day. 

With my “blue ocean detector” activated, I started thinking differently about my new job. Since the epicenter of the Econoquake had been the financial sector, I was reasonably sure that many in finance would be downsized, bankrupted or merged out of a job.  I wondered if any of those people might start a company. These highly educated, financially astute businesspeople had been among the best compensated people in America.  Generous salaries.  Excellent benefits.  Significant upside in the form of famous -- or infamous -- bonus pools.  Entrepreneurship didn’t appear to have been their preferred path.  But things seemed likely to change.  So, my team and I commissioned some fast-track primary research and got ready.  In less than a month, we launched the first 0% financing program for SMB in Hewlett-Packard history and we received a clear message from our research:

White collar, tech-savvy professionals in finance, as well as other functions, were starting over as entrepreneurs.

We determined that over half of the professionals affected by job loss saw this as an “opportunity” and were building a plan focused on growth.  The minority saw entrepreneurship as a necessity or a stopgap until the economy recovered and they could resume their corporate careers.  Among other key insights, but especially important to me at HP, these new startups needed technology to launch their business, and they strongly preferred to buy at retail where my brand was dominant and preferentially positioned.

I Took a Deep Breath and Jumped

In January of 2009, I stood in front of executives at HP for the first time and bet my career on “The Accidental Entrepreneur” – white collar professionals, returning military service members, “the newly unretired” (Baby Boomers who returned to work to shore up their finances due to declining home values and stock portfolios) and stay-at-home spouses.  These people had chosen a different path – corporate career, military service, retirement or raising a family, but The Great Recession had other ideas.  I believed that millions of new companies were about to be founded.  Companies that would be focused on knowledge work, rather than selling at retail or creating something physical.  They were about to go to war in the challenging Great Recession environment, and I wanted to be there to arm them.

Fact of the matter is that my choice took real conviction.  Soon after accepting the SMB position, I, along with several others in the HP Commercial organization, had committed to a plan called Wild West.

The objective of that plan was to eliminate a 16-point U.S. SMB share gap to Dell (34.1% to 18%)¹ and take ownership of the #1 share position in the U.S. SMB market in less than 36 months!

Dell had achieved dominance in SMB over a 20-year period and we were committed to dethroning them in less than 3 years.

The original strategy had been developed with limited involvement from me and my team as I’d arrived late in the process.  It called for us to “outdo” Dell at the call center/web sales model they had invented. HP had invested in a large call center to do just that. But market conditions had changed dramatically from Jan 2008 to Jan 2009, so I believed it was reasonable to revisit our strategy. My research suggested that the growth in the SMB market would blindside other competitors who failed to grasp the potential of millions of newly-unemployed, highly educated white-collar workers – almost 3 million, as it turned out – who would consider turning to entrepreneurship for the first time.     

²      

Among the unpopular decisions I had to make and defend was my insistence that we merchandise our SMB PC solutions in retail stores as well as online.  HP had legitimate concerns about “crossing the streams” between business units:

1.     Commercial and Consumer Business Units were separate P&Ls.

2.    Consumer Business Unit had full control of what was merchandised in HP’s physical/online retailers.

3.    My budget as Americas SMB Marketing leader was tasked to drive outcomes in the Commercial business – calls to the call center, HP sell through at HP.com and resellers like CDW and Insight, VARs, etc. 

I was unpopular in my own organization for months as I secured the necessary agreement to merchandise in retail (the 0% SMB financing program helped win the day!) and began running campaigns targeting “the lean mean” growth companies founded by The Accidental Entrepreneurs.

As it turned out, I jumped for the right reasons.

I Didn’t Get Fired

The Accidental Entrepreneurs were real – and they did launch companies based on knowledge work.  Our research showed work and leisure were merging for this audience.   Mobility, productivity and entertainment were their priorities and most wanted a work and play laptop.  We stocked our retailers’ shelves and our website with a dedicated line of laptop computers with pre-installed software and support services designed for small companies with little or no IT support. And CD players and entertainment software.

By 2011, channel research proved that, as I predicted, The Accidental Entrepreneurs had fundamentally changed the buying behavior of SMB PCs. The Direct Inbound (phone and web) model perfected by Dell had lost more than a billion dollars in revenue while Retail gained about half a billion.

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And:

In the summer of 2011 -- two quarters ahead of the Wild West deadline -- HP passed Dell to take the #1 position in the U.S. SMB 1-999 employee market for the first time in company history.

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Did This Strike A Chord? What Do You Like? What’s Missing?

Have you ever conducted primary research on the SMB market with an interesting angle that you are willing to share?  Anything from the entire study, if you have the rights, to your observations and conclusions would be valuable to this audience.

Were you an Accidental Entrepreneur who started a company during The Great Recession?  Did you know/do you know any?  How did you/they fare?

I’d like to meet you/them and hear your/their story.  With your/their permission, I want to share as much real-world experience from those who lived it and I may use anecdotes or case studies in future issues.  Introduce us please.

I can deliver a better quality, reader-centric production if you are willing to provide me with real-world examples and logical, empirically-supported feedback.  Have some data that conflicts with my market assessment? Share it and I’ll respond and learn from you.  Disagree with one of my conclusions?  Tell me and we will have a civil discussion.  Maybe you will convince me, and I will share with the group.  Leave me feedback by replying to this newsletter or emailing [email protected].

History Doesn’t Repeat Itself, But It Rhymes.

Fifteen years later, another cohort is being born under conditions that rhyme with 2008 – but the disruption isn’t an Econoquake this time.  It’s Artificial Intelligence.  And the professionals AI is displacing are young, technical and armed with the very tool that’s disrupting their traditional path. Beginning in Issue 005, I’ll introduce you to The Artificial Entrepreneur — the AI-displaced cohort that’s building a business with AI.

In the next three Tuesdays, you’ll get:

·      Issue 002 – my pre-Great Recession understanding of the SMB market and the research that deepened my understanding of the post-recession SMB market.

·      Issue 003 – how the Great Undercount by the U.S. Census data materially misses the true scale of SMB cohort formation and the release of my SMB Cohort Formation Index 2006-2014.

·      Issue 004 – the peer-reviewed academic paper that finally explains why recession-born cohorts persistently outperformed baseline.  Spoiler:  it’s not what everyone thinks.  In fact, it’s not what I thought in 2009.  It even shocked me.

See you next Tuesday.

Know Someone Who Should Read This?

If today’s issue was useful, pay it forward.  If you know a marketing leader, PE investor, CEPA, fractional CFO, search fund operator, boomer business owner or SMB analyst or journalist who’d benefit from being early to this, click the button below to open your default email tool where a proposed subject line and email is already provided. Edit anything you want and enter one or several emails in the To line to send to others.  Every new reader helps me sharpen the work.

After the Foundation, the two parallel weekly threads run in alternating fashion, with crossovers.

The SMB Cohort is independent research and commentary. Analysis draws on primary research, public and licensed data sources, and the author’s professional experience and judgment; while rigorously developed, it can be wrong. Nothing published here is investment, financial, legal, tax, or other professional advice, and nothing should be acted on without independent verification from other sources. Brian D. Burch and The SMB Cohort accept no liability for outcomes resulting from reliance on this content.