The UK’s smallest firms (those employing up to nine people) are responsible for 15 per cent of our corporate turnover and 9 million jobs*. Despite this huge influence, they are often overlooked and grouped together with all small and medium-sized businesses (SMEs). This is what we like to call the ‘SME fallacy’; the damaging assumption that all SMEs are the same, have the same challenges, and require the same support.
Our latest research shows that the smallest businesses need more tailored support so they can free up time to focus on growth. For example, 93 per cent of larger SMEs (50-250 employees) employ a finance or accounting specialist, but just 37 per cent of the smallest businesses have invested in one. They are often left juggling multiple roles. This gap in resources is costing the smallest businesses twice the productivity gains of larger SMEs – 12.5 per cent extra turnover annually compared to 6.39 per cent.
And the research shows slower adoption of technology among the smallest firms too: just 58 per cent use finance and accounting software, compared with 84 per cent in larger SMEs (50-250 employees). We need to help small businesses understand how tech can help free them up from non-core roles so they can focus on the most important areas of their business.
Time is money, but it pays to take yours
Running a small business takes up a lot of time. From managing stock levels to marketing, to hiring staff and admin, there are a lot of tasks to juggle. Small businesses spend less than half of the working week (46 per cent) on their core jobs. But there are tools that can help.
As Mark Woodhall, founder and managing director at Facility and Sports Club Development says, “When you work on your own, one of the biggest challenges you face is time management.” But taking the time to understand which technology is right for you and your business will pay dividends in the long run.
To help with selecting the right digital tools, small businesses should mirror the approach to hiring people. This means ensuring you are taking on new assets with the right fit, rather than rushing or making additions for the sake of filling gaps quickly. This can set up the business for long-term success and reduce the amount of turnover in technology providers (another costly process). Taking the time to research and understand what tech is right for you will pay off in the future.
This is a process Sanjay Aggarwal, chief spice officer at Spice Kitchen understands well, “The game changer for me has been investing in people and technology, without that I am a one man band running around like a headless chicken. My advice is to embrace tech and don’t underinvest in yourself or your business.”
Start small to grow big
Just 27 per cent of small business owners believe they get their tech and software choice right. To help avoid making a mistake you should start by taking small steps and prioritising the technology options which will have the most impact and be the easiest to implement. It is also important to keep in mind how the technology will fit within your company culture.
This can be easier said than done, as technology marketing material can often be littered with jargon making it hard to understand what its true benefits are. However, there are steps you can take to overcome this barrier. As Alexandra Borthwick, founder at Made Scotland advises, “When I first launched, it was a real process of working out which apps were going to work for me. For example, it was the big apps like Shopify, Canva and Xero which helped me feel in control of my business.”
It can also be worthwhile testing out ideas with free products. For example, social media apps are free, so you can experiment with engaging content without spending any capital.
Unlocking long term growth
The UK is sitting on so much untapped potential. Xero’s Digital Drag research with Cebr found an extra £77 billion could be added to the economy if all small businesses digitised at the same rate as the top 20 per cent of tech adopters.
For small businesses looking to take their first steps, we encourage you to reach out to people in your network to ask about their digital journeys, and what advice they could give you. For example, your accountant might be able to offer insight into how similar businesses have digitalised.
To find out more about the ‘beating the digital drag’ in your small businesses, take a look at Software & Solutions for Small Businesses | Xero.
* Xero’s ‘Beating the Digital Drag’ report
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