When predicting what will happen to small businesses in 2023, analysts’ opinions vary wildly, to the point where small business owners might find it challenging to separate the signal from the noise. Often, “experts” will simply extrapolate trends from blue chip companies to smaller businesses, when the reality of the micropreneur is clearly altogether different.
The best way to find out how SMBs are really thinking in the climate is to ask them. Today’s small business owners are seeing, first hand, the effects of economic turmoil and are adapting their behavior accordingly. At the end of 2022, many organizations carried out surveys to better understand the SMB sector.
Here are three of the most illuminating insights.
Tech adoption correlates with company growth rate
One survey was conducted by Brightflow.AI, the financial intelligence platform, who polled 200 SMBs for their Turning Business Insight into Action report.
Interestingly, they split the responses between fast-growing and slow-growing firms, where the former are identified as experiencing YoY revenue growth of 10% or more. Through the various questions they’ve asked, it appears technology adoption is the major driver behind why some companies are more successful than others.
For instance, 51% of the fast-track firms are innovating to create new products and diversifying their offerings, while only 31% of slower companies are doing so. This gap is notable, but it logically follows that these innovative firms are more likely to expand at a more rapid pace. Likewise, 53% of fast-growers are investing in new technology, versus 39% of their slow-growth counterparts.
The caveat is whether it’s the fast-growing companies’ attitudes toward technology which gives them their advantage – or if the more successful companies simply have greater foundations to experiment, diversify and invest in technology.
One statistic which stood out in favor of the latter. Apparently 80% of fast-growing companies indicated they had the data they needed to work with for driving growth, compared to only 33% of slow-growers. This marked difference shows how important access to good data is in the modern SMB world.
Sentiment is better than you might think
Vcita, the all-in-one app for small businesses, surveyed 302 small businesses in mid-November 2022. As they carried out a similar survey at the end of 2021, there is a useful baseline to put their results into context.
The headline number here is that 81% of respondents believe their business can withstand an economic downturn, which shows remarkable optimism amongst SMBs. This is down from 91% at the end of 2021, but it still shows noteworthy resilience when taking into account the increase in interest rates and efforts to combat inflation in the US.
Small business entrepreneurs’ strategy and planning is consistent with this optimism, and 52% of participants said their main focus for the next year is on expanding their client base. This indicates a sales mindset compared to a consolidation you might expect in difficult economic conditions. If SMBs were worried about their future to an extreme degree, you might expect their focus to instead be on cost cutting or retaining their existing client base.
Similarly, over 50% of SMBs plan to increase their spending on digital tools in 2023, which shows they are still willing to make an investment in growth. This means that even in a potential recession, demand for digital business tools could stay buoyant. In the past, digital literacy could be a differentiator for SMBs looking to grow, whereas now it’s increasingly understood as important to even stay competitive.
Buyer’s remorse is rampant
Finally, Capterra, the business app discovery platform, surveyed hundreds of US SMBs about how they use technology in their operations.
The most insightful takeaway was the high prevalence of buyer’s remorse from SMBs regarding the technology they’ve purchased in the last 12-18 months. Some 61% of SMBs confessed they’d regretted adopting at least one tool they had acquired. With the pressure to digitize during the pandemic, it’s understandable some SMBs made decisions without having enough time or expertise to make the right choice.
Diving in deeper, the survey reveals that no one reason dominates why SMBs experienced remorse. The most common cause, at 39%, was lackluster support on the part of the service provider. This was followed by higher-than-expected costs, with 34% reporting this issue, and lack of evidence for a positive ROI at 33%. Several other reasons were likewise cited by over 30% of respondents, so clearly, there’s not one simple solution.
Tech adoption decisions can be costly for SMBs ,especially in an environment where market experts expect a downturn in demand. Avoiding making poor decisions could be what keeps an SMB afloat. Capterra advises SMBs to think about the total cost of adopting new technology rather than the often misleading headline figure and to make full use of free trials.
Summary
As 2023 begins, the challenges for small and medium businesses are receiving a lot of attention. However through these three surveys, it appears their relationship with technology is a strong indicator of how they will fare.
Here are the three highlights:
â—Ź 81% of SMBs believe they can survive an economic downturn according to vcita.
● 61% of SMBs experienced buyer’s remorse for a technology purchase according to Capterra.
â—Ź Â Â Â 53% of fast-growing companies are investing in technology opposed to only 33% of slow-growth companies.
