SMB Growth Stumbles Over Technology

While there’s been talk of an economic slowdown ahead, and declining optimism among the business community, the latest stats on small businesses (SMBs) are quite positive. Better-than-expected job performance, as well as new evidence from the Small Business Administration (SBA) on SMBs’ contribution to the economy, are the bright spots in this week’s B2B Data Digest.

“Small businesses continue to be big contributors to the U.S. economy,” said SBA Acting Chief Counsel Major L. Clark in a statement announcing the report. “While their contribution has grown at a slower rate than that of large businesses, small businesses continue to be at the forefront of driving innovation, jobs and economic growth.”

However, as SMBs drive innovation for the U.S. market, other research released recently showed the headwinds that small firms are facing from global competition and larger rivals, particularly when it comes to embracing digitization.

“Small and medium businesses are punching above their weight when it comes to competing in the global market against large firms with big teams and big budgets,” said TradeGecko CEO Cameron Priest in another statement. “But as they grow, they are being stretched by operational issues and manual processes.”

Technology can “level the playing field” for small businesses to compete, Priest added, though another recent survey revealed that SMBs often struggle to use technology to its full advantage. Below, PYMNTS examines key data points from these reports, showcasing the strength and promise of the small business community, as well as the challenges that lie ahead.

In January, 63,000 jobs were added by small businesses, Moody’s Analytics and ADP said in their report. Most sectors reported job increases, and according to the historic dips in job growth typically seen during the month of January, the data revealed that 2019 was not as severe as it has been in years past. Companies with 300 or fewer employees reported a 2.06 percent decrease in hiring month over month, after a 0.49 percent decrease in December.

Forty-four percent of U.S. economic activity can be attributed to firms with 500 employees or fewer, the SBA’s Office of Advocacy and ACA International found in a separate white paper. Between 1998 and 2014, SMBs’ share of gross domestic product (GDP) declined from 48 percent to 43.5 percent, though SMBs’ own GDP increased by about 25 percent. That’s not as fast as GDP for large enterprises, but still reveals the strength of SMBs’ contribution to the economy, totaling $5.9 trillion in 2015, the report said.

In 2018, 80 percent of small firms reported either maintaining or increasing revenue, new TradeGecko analysis found, despite the rising competition stemming from global competitors and large rivals. More than 40 percent of small firms said they have expanded into new geographic markets or channels as part of their growth trajectories. For the smallest firms, with less than $1 million in revenues, word of mouth is their greatest ally. Yet, when it comes to using technology, the majority said they use Facebook and Instagram to market their products and services, though nearly one-quarter of these firms also said they still use pen and paper for inventory management, and 31 percent said they use spreadsheets.

Forty-two percent of small businesses said they don’t use technology to its full capacity, data from Oasis revealed recently. The survey asked nearly 300 business owners with 1o to 99 employees about how they deploy technology. Thirteen percent said they aren’t using technology at all, while 31 percent said they try to use technology, but aren’t entirely sure how to use it most effectively. The most popular forms of technology business owners use are websites, cloud-based solutions, mobile apps and interconnected devices, while one-fifth also said they use analytics and reporting tools. However, failing to use these tools to their full potential represents a “missed opportunity” for SMBs, said Oasis EVP and CIO Joel Steigelfest in a statement.