In the next two years, 60% of global economies will be digitised. Making up 90% of all global business, small businesses have a huge role to play in defining the scale and speed of this transformation.
SMEs account for 50% of global GDP and 70% of global employment. There is no global economy without the small business economy. We’ve witnessed this play out throughout the Covid-19 pandemic. Small businesses suffered first and were hit the hardest when lockdown measures were implemented. Employment in small businesses was impacted twice as hard as businesses overall.
We know from the Xero Small Business Insights, which is based on analyzed, aggregated data drawn from hundreds of thousands of Xero customers, that the businesses that performed the best shared a number of common characteristics.
- Technology-enabled businesses lost 40% fewer jobs than the rest, and from a revenue standpoint performed 12% better.
- Businesses with five or more apps connected to their Xero account saw revenues fall one-third less and 40% fewer job losses than other small businesses through the COVID crisis.
What was once a shift to the cloud, has become a race to the cloud, and as the ease and rate of new technology adoption accelerates, the benefits compound for the small business economy.
So in a future in which digital operations become a competitive mandate, what’s going to matter to all these anonymous, vital, courageous small companies that generate half of the world's gross domestic product?
We see four areas small businesses will want to look at to grow amidst the pandemic.
Base decisions on data & insights
Globally, cash flow issues are the number one reason small businesses fail.
When the margin for error is so narrow, and business risk is exacerbated by a worldwide pandemic, competitive advantage depends on certainty and accuracy of choices, the ability to see patterns and correlations in data, to understand risk and confidently predict where the business will be in the short and medium term.
To do so, businesses should look into digitalising their financial processes. This will enable companies to access and share up-to-date records for revenue, payroll and cash flow seamlessly. Furthermore, the data that flows through these financial and operational systems also provides business owners with valuable insights and predictive analytics they can leverage to optimise their business opportunities and drive efficiencies through their operations.
Get paid faster
For most small businesses, any slip or an interruption in payments comes with immediate implications for payroll, solvency and perhaps survival. A total of HK$13.339 billion worth of invoices were paid late to small businesses in Hong Kong in 2018.
To alleviate this pressure, there needs to be a more reliable and immediate solution on the incoming side of the balance sheet -- through online sales and payment systems.
- Across Asia, small businesses with online invoice payments get paid up to 25 days faster.
- In Hong Kong, 86% of businesses seek to capitalise on digital sales opportunities by improving their online shopping experience and boost their competitiveness.
Getting access to capital
In the wake of a looming global cash crisis, or more accurately, a public health crisis with hard economic consequences, we have more small businesses and stand-alone operators in need of operating capital.
In Hong Kong, online lending platforms are on the rise, offering accessible and flexible financing options for small businesses. Cloud technology enables small businesses and lenders to openly and seamlessly exchange data in a financially democratised and interconnected model.
Forming an ecosystem and tapping on the expertise of professionals
Small businesses can substantially increase their ability to survive and thrive by tapping into the ecosystem of professional services, business associations, community and customers at their fingertips.
43% of SMEs in Singapore revealed that they are likely to depend on communities, customer feedback and business associations during their decision-making process, rather than solely relying on pure instinct.
Furthermore, accountants, bookkeepers and other professional service providers can also advise business owners on the financial resources like grants and loans available to them, along with technology and tools to help SMEs stay competitive and resilient.
As every participant in the small business economy reflects on the last several months, I'm reminded how small, connected and dependent we are on the networks, systems and relationships that support us, both in business and our personal lives.
Individually, none of us are big enough, wealthy enough or capable enough to give rise to a new level of opportunity in business or a new era of public health and safety.
Together though, we can discover it, bring it to life, and actually change things for the better; drive real progress in the quality of life on our planet.
When small businesses succeed, families succeed. Kids succeed. Communities succeed. We’ve got a stake in those outcomes. That's what we're working on, and that’s all the motivation we need.