Digital Tools a Boon to Small Business

Advanced use of digital technologies by small businesses can drive greater revenue, job growth, and exports, according to new research from Deloitte.

Like large enterprises, small businesses are commonly working to capitalise on new tech tools, respond to disruption from technological change, and transform their businesses for the digital age. New Deloitte research1 on the effects of digital adoption finds that by embracing digital technologies and tools, small businesses—which in aggregate can have an outsized influence on the economy and employment—are able to increase their competitiveness.

In a more digitised world, consumers expect to engage with businesses through online channels. While this can be the case for large enterprises, it can be particularly true for small businesses, which may not have the size or reach to engage with new or existing customers otherwise.

Many small businesses have access to a range of digital tools that allow them to increase accessibility, information availability, and customer connection. To assess how these tools improve business performance in small businesses, Deloitte surveyed more than 2,000 businesses with fewer than 250 employees, collecting responses on their use of digital technologies and performance according to key metrics such as revenue growth, job creation, exports, innovation, and customer numbers.

2 Researchers analysed small businesses’ use of digital tools in six categories: • Business web presence, such as online directory listings, websites, and mobile apps. • Social media for customer engagement, sales, marketing, or other business purposes. • Data analytics to gain customer insights or inform business decisions. • E-commerce and online scheduling capabilities via their own websites or third-party platforms. • Online advertising, including ad banners on websites, social media advertising, and search engine marketing and optimisation. • Internal productivity tools that improve internal business processes, such as cloud-based software, video conferencing, and corporate social networks. To quantify the benefits realised by the most digitally advanced small businesses, researchers grouped each business into one of four digital engagement levels— basic, intermediate, high, and advanced—based on how small businesses use digital tools. These engagement levels capture the range of digital activity across the small business community surveyed while recognising that different digital tools may be relevant, depending on specific business circumstances and requirements. Basic. Representing 20 percent of the sample, basic-level businesses have a relatively undeveloped digital presence. They typically use an email address but shun websites, social media, and internal use of digital tools. More than 90 percent of businesses in the basic category do not have a website, and 85 percent have no social media presence. Almost none engage in online marketing. Intermediate. Businesses categorised as intermediate users of digital tools tend to have simple websites with no e-commerce or scheduling capabilities. They often have a limited social media presence and may leverage online directories, third-party marketplaces, and simple online marketing tools such as email advertising. Businesses with intermediate levels of digital engagement accounted for 30 percent of the sample. Although 70 percent have a website, only 10 percent have a mobile-responsive website. More than half (51 percent) have some presence on social media. High. Also accounting for 30 percent of the survey sample, highlevel small businesses often have more sophisticated websites. In this category, 58 percent of businesses have online scheduling or e-commerce capabilities. Internally, they take advantage of tools such as videoconferencing and cloud software—70 percent utilise digital technologies for internal purposes. Eighty-three percent of businesses in this category engage in online marketing strategies using social media advertising, web page ad banners, and other digital channels. Advanced. Advanced businesses, representing 20 percent of the survey sample, leverage data analytics, engage customers via a mobile app, and use sophisticated online marketing strategies such as search engine optimisation and video advertising. Within the advanced category, 81 percent of small businesses collect data about website visitors, with the majority using this data to analyse customer trends and inform business decision-making. Twenty-seven percent have a mobile app, which is significantly higher than the average of 3 percent across the other levels of digital engagement.

The research indicates that growth and employment dividends are associated with higher levels of digital engagement for small businesses of all ages and across all industries and geographies. For example, among the small businesses surveyed, those with higher levels of digital engagement have greater growth potential—they were more likely to have experienced revenue growth over the past 12 months and have an increased likelihood of expecting future growth.

In particular, small businesses surveyed were found to experience an increase in revenue growth of 11 percentage points per additional engagement level reached. And compared to the small businesses surveyed with the most basic level of digital engagement, the most digitally advanced small businesses also: • Earned twice as much revenue

per employee. • Experienced revenue growth over the previous year that was nearly four times as high. • Were almost three times as likely to have created jobs during the previous year. • Had an average employment growth rate that was more than six times as high. • Were three times as likely to have exported goods over the previous year • Had greater levels of customer diversification, inquiries across the sales funnel, and innovation.

These benefits illustrate how the adoption of digital technologies can create opportunities for small businesses to grow through new markets and products. Given the increasing prominence of digital tools and technologies across the business and consumer landscape, improving the digital engagement of small businesses may be an important driver of future growth for both small businesses and the entire economy. Small businesses should consider continuing to seek opportunities to adopt new and more sophisticated digital tools, and be strategic about adapting these technologies to grow their businesses in the future. For more information, please go to www.deloittedigital.com.mt 1. The Connected Small Businesses US research study was commissioned by Google and conducted by Deloitte Access Economics. 2. Data was gathered using an online survey of a nationally representative sample of 2,013 U.S. businesses with fewer than 250 employees. The majority (92%) of the businesses sampled had fewer than 100 employees.