We don’t know exactly what the world will look like after the pandemic subsides, but experts are predicting what it could look like for small businesses. We spoke with Laurie McCabe, partner at SMB Group, about their 2021 SMB Technology Directions for a Changing World Survey Study. Laurie shared data and insights on how small and medium businesses with 1-250 employees have navigated the past year, how they feel about this year, and the years to come.
1. As vaccines become widely available and more and more states open up, how are SMBs looking at the future?
More than a year ago, when we surveyed small and medium businesses (SMBs) at the beginning of the pandemic, fear and uncertainty were the overriding sentiments. Sadly, as we know, a number of these businesses went under, but the majority were able to stay the course. The ones able to hang on pivoted to produce things people were suddenly clamoring for. For instance, turning physical world services like gyms and doctor visits into virtual services, and getting their employees set up to work remotely. SMBs were adapting to both capitalize on what they saw as new opportunities and, at the same time, trying to reduce the risk from the downturn.
And as they look to the future, almost three quarters of SMBs are optimistic about their prospects for 2021 and beyond.Laurie McCabe, partner at SMB Group
I’m happy to report that in our latest survey, optimism and rebound were really the themes of the day. About two thirds of the SMBs that answered the surveys said they made significant changes to their business strategies. As a result, a lot of them did a lot better than they thought they would — 40% said revenues rose year over year from 2019 to 2020, which is remarkable when you think about how we all felt a year ago.
And as they look to the future, almost three quarters of SMBs are optimistic about their prospects for 2021 and beyond. So it’s good, good news. It feels like finally there’s light at the end of the tunnel!
2. In your research, you discuss how optimism varies for SMBs across industries and company size. Can you explain what those differences are and why you think we’re seeing them?
Overall, larger businesses have fared better than smaller ones on almost every measure. And they’re more optimistic about the future, broadly speaking. We see the biggest break points between businesses with 20 employees or more, and those with 20 employees or less. Those with more than 20 employees were almost twice as likely to have had revenue growth year over year 2019 to 2020.
Another thing that really struck me was that the bigger companies, like those with 10 or more employees, were more likely than not, to have secured PPP loans in the first round. But in the one to nine employee range, only 13% of businesses got them. Historically these really small businesses have been very adverse to risk, paying interest, and being in debt. Hopefully, some of them will be able to capitalize on this second round of PPP loans. PPP loans have very attractive terms — and can help these businesses take advantage of improving market conditions.
Two-thirds of the SMBs we surveyed either strongly agreed or agreed that using technology effectively is vital to growing your business.Laurie McCabe, partner at SMB Group
We also saw industries that depended on physical experiences bore the brunt of this recession — this includes travel, hospitality, and personal services. Businesses like IT, financial services, and professional services, tended to do a lot better. The reasons are pretty obvious.
3. How do SMBs feel about technology, and how is it affecting their day-to-day?
Most SMBs see a strong connection between technology and business. Two-thirds of the SMBs we surveyed either strongly agreed or agreed that using technology effectively is vital to growing your business. About the same percentage also said technology investments have paid off. That second one surprised me because when we asked that question, even just four or five years ago, the percentage was a lot lower. Now we have more solutions built for smaller companies, making it easier for SMBs to get value out of tech investments more quickly, which is a good thing.
So even in the midst of this downturn, we saw that over half of SMBs decided, “Okay, technology is important and I’m going to make the tech changes I need to make, to support the business changes I need to make.” Manufacturing businesses retooled assembly lines to make personal protective equipment, retailers adopted tech to facilitate curbside pickup, gyms started adding virtual classes. It’s made the case that technology can really help businesses adapt.
4. Based on your research, how do SMB’s current digital investments inform their future? What difference is digital transformation making in SMB growth?
A lot of businesses that made changes during the pandemic knew they had to do more to modernize their business with technology before the pandemic hit. COVID was really the push to accelerate putting these plans into action.
Now, as pent up demand for dining out, travel and other things we put on hold comes back, more SMBs will recover and rebound.LAURIE MCCABE, PARTNER AT SMB GROUP
At this point, about 40% of SMBs say they actually have a digital transformation strategy in place and are starting to execute on it, and around another third of businesses are trying to set up that strategy. That’s a really good sign, because another thing that came out in our findings was the SMBs who’ve even just begun the digital transformation process are significantly outperforming those who haven’t. The proof is in the outcomes — if you have a good plan and you use technology wisely to support operational changes, it really does seem to pay off.
5. How does this trend in digital transformation among growing SMBs affect automation priorities?
The number one automation priority for SMBs is customer service. And when you think about it, that makes sense because during COVID customers really changed their whole psychology around when, where, how, and who people wanted to buy from, and how they wanted to access service. For instance, people didn’t want to take something in somewhere to get it fixed — and they probably couldn’t in a lot of cases. So businesses had to figure that out and try to get ahead of the curve and serve customers more effectively. A lot of that comes down to using technology and self service. Businesses can help customers solve a lot of problems without them having to leave their homes.
6. Can you share what you expect the post-pandemic landscape will look like?
I’m as optimistic as most SMBs have proved to be adaptable and resilient. As I mentioned, many SMBs ended 2020 with better results than they had in 2019, and the majority are optimistic about 2021.
Many businesses that did have to shut down for a while took the time to figure out what changes they needed to make to reopen, what new and different products and services to offer. These changes helped them to get back on the growth path. Some industries — such as construction — started booming because people made it a priority to make their homes as comfortable as possible. Local farmers that had primarily sold to restaurants created channels to sell to consumers.
One thing is crystal clear: for businesses to be resilient no matter what comes their way, they really need a strong technology backbone.Laurie McCabe, partner at SMB GrouP
The pandemic definitely shook everyone up, but in many cases, it has led small businesses to rethink and refresh how they do things. Now, as pent up demand for dining out, travel and other things we put on hold comes back, more SMBs will recover and rebound.
7. What’s the most important thing SMBs should do to prepare?
One thing is crystal clear: for businesses to be resilient no matter what comes their way, they really need a strong technology backbone. They need solutions to empower their employees to work anytime, anywhere — especially in this increasingly tight labor market, They also need solutions to help them better engage with their customers, and tune into potential shifts in what, how or where people want to buy. Staying one step ahead of customer expectations is always critical, but particularly important in times of flux.
A lot of SMBs are maybe just starting to dip their toes into this, but another need is technology to help us look at different scenarios. SMBs need to figure out, “Okay, if X happens, here’s three things I can do, and then here’s how these outcomes may play out.” Tools like that will help everybody to take advantage of new growth opportunities as they’re emerging now.
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