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In a time when small businesses face a myriad of challenges, from navigating inflation and rising interest rates to challenging supply chains, they stand as more than just the backbone of the economy. Small businesses are essential drivers of innovation, employment and vibrant communities. In order for small businesses to compete and grow in a challenging marketplace, they have to be digitally ready and able to evolve with the tech-driven expectations of today’s consumers. In doing so, they’re better equipped to meet current demands, withstand economic uncertainty and get on the path to growth and sustainable success.
What exactly does it mean to be a ‘digitally ready’ small business? It means embracing technology-based solutions that streamline operations and help connect with customers. It requires the agility to keep up with the ever-changing digital landscape. And it also means staying responsive to market trends, and leveraging tools and strategies that empower business resilience and success in our digital-first era.
The objective of this FreshBooks report is to offer a framework for small business owners to evaluate their business' digital readiness. FreshBooks aims to equip owners with actionable insights that will inform their next digital investments, ensuring they can make smart choices that lead to sustainable growth and impactful outcomes.
<strong>The Digital Roadmap </strong>
To establish the framework for assessing digital readiness, FreshBooks conducted a survey of 1,000 small business owners across the U.S. and Canada. These businesses are as diverse as the communities they serve, representing sectors like financial services, marketing, healthcare, education, and various trades. Their teams range in size from solo operations to just under 40 employees, painting a comprehensive picture of small business across North America.
Our survey explored 10 distinct operational areas where digital tools can make an impact, which are illustrated in Figure 1. These areas were then grouped into 4 levels of priority, based on rates of adoption, costs and/or other barriers to entry, and the potential benefits and ROI to a small business. On one end are digital technologies that are relatively easy for small businesses to implement, and were shown to be widely adopted by the small business owners in the survey. At the other end are areas that may require more substantial investment but can offer high returns and competitive advantages.
How does your small business stack up in the digital landscape? Continue reading to see how you compare with fellow business owners across North America and gain actionable insights on elevating your digital maturity.
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<strong>Priority 1: Table Stakes <br>Cost-Efficient, Straightforward Setup, High ROI, Essential for Modern Business</strong><br>These areas were found to be 'widely adopted' by survey respondents. Only a small fraction (17%) lack digital billing capabilities, and just 15% do not currently offer a full mobile experience to their customers. In short, if your small business hasn't implemented these digital solutions yet, you’re falling behind. These are predominantly customer-facing technologies, which meet the needs and digital experience expected by today’s consumer.
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<strong>Priority 2: Low Hanging Fruit</strong><strong><br></strong><strong>Budget-Friendly, User-Friendly, High ROI, Essential for Competitive Edge</strong>
These options offer a compelling combination of low financial barriers and substantial opportunities for small businesses to not only digitize their operations but also establish themselves as digital innovators.
Despite their importance, our survey reveals only 41% of small business owners have a complete digital strategy or plan in place. And just 27% of owners said they’re experimenting with Generative AI within their businesses. Each of these options are recommended for small businesses, as they provide potential to gain a competitive edge, increase operational efficiency, and continually meet the needs of today’s digital-savvy consumer.
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<strong>Priority 3: Customer-Centric Digitization</strong><strong><br></strong><strong>Variable to Moderate Cost, Some Technical Setup, Substantial to High ROI</strong>
<strong><br></strong>Finding, cultivating, and retaining customers is the lifeblood of small business success. Surprisingly, the majority of small businesses owners are not making full use of two of the most powerful customer focused digital technologies available to them. Our survey revealed that less than half (44%) of respondents have implemented a Customer Relationship Management (CRM) system. And just 39% have adopted or deployed Search Engine Optimization (SEO) or Search Engine Marketing (SEM) strategies to elevate their online visibility to potential customers.
Investment into these strategies can be significant, but small businesses looking to get a leg up in the marketplace should consider these tools to enhance customer engagement and boost overall market presence.<br>
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<strong>Priority 4: Digital Safety Nets: Risk & Reward</strong><strong><br></strong><strong>Substantial Cost, Essential for Scaling and Enhancing Customer Trust</strong>
<br>While digital tools offer substantial benefits, they also pose new kinds of risks. It's important to strike a balance by implementing digital safety nets that not only protect your business but also enable you to seize opportunities securely.
Our survey findings show that only 45% of owners are storing business information securely in the cloud. And just over half (54%) have secure tech and policies in place to protect business and customer data. While investing in digital security measures might seem costly, the potential financial and reputational damage from a data breach or leak of private customer information could be significantly more expensive and challenging to address.
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<strong>Time and Money: The Real-World Investment in Going Digital</strong>
What about the nuts and bolts; just how much time and money are small business owners investing in digital solutions?
When it comes to carving out time for digital initiatives, the landscape is quite varied among small business owners, as shown in Figure 2 and 3. Our survey showed that on average, owners dedicate about 20% of their working week to planning or advancing digital projects. Those at the forefront of digital transformation (a group we'll refer to as 'Leaders)' were respondents who garnered top scores for overall digital readiness. Leaders spend upwards of 42% of their work week on these tasks. On the other side, the 'Laggards' (those who received low scorers in overall digital readiness) are significantly behind, investing a mere 5% of their time per week.
Investment in digital initiatives isn't just a matter of time, it's also a financial commitment. On average, small business owners are allocating 17% of their annual operating budget to fund new digital projects. Those categorized as 'Leaders' are dedicating 32% of their budget to digital advancements. The 'Laggards,' however, are trailing with a minimal 5% budget allocation toward digital initiatives.
<strong>Figure 2 and 3:</strong>
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<strong>The Digital Road Ahead </strong>
Whether your small business is focused on marketing, construction, healthcare or interior design, understanding where you fit in the digital landscape is important for future growth and success.
To assess your business’ digital readiness, start by evaluating the tools and strategies highlighted across the priority levels in this report. Compare your practices with the survey averages to determine where you stand. Are you a 'Leader,' with substantial investments of time and budget in digital solutions? Or do you find yourself in the 'Laggard' category, with minimal commitment to digital growth?
"This report serves as an invaluable tool, offering insight into where owners stand in the digital landscape and how they can harness the power of billing, accounting, and payroll on FreshBooks' comprehensive platform—a solution that evolves with their growing businesses” said Stefano Grossi, Chief Product & Technology Officer at FreshBooks.
The objective of this FreshBooks report is to offer a framework for small business owners to evaluate their business' digital readiness. FreshBooks aims to equip owners with actionable insights that will inform their next digital investments, ensuring they can make smart choices that lead to sustainable growth and impactful outcomes.
<strong>Survey Methodology<br></strong>FreshBooks designed and fielded an online survey of approximately 1000 small business owners from the United States and Canada. Participants were sourced via an online panel and represent a wide range of small businesses by industry, revenue and employment. The study’s margin of error is +/- 3.2% at 95% confidence.
