Start using Xero for free Sign up now

You're on our website.
Data & Insights 2 min read

How beating the digital drag can help fuel your small business growth


Oct 18, 2023

From your local plumber and barber, to your favourite cafe, these small businesses sit at the heart of our communities. They are the ones driving jobs, economic growth and a place for people to come together. These smallest businesses — those employing up to nine people — make up 15% of the UK’s turnover, and provide over a quarter of jobs. 

But despite this, a “digital drag” is holding the smallest firms back from reaching their full potential.    

Our Beating the “digital drag” report with the Centre for Economics and Business Research (Cebr) reveals these businesses could generate £77.3bn in extra revenue and create 885,000 new jobs if they digitalised at the rate of the top 20% of tech adopters. 

Just 30% of small businesses (0-9 employees) have increased their use of digital technologies since 2019, compared to 69% for larger SMEs. But those that digitalised most in the last four years grew their revenue by 8.1% over the same period. The slowest suffered a decline of 4.7%. This highlights the huge opportunity for the UK’s smallest businesses. 

Overcoming obstacles to find the right tools

Taking steps towards greater digitalisation can be hard, but Huib Maat, founder of perfumery Pairfum London has faced these challenges. “We already have to wear many different hats as small business owners, so it is difficult to add too many tools, as each one of them has a learning curve before we become an expert. I would definitely appreciate more expert advice and guidance that’s tailored to my size and type of business.”

But investing in the right tools has paid off for Pairfum. “For every new piece of tech we consider bringing into the business, we assess whether we can afford it, how easy it would be for our team to use it, and crucially, how much of an impact it will have on our productivity. But when the right tools are used, they can transform a business. We are currently experimenting with AI in the development of our next range of fragrances and products.” 

Tips to beat the ‘digital drag’

If you’re caught in the “digital drag” and overwhelmed by the choices out there, here are our tips to help choose the right technology for your small business:

  • Set clear expectations: help staff embrace new by tackling psychological and behavioural barriers. Part of this comes down to talking plans through so everyone knows what’s expected of them, and how the tech will help them do their jobs.
  • Prioritise the right tech: start with the options that will have the most impact. Think not just about what the tech can do, but how it will fit into company culture.
  • Predict trouble spots: think about all the things that could go wrong. Advance planning can reveal any hidden threats and help avoid any teething problems.
  • Balance costs and benefits: create lists of the costs and benefits. Being objective helps overcome any resistance to change by identifying exactly what’s at stake.
  • Put into practice: check out relevant training and support from industry bodies, groups or trade associations. Working with a mentor or advisor (like an accountant or coach) is another great way to develop a strategy and boost skills in key areas. 
  • Learn and adapt: reach out to people, like an accountant or business coach, who might be able to offer insight into how similar businesses have digitalised, and what benefits they have enjoyed. Find out what did and didn’t work for others.  

To dive further into the research, read the full report here.

Share this article


Related topics:

Start using Xero for free

Find out why 4.2 million subscribers locally and across the world trust Xero with their numbers.

Try Xero for free

Related articles: