Global crises always hit small businesses harder than larger enterprises. Their size makes them naturally more vulnerable to disruption. They’re already small so they struggle to downsize. Furthermore, they’re less diversified in their activities and are often very dependent on credit.
In the wake of the financial crisis of 2008, fewer businesses were started, many laid of employees or closed outright, and commercial lending plummeted. We hear echoes of that crisis today. Yet as bad as 2008 was, many of today’s big tech companies were founded in the wave of innovation that followed. Today, technology could play a crucial role in helping small businesses weather the challenging times and succeed in the years to come.
Confidence crashes to an all-time low
The Federation of Small Businesses has recorded a record drop as small businesses’ confidence crashes to an all-time low. 9% of owners intend to sell, close or hand on their business and 31% intend to let staff go in the next three months.
To keep things in perspective, small businesses account for half of all turnover and 60% of all employment in the UK. As well as providing opportunities for entrepreneurs, driving innovation and fostering local economies, they often make up an important part of larger businesses’ sales targets. The success and prosperity of the country rests on the survival of its small businesses.
Echoes of recovery
It’s encouraging that the decade following 2008 saw much better economic conditions for smaller businesses. Here again their size played to their advantage as they were quick to benefit from the changes in their environment.
Many businesses were also founded in the ashes of the financial crash that would go on to become media staples for the decade to come. WhatsApp, Venmo, Uber, Slack and Square were all founded in 2009. Instagram and Pinterest in 2010.
While it’s still to early to tell how well or quickly small businesses will recover from the COVID-19 crisis, we’re starting to see technology emerge as a vital lifeline in keeping these businesses open and innovating.
Punching above their weight
Agility and flexibility are crucial characteristics of smaller businesses. Even at the best of times, their survival depends on their ability to adapt to their customers.
Technology has played a vital role in this crisis, helping many businesses stay open and reach customers in innovative new ways. Of the businesses that have stayed open throughout the lockdown, one in five have either increased their online presence or created a new one from scratch.
Many global tech brands have set up funds and programmes offering financial and technical support to small businesses. Facebook created a Small Business Grant Program, offering $100 million in grants and ad credits for 30,000 businesses in the 30+ countries they operate in. It also launched Shops to make it easier for small businesses to set up an online store on Facebook and Instagram.
More recently, Amazon has joined the BBC and Pearson in pledging to contribute to a new Reskilling for the Recovery Fund, helping small businesses in London pay for apprenticeship training for staff.
It’s not just the global tech companies either. Bark, a UK platform that helps small businesses build up their online presence, launched a new initiative to help these businesses connect with new customers digitally, operate their business online, and build trust under lockdown.
A platform for resilience and success
There’s no sugar-coating the impact that COVID-19 has had on small businesses, but it’s becoming clear that technology has been the difference between closure and survival for many. Online sales, remote working and collaboration tools have meant some small businesses can lean into their natural agility and find new ways to meet their customer’s needs. For those that stay open, it seems likely that these technologies will lay the foundations for resilience and continued success in the years to come.