Business experts share how digitization makes a difference for small business success

Small and medium-enterprises make up more than 90% of global businesses. What’s more, the number of new small businesses has reached historic highs within the last 18 months. A fresh wave of entrepreneurs have entered the small business realm, some out of necessity—the COVID 19 pandemic left thousands searching for additional streams of income—others simply saw an opportunity to follow their entrepreneurial dreams.

No matter what the reason, these new business owners have one thing in common: they’re struggling. Struggling to get the capital they need when times are tough. Struggling to gain access to the tools and resources they need to run their businesses effectively. And struggling to thrive in what feels like a never-ending pandemic.

The Entrepreneurship Exchange 2021 (EX21) is a virtual summit intended to bring small business leaders, entrepreneurs, experts, and policymakers together to discuss key issues, explore actionable insights, and discover innovative solutions for the future of small businesses. Small business owners and aspiring entrepreneurs around the world attended live on October 13. If you missed it, you can check out the recording here .

Digitization was a prevalent theme throughout EX21. This is what we learned.

Digitization is the key to survival for small businesses

When the pandemic hit, many small businesses were forced to shut their doors to comply with shelter-in-place orders and other COVID restrictions. These businesses quickly discovered that digitization may be their only means of survival.

Rachel Lambo, CEO and Co-Founder of Sade Baron, a natural body care company, said her company wasn’t online at all in their first year of business. They made most of their sales from markets and shows. When the pandemic hit, everything changed. “We started doing completely online sales,” Lambo said. But it wasn’t an easy transition. Moving to an entirely ecommerce platform was nerve wracking, especially when it came to things like shipping products safely and on time.

But there was a silver lining. Lambo quickly realized her customer base was much larger than she realized. Sade Baron was getting online orders from customers all around the world—and their market only continued to grow. Today, Lambo said her business is doing twice as well as they did in 2020, and four times better than they did in 2019. Adopting and embracing digitization helped her business grow in ways she couldn’t have imagined.

And she’s not alone.

Dana Donofree, Founder and CEO of AnaOno, maker of innovative post-surgery bras, said she felt fortunate that her business already had a strong ecommerce platform when COVID hit. But transitioning to entirely online sales still came with challenges. “Most of our clientele is typically over the age of 50,” Donofree said. “This is a demographic that wasn’t so used to shopping for their bras and underwear on the internet before the pandemic.”

But small business owners like Donofree have the unique ability to be nimble. “We had to completely redirect all of our energy and attention to a digital environment,” Donofree said. And AnaOno shoppers of all ages were grateful for the shift. Donofree said they hear all the time from customers how thankful they are to find the bras they need and a business that understands them on the internet.

Taking these stories as just two examples, it’s clear that digitization is a game-changer for today’s small businesses, especially in light of the pandemic.

5 ways digitization makes a difference for small businesses

A survey conducted by Facebook found that 51% of small businesses reported increasing online interactions with their clients, while 36% of personal businesses that use online tools indicated they were conducting all their sales online in response to the crisis.

Small businesses that utilized digital tools and leveraged online sales using payment, delivery, social, and productivity tools were less likely to experience economic hardships and were better prepared to weather financial strains.

But, for many small business owners, transitioning to a digital landscape wasn’t easy. Others still aren’t convinced they can take the leap. As part of EX21, Karen Kerrigan, President and CEO of the Small Business & Entrepreneurship Council, sat down with four business experts to get their take on how digitization is transforming the business landscape . This is what we learned.

1. Digitization is here to stay—but you already knew that.

We’ve heard it before—digitization is the new normal. And this panel of experts only confirmed that suspicion.

U.K. Small Business Commissioner, Liz Barclay, says fewer small businesses failed during COVID 19 thanks to digitization. Within the first few months of the pandemic, small business owners jumped ahead at least five years in terms of digital adoption—”and we’re expecting that to stick,” she said. “The tools are available.”

Kerrigan agrees. The silver lining of the pandemic is the discovery of technology and digital tools that allow small businesses to operate more efficiently. “85% of businesses said they would not have been able to survive without these [tools],” she said. For these small businesses, there’s no going back to the clunky, inefficient way of doing things.

2. Ecommerce is essential for a successful holiday season

Kaitlyn Wilkins, VP of Global Small Business Sales at Facebook, says that while digitization is certainly helping to drive recovery for small businesses, it’s also essential for a successful holiday shopping season. “The holiday period is critical for small business survival as we head into year two of the pandemic,” she said.

More than 17% of small businesses expect to make over 50% of their annual revenues within the last three months of the year, and that number is even higher for diverse-owned businesses. “Digital is the new normal,” Wilkins said. Businesses hoping to meet their revenue goals come December 31 need to meet their customers where they are: online.

3. Going digital doesn’t have to be difficult

For some business owners, going digital is a big jump in how they operate—many are reluctant to take the leap. And for good reason, things like cyber security, digital payments, and shipping can be complicated to adopt. Across the board, business experts recommend turning to trusted partners and platforms to make the transition easier.

“Find those platforms that are going to make your life easier as early on as you can,” said Donofree. “If you’re going to start an ecommerce store, look at Shopify. If you’re going to ship products, you need a plugin like ShipStation. And, of course, to keep all of your accounting in line, you’re going to need QuickBooks Online.”

Wilkins says Facebook was in a unique position to physically see the spike in new businesses signing up for business pages and advertising on the Facebook platform. “Many of them are moving online for the first time,” she said. “We knew we needed to do more to meet them where they were.” So Facebook set out to help more business owners build an online presence, from advertising to building a website—which, for new small business owners, can be a complicated first step, Wilkins said.

Dr. Barbara Kotschwar, Executive Director at Visa, said small business owners have expressed a preference for assistance with digitization even over assistance with capital through loans and grants. “We need to think about how to reach out to these groups and make sure they’re comfortable [with digitization] and able to thrive.”

4. For diverse and women-owned businesses, digitization is essential

There are 62 million latinos in the U.S., and the median age for this population is 30. In fact, 6 in 10 millennials are hispanic. They represent a young, vibrant population of small business owners with digitization in their DNA, said Ramiro Cavazos, President and CEO of the U.S. Hispanic Chamber of Commerce. “This community is positive about the future,” he said. They’re diverse, they’re highly educated, and they boast a higher percentage of business success.

On the flip side, these business owners have faced more than their fair share of adversity. “This community, over the years, has been discriminated against when it comes to small business loans,” said Cavazos. “Eight out of 10 applicants in the latino community applying to a bank were turned down for loans, even before the pandemic.”

Dr. Kotschwar says digitization can level the playing field for these diverse and women-owned business owners. Firms formed in the past year are more likely to be headed by women, and in the U.S. there is a significant rise in diverse-owned and women-owned businesses. Digitization expands the reach of these businesses, allowing them to export to and explore new markets.

Beyond that, Wilkins says companies like Facebook are leaning in to intentionally support diverse and women business owners by helping them access mentoring, networking, and capital. “Organizations like Facebook are uniquely positioned to help comprehensively,” she said. “Not just around our products.”

5. Business success depends on government support

There’s no doubt about it, in today’s environment, digital is a must for small and medium enterprises. And their success also depends on governments’ ability to keep pace with and support digital innovation in small business operations.

Governments around the world are taking action to support small businesses going digital. This year, the U.K. announced that it would enact a ‘Help to Grow: Digital’ scheme, aimed at boosting productivity and innovation in small and medium-enterprises across the U.K.

In the U.S., Congresswoman Nydia M. Velazquez says her committee passed an unprecedented investment in American small businesses—$25 billion. It’s her hope that this capital will fund the way for the smallest of the small businesses, those who too often struggle to get capital and have less access to vital resources. The “Build Back Better” program will invest millions in improving entrepreneurship development by providing free or low-cost training. Additionally, the program hopes to close tax loopholes for large corporations and level the playing field for small businesses.

“Businesses can do it alone,” she said. “They need support for their communities and governments to build back better.”