It’s been a devastating year for many Australian small businesses, with a Forrester Consulting study commissioned by Xero, The next chapter for small business, revealing 38 per cent are struggling to stay afloat.
But one of the unique strengths of small business is the speed with which they can adapt to changing market conditions. In fact, that was the key difference for the 21 per cent of small businesses that are thriving right now – they planned ahead and stayed agile, even before COVID-19 hit.
These are some of the other top trends setting small businesses up for success in 2021.
Xero’s “Stronger and smarter: a small business handbook” identifies a number of consumer trends that have emerged since the pandemic, including a focus on health and wellbeing, cocooning at home, low-contact and cashless transactions, and less splurging, more sharing.
The biggest fundamental change to consumer behaviour to come out of 2020, though, is the mass move online – and it’s a change that’s here to stay.
It was noticeable back in January when the bushfires forced people inside. Then lockdown turned the steady migration into a stampede, with small-usiness revenue from online channels surging to 52 per cent during COVID-19, up 12 per cent from 2019. My grandmother is a good example of how far the move to online has spread – a former technophobe, she has come to love playing online bridge during lockdown.
The convenience of online combined with the current strong community support for small business means there’s an opportunity to significantly broaden your customer base – but if you’re not providing a decent user experience, you could lose all of your customers pretty much overnight.
According to the report, thriving businesses were more likely to have engaged with their customers on different digital channels during the lockdown, and to have adopted new customer acquisition and retention strategies.
Increased online marketing engagement through company websites, social media channels and third-party platforms was the most common strategy to survive and thrive through the pandemic, employed by 28 per cent of small businesses.
A key trend going into 2021 is digitising and optimising internal processes, so businesses can capitalise on the bump in online trade. Working capital gives business owners greater freedom in their strategic decision-making. In the next few years, e-invoicing and open banking will increasingly help them to understand and unlock more of it.
Another good way to maximise cashflow? Work hand-in-hand with an adviser, such as an accountant or bookkeeper. You’ll make better-informed decisions, and they can help you use existing tech to give you better forward visibility and make sure your capital isn’t tied up unnecessarily in inventory.
Speaking of tech, the report found thriving businesses were more likely to adopt solutions to improve their finance, supply chain and employee management. (Again, this is where your accountant or bookkeeper can really help.)
Leveraging tech reduces administrative tasks, simplifies compliance, maximises productivity and allows you to take advantage of new supply chain options, so there’s a lot of good coming out of this trend.
There’s a lot for small-business owners to look forward to in 2021 in general. When it comes to capitalising on these opportunities though, it’s now or never, because it’s only a matter of time until the big guys start to catch up. It’s up to businesses to get in there, own their space and carve out that point of difference while they can.
Angus Capel, Small Business Advocate, Xero Australia