We are now – hopefully – reaching a point where we can talk, positively and seriously, at last about recovery from the pandemic.
A place also, where we can step back and look at the incredible journey that small businesses have been on over the last few years, and where they are going next.
It will take years to process this time in history. But from a business perspective, the data coming out already has some fascinating and vital insights.
I was struck by findings from Lloyds Bank’s seventh ‘Business Digital Index’. This research underlined a lot of what we know to be true. During the two years of the pandemic there has been a phenomenal digital shift, as small businesses adapted and pivoted, embracing online as a platform to operate, sell and connect. According to the research almost two-thirds (64%) of small businesses now have the highest level of digital capability.
But it also showed the inequality in the picture. In particular, the story of those small businesses – many of them running businesses solo – that are being left behind from this groundswell of travel into the online world.
A fifth of sole traders (22%) still have ‘low’ digital capability according to this analysis by Lloyds Bank. Over three quarters (76%) of this group do not plan to invest in technology at all, 44% say they don’t feel confident using digital to grow and 51% say they don’t have the funding to digitise their business.
Not all sole traders are disinclined towards digital of course, many embrace this with gusto. But this data shows that many have also fallen behind other-sized businesses during the pandemic, particularly in terms of digital business skills.
This isn’t good news. Not only is it harming the success of these entrepreneurs, but it points to a twin-track recovery amongst small businesses. And the UK needs all the nation’s 6 million small businesses at their peak to power recovery.
Sole traders account for around two thirds of UK small businesses – a sizeable group. And the study found that bridging the ‘digital divide’ for those in this group has the potential to unlock £24 billion for the UK economy every year, or an estimated additional £23,000 for each solo business that super-charges its digital capability.
It’s a huge opportunity that needs targeted intervention. And this needs to be done with the recognition that the roots behind this issue are complicated.
Running a business solo has a unique set of challenges – a lot of pressure falls on these owners to handle everything in their business. Taking time out to ‘work on’ the business, versus ‘working in’ the business, isn’t easy to do, regardless of how essential it is. And it isn’t helped by the fact that when some traders do go looking for support, in the UK a lot of this is designed for small businesses at a later stage of growth.
Sole traders struggle to take time out of running their businesses, due to a lack of time and resource. And being at an earlier phase of their entrepreneurial journey, their route to scale will require different digital skills and tools, compared to larger businesses who have got to the point of taking on staff or outsourcing, or can finance more sophisticated technology.
I believe a core part of the solutions needs to be a Help To Grow style scheme for sole traders. A programme which recognises the individual needs and requirements of this group of businesses and helps to propel them forward in the way that other schemes are currently doing for bigger businesses.
Help to Grow Management, for example, gets amazing feedback from participating small firms that are eligible to take part. But a programme more tailored to the ‘one-person-bands’ is needed to unlock the huge potential in the very smallest firms. One which is delivered flexibly and digitally and created with their unique challenges in mind, could unlock massive growth opportunity for Great Britain.
It’s time for the private and public sector to step up and make this happen, to drive economic recovery from the grass roots of business up. The chancellor’s March Budget would be a fantastic time for the Government to signal its support.
With so many challenges out there in the world, we need to make sure our small businesses have all the support they need to deal with ongoing issues and make that leap into the future to fulfil their potential.
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