Small businesses are expected to grow revenue in 2021 despite the multiple challenges posed by the COVID-19 pandemic
Many small and medium-sized enterprises (SMEs) from around the world were badly affected by the pandemic. SMEs reported lower sales and high closure rates, which then led to an increase in the unemployment rate as SMEs account for 60% to 70% of employment in most countries. You can read all about the state of small businesses in 2021 and the challenges they faced throughout the pandemic here.
However, in this article, we are going to cover the approaches taken by SMEs to weather this unwavering storm. According to a report by Bank of America, 60% of small businesses are expected to grow revenue in 2021 despite the multiple challenges posed by the COVID-19 pandemic.
Based on the April 2021 Global State of Small Business Report by Facebook, to survive, 60% of global SMEs have made at least one change to the way they do business. And this involves adopting new digital tools, practising remote working, and more.
Back to the 2021 Small Business Owner Report conducted by Bank of America, it was reported that 56% of the respondents are confident and have high hopes that the economy will soon improve and 21% of them have plans to hire more workers in the coming months. To help aid the recovery of their businesses as well as the economy, 62% of small business owners have already started building their digital strategy that includes interacting with customers virtually, working and communicating with employees remotely, enhancing online presence, and accepting digital payments.
Some innovative SMEs have reacted fast to the pandemic by capitalising on digital opportunities such as e-education, e-health, and e-commerce. However, many start-ups were badly affected by the pandemic as they were not prepared and well equipped with the necessary digital tools to resume operations. According to the World Economic Forum, more than 40% of new ventures end up in the “red zone” with only three months to sustain their business. The negative impact of the pandemic has been more substantial towards SMEs than in larger companies. Therefore, to overcome these challenges, SMEs must digitalise.
According to a report by OECD, SMEs that sell their products or services through digital channels showed higher sales than SMEs that don’t. Digital platforms allow SMEs to utilise low-cost logistics, tailored advertisements, and better communication between them and their customers. The report on the global state of SMEs in 2021 by Facebook revealed that the main reason SMEs adopt digital tools was to improve their communication with customers (55%). Other reasons would be to improve advertising (40%) and selling goods and services to customers online (37%).
About 60% of SMEs in the hospitality sector and 57% from the retail sector had started using digital tools for advertising. And SMEs that sell goods and services online were able to meet consumer demand and achieve higher sales as compared to less digitised SMEs as 25% of their sales was earned through digital means. Some of the common digital tools used by SMEs are Facebook, Instagram, WhatsApp Business, and Facebook Messenger.
SMEs that did not change from a physical storefront to a digital one have found themselves cut off from the markets and face lower sales. This is because businesses that do not have a digital presence lack visibility, and therefore, are out of customers’ reach. Realising this, many brick-and-mortars that used to rely on in-person contacts, such as restaurants, have started to implement a new business strategy—contactless deliveries. Contactless deliveries allow them to safely sell their goods to their customers.
To thrive amidst the pandemic, SMEs must also be open to new opportunities. Based on research by Society for Human Resource Management (SHRM), it was found that nearly half (43%) of 416 SMEs with 500 or fewer employees resorted to making new adjustments to their business strategies. These changes may be in the form of practising contactless deliveries, upskilling their employees, adopting new technologies, and even venturing into new markets that are in high demand such as producing face masks and hand sanitisers.
The pandemic has forced many businesses to re-evaluate and reimagine their business models. SMEs from the retail, manufacturing, and service sectors had to digitalise their processes to accelerate business and stay relevant. Because only by adopting digital technologies can SMEs build better customer relationships and leverage new partnerships.
In the US, about 75% of SMEs in knowledge-based industries, 33% from the service-based industries, and 25% from physical labour industries have the majority or all of their employees working remotely, according to the data by SHRM. And about 66% of business owners agree to allow for more flexibility and remote working post-pandemic. However, not all SMEs could afford this ‘working from home’ policy. The report conducted by Facebook explained that only 34% of global SMEs can allow a quarter of their employees to work remotely and 17% of global SMEs have made changes to their remote working policies. This is significantly different from large companies that can allow for more working-from-home flexibility.
Since remote working is becoming the new norm in most companies, this may pose a problem for SMEs that failed to implement the work-from-home policy. Employees may expect to find more remote or hybrid working arrangements moving forward, and SMEs that are unable to accommodate will struggle to attract employees, and therefore, get left behind.
Digital transformation is, without a doubt, the solution for SMEs to thrive now and in the future. It helps SMEs to innovate, improve processes, expand into new markets, and increase connectivity. Another business process that demands digital transformation is payment. As mentioned in our previous article, fees and payments are huge pain points for SMEs as 62% of SMEs rely on low maintenance fees when opening a business checking account.
Luckily for SMEs, there are now multiple sources of financing that are beyond traditional methods. Digital technology has granted self-employed entrepreneurs and business owners more access to modern corporate financial solutions, like TranSwap.
All in all, the COVID-19 pandemic has indeed forced many SMEs to digitalise their services and processes. By leveraging digital tools to change the way they operate and connect with customers during the pandemic, SMEs stand a chance to increase their sales and reach a wider audience. And moving forward, SMEs should expect new consumer habits and employee expectations that are more centred on digital technologies, such as remote working, e-commerce, AI chatbots, and digital payments, among many others.
TranSwap offers award-winning fintech solutions, customisable to your business needs. Our products include Global Account, Global FX & Payments, Fintech-as-a-Service, and Corporate Debit Card that is launching soon. With a TranSwap account, you can pay to more than 180 countries, hold up to 34 currencies, and convert anytime you want. Our Fintech-as-a-Service includes white-label and API solutions to supercharge your business and unlock new global markets and revenue opportunities. For further enquiries, send your questions here or visit our website at transwap.com.
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