2021 Preview

Digital tools form a safety net for small businesses. In this first-ever research that looks back at a full year of the COVID-19 pandemic, it is clear that small businesses utilizing Digital Safety Net products and services have enjoyed dramatically stronger revenue and hired significantly more people. The Digital Safety Net is literally a small business lifeline. 

As the pandemic hopefully winds down, small business owners are looking ahead to a “new normal” that will continue to be fueled by digital tools – services, platforms, and marketplaces – that power efficiency, growth, and financial security for their businesses and families. Understanding how digital tools impacted and transformed small businesses during the pandemic provides an informed framework for how government and industry can make our small business economy stronger and more resilient in the future, by educating and training small businesses and thereby promoting their adoption of Digital Safety Net tools.

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Lead Findings

    SMBs’ use and continuing adoption of Digital Safety Net tools and services varies, due to several factors.

  • Digital adoption among small businesses ranges from the digitally advanced (40%, that use a large and diverse number of tools) to the digitally uncertain (24%, that have low adoption rates and remain skeptical of digital tools).
  • Nearly all (97%) digitally advanced small businesses adopted new digital tools and business strategies during the pandemic, while only half (51%) of uncertain businesses did.
  • Many SMBs are cautious about Digital Safety Net tools due to concerns about cost, ROI, regulatory risk and their own digital knowledge/comfort, but digitally advanced SMBs overcome these concerns while digitally uncertain SMBs do not.
    Digitally advanced small businesses make more money and hire more people.

  • Digital adoption cut revenue losses in half (-12% for digitally advanced SMBs vs. -23% for digitally uncertain SMBs)
  • Digitally advanced small businesses hired 2x more employees on average vs. digitally uncertain SMBs.
    Digitally advanced small businesses vastly outperform digitally uncertain small businesses on key success metrics and are well positioned to press their advantage into the future.

  • Digitally advanced businesses retained customers at a 5x better rate and acquired new customers at a 20x better rate during the pandemic.
  • Digitally advanced small businesses are more than 2x as confident about making new hires in 2021 (88% vs. 36% of digitally uncertain).

Additional Findings

  • 81% of SMBs report changing their business to incorporate new digital tools and strategies due to COVID.
  • 98% of small businesses say digital tools are helpful in running their business, with 59% of small businesses saying they have been more helpful during the pandemic.
  • 93% of small businesses report maintaining or increasing their use of digital tools post-COVID.
  • 92% of small businesses are optimistic that their business will grow and thrive over the next 3 to 5 years, in a survey conducted with over 2,200 small businesses across 15 states.
  • 81% of small businesses cite future preparedness as a top concern, with 89% of digitally advanced vs. 65% of digitally uncertain small businesses desiring to become more resilient.
  • During the pandemic, approximately 11 million small businesses (37%) would have closed all or part of their business without digital tools.

What It Means

The New Normal: SMBs are never going back. All SMBs are going digital — even SMBs that lag digitally are using more tools, while digitally advanced SMBs are accelerating even faster. In the New Normal digitally-driven business is just business; in the near future digital tools will be a critical part of every business, large and small. Perhaps because of their new-found digital strength, SMBs are facing the continuing pandemic and uncertainty optimistically, with 75% anticipating full recovery within a year.

The Path to Supporting SMBs: The value of digital tools to small businesses has never been greater, but we must ensure that SMBs are aware of and can access digital tools. A fundamental goal of economic and small business policy must be to convert “digitally uncertain” SMBs into “digitally advanced” SMBs, which requires helping them overcome their doubts about digital ROI, their own knowledge gap, and regulatory risk (e.g., privacy and data protection). This uncertainty is a significant cause of the gulf between digitally advanced and digitally uncertain small businesses, and the gulf is widening and creating a new SMB digital divide. Government can help millions of SMBs by working with the private sector to provide more education, and pointing SMBs to practical, accessible training opportunities that will help them engage with the Digital Safety Net and become stronger and more resilient.

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In mid-2020, Google commissioned LRWGreenberg, a Material+ Company, to conduct a study in the US to better understand the shift in digitalization among small businesses amid the ongoing COVID-19 crisis, and how digital tools have helped these businesses survive the pandemic. Using the 2020 US study as a baseline, we conducted this study on SMBs in order to understand the evolution of the impact of the pandemic, and the continuing role that technology has played in helping SMBs.

The results presented here are based on the findings from a quantitative survey of 2,037 SMB leaders from across the US, conducted from February 17 to March 11, 2021. The data were weighted by gender, ethnicity, veteran status, region, business size, and vertical, for an accurate representation of SMBs nationally. Crucially, this study focused only on those SMBs that weathered the COVID storm, at least to some degree. Those who shut down permanently were not included in this study.

Additionally, using the LRWGreenberg study as a baseline, 3C commissioned Catalyst Research to conduct a supplemental survey of 2,200 SMBs across 15 states utilizing an identical participant profile and many of the same questions, while also seeking to gather additional forward-looking sentiment. While the supplemental survey data is not statistically representative, with more than 2,200 completed interviews across 15 states, findings – if not representative – are certainly illustrative of reliable trends and observations.