By Itzik Levy, CEO and co-founder of vcita
With economies in turmoil, inflation is high, and a recession looms. Consumers are cutting their spending, and rounds of layoffs are dominating headlines. No one seems to be waiting for economists to decide if these conditions make for an official recession or if stagflation is a more precise name for it.
In response, enterprises everywhere are doubling down on data insights to find new and clever ways to boost revenue and maximize their efficiency. This is all well and good for large companies, but small businesses aren’t in the same position and don’t generally have the same options to leverage data.
The stakes are high, too, as small businesses represent the backbone of our economy. Some two-thirds of all American jobs created in the past 25 years have been at small businesses, and teams of nine or fewer employees, often referred to as “microbusinesses,” employ over three-quarters of the private sector’s active workforce.
If this sector continues to be left on the outside of data-driven strategic management practices, then the economic fallout could have severe consequences.
Small businesses are short on data insights
There are many reasons why small businesses are too often left out of the data intelligence game. For a start, small businesses tend to lag behind when it comes to sophisticated business intelligence (BI) tech, largely due to their size.
When you’re running a small operation, you likely lack the resources to set up a dedicated data science team. It doesn’t help that many SMBs had to lay off staff over the last two years and that they’re already playing catch-up when it comes to digital transformation.
I spend a lot of time speaking with microbusiness founders, freelancers and solopreneurs, and for the most part, they view advanced business intelligence as being beyond their reach. This makes sense, after all. Whether you start your dream business or side hustle alone or with a handful of workers, it’s natural that the lion’s share of your resources are going to be dedicated to keeping your business operating and your sales pipeline flowing.
From my perspective, making a living in a field that provides creative fulfillment is what it’s all about in this sector, which all too often makes overcoming the challenges of strategic, data-driven business management a secondary priority.
On top of that, most BI tools aren’t designed, priced or marketed with microbusinesses in mind. As a result, many small business owners don’t think of BI as being within their reach.
“For many companies, data analytics seems like a pipe dream,” observes data scientist Rijul Singh Malik. “It’s something that businesses like Amazon and Netflix do, but how could our businesses ever reach that level of sophistication?”
Those who do want to try out BI quickly find out that the tools available are either too expensive to run on a small scale, or don’t work effectively with small business data, which is something that my team at vcita is working to change.
Without data insights, small businesses can’t compete
Even in the small businesses sector, data can be scattered across the company. Because many businesses are still in the early stages of digital transformation, a lot of their data hasn’t yet been digitalized and is still siloed in individual departments or teams, so bringing it together is hard work.
Unless they’re already using a consolidated tech stack, where marketing interactions and business transactions are logged automatically, even the task of connecting all of their data signals into an analytics engine is often out of reach. Without tools designed to help them with their specific data challenges, and without awareness of those tools, small business owners will remain stuck behind the barrier of data.
That would be particularly damaging, because it’s arguable that small business owners need BI even more than the big enterprises that threaten their existence. If our local economies have any hope of rallying, small businesses will need to lead the way.
Small businesses have a smaller financial cushion and far less wiggle room than large corporations to ride out economic storms. They need those data insights to help make them more efficient, so they can use their resources effectively and find the most lucrative business strategies to emphasize.
Small businesses need BI to give them eyes
In times like these, small businesses can’t use their own gut instincts and business histories as a guide to help them make decisions. Even those that made it through the last recession can’t just replicate the same playbook, because the economic landscape is always in flux.
It’s often noted that small businesses are more agile than larger ones. They don’t have as many established precedents, layers of leadership approval or long contingency assessment processes that slow them down. As a result, the narrative goes, they can pivot on a dime to take advantage of changing circumstances. That’s only possible if they are aware of those changes, and it’s BI that gives them that awareness.
Small businesses need BI so that they can remain competitive in their markets. Large enterprises are able to forecast customer demand, predict emerging risks, spot opportunities and seize them, and this playbook needs to be democratized. "Data used to be just reporting what had happened," says Steve Jones, chief data architect at Capgemini. "Now, we're looking at data driving the business outcome.”
With the help of BI, small business owners are able to drive more revenue. They need BI to enable them to deliver better customer experience with services like personalized marketing and support, and to understand what their audience really wants so they can optimize their services accordingly. With BI, small businesses can confidently diversify into new markets, geographies, or lines of business, and collaborate with other businesses to drive innovation.
Even during times of economic turbulence, small businesses can maintain their competitive edge and find ways to continue to bolster their bottom line, but only if they get the BI tools they need. Our local economies and our national employment rates depend on it.
Author bio
Itzik Levy is the CEO and co-founder of vcita, a platform that helps small businesses manage their time, client relationships and finances.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.