• David Parker

How UK small businesses can digitalise

It’s widely recognised that digitalisation is a huge benefit for small businesses and that through technology, they can achieve greater operational efficiencies, save time and drive growth.


We also know that the next phase of Making Tax Digital (MTD) looms, making the need for digital transformation even more pronounced for small businesses across the UK.


But why many small businesses are still reluctant to embrace digital transformation and how can they get help to overcome this reticence?


Xero's One Step research, in which behavioural scientists surveyed small business owners to understand the human factors that are preventing technology uptake, is an excellent place to start.

Understanding obstacles

The research found that the main barriers preventing technology adoption for UK businesses include resistance to change, uncertainty around outcomes, the perceived hassle of digital adoption and the ability to easily compare options, among others.


These barriers are accompanied by scepticism and a lack of confidence, which are preventing UK small business investment in new technology. After the disruption and uncertainty of the past 18 months, is it any wonder that these businesses feel risk averse?


Only four out of 10 small businesses in the UK are open to taking risks when making business decisions, while five out of 10 are reluctant to accept the risk of negative outcomes from tech-related decisions.


Meanwhile, seven out of 10 respondents claimed that focus is placed on day-to-day survival, as opposed to how to better run their business, while only three out of 10 said they would consider themselves worse off if digital investment is postponed.


Immediate survival clearly feels more pressing than long-term planning and optimisation. There is scepticism, too – UK small businesses were the least likely across all regions to agree that new technology would see benefits to their business once they integrated it.


It’s not all doom and gloom, however, with six out of 10 claiming to be confident when embracing new technology, while the same number were excited about the prospect. But these numbers will need to increase as MTD compliance becomes a necessity, and the benefits of digitalisation become even greater as we enter the next phase of recovery.


Helping small businesses digitalise

There are some steps small businesses can take to try and overcome these barriers. For example, using a decision matrix can help compare digital options and prioritise technology adoption easily based on business priorities.


Carrying out pre-mortems before any tech implementations can also help build confidence in adoption. By imagining a scenario that goes wrong, and then working backwards to determine how it would fail, business owners can identify potential risks and feel more in control.


Finally, rational cost-benefit analysis – listing out as many benefits as possible to new technology, and assigning time and/or monetary value to each benefit – can help reassure businesses. This will help owners understand what an implementation will actually do for their business, and at what cost, so it feels less like a leap into the unknown.


Small businesses, however, shouldn’t feel like they are solely responsible for undertaking this journey. Everyone from the government, to big business, to policy makers and more have a part to play.


With the right support, small businesses will be able to overcome these barriers and achieve the rich benefits promised by digitalisation. By enabling this, we can nurture a more robust economy in the future, driven by a successful small business community.


Article by Xero