A new generation of SMBs was born during COVID and they expect more.
It's official – the next generation of SMBs (small and medium-sized businesses) is here, and they are on the rise. Riding on the back of the 2020 work-from-home revolution, digital acceleration, and the great resignation, we saw a new type of founder (and a new type of SMB) rise from the ashes.
We needed to know more – so Accenture surveyed approximately 5,800 professionals and found that nearly 1 out of every 10 individuals surveyed started a business in the last 3 years to realize their long-standing latent ambitions1. The new SMBs they created are quite different from their predecessors; they are digitally-savvy, have new goals & priorities, and are predominantly self-funded. Based on our analysis, we believe the number of these "next generation" SMBs will continue to grow – as individuals are more focused on pursuing their own dreams/path and have the tools and capabilities at their fingertips to do so.
Since we know these SMBs are fundamentally different than their predecessors, enterprises must learn as much as possible as quickly as possible to ensure they are holistically supporting this new, fast-growing segment. To better understand these new SMBs, we dove into further analyzing the group of ~580 new founders and their businesses. Here is what we uncovered…
Remote work opens new doors
The flexibility of work-from-home (WFH) is driving SMB growth. Many of our respondents who started their company within the past three-year period cited the ability to work remotely as a key motivating factor. In fact, 64% of these professionals indicated that starting their business would not have been possible without the WFH option1.
To our surprise, 35% of SMB founders are now pursuing their business as a "side-hustle" in addition to their existing employment income1. This was particularly the case in 2020 when 42% of SMBs were started as a side business1.
This isn't just business, it's personal
The #1 reason that motivates SMB founders to start a new business is to realize personal goals and passions. Our analysis shows that these founders are so devoted that many are funding their dreams themselves. 74% of the new SMBs use personal financing to support their business, while 36% are tapping into their personal network of friends and family1. On average, this Next Generation of SMBs leverage at least 2 sources of funding to ensure their passion and businesses are a success.
Next-gen SMBs are here to stay (and stay as SMBs)
Just because these businesses are self-funded and often a secondary source of income does not make them any less serious. SMB founders are ambitious, determined, and savvy – with clearly defined long-term strategies and goals. While many founders run their company as a side job, 80% plan to ultimately make it their primary occupation1. And they are persistent with their commitment, with 69% saying they'll start a new business if their current venture doesn't prove viable1.
Not only are these SMBs here to stay but they want to remain as SMBs – with 70% of the new founders planning to remain as SMBs1. In line with recent shifts in lifestyles and personal priorities, these new SMBs have no ambitions to become enterprises – meaning they will become a permanent part of the SMB customer base and change the makeup of the SMB landscape.
The new wave of SMBs is digitally-powered
One of the characteristics that has changed the most is the SMB's savviness with technology. Leveraging new technologies is a front-and-center focus for this new generation of SMBs – nearly three-quarters plan to invest in digital capabilities in the coming year1. Unsurprisingly, these SMBs considered "leveraging new technologies" a higher priority challenge to tackle in the next year relative to their predecessors (ranking it #4 priority vs #12, respectively).
This enthusiasm for technology reflects the digital fluency among the new generation of SMBs. We found these new SMBs are twice as digitally savvy as their more traditional SMB predecessors. The digital disparity between older and newer SMBs is particularly apparent in 2020, and we predict this tipping point in technical acuity will persist. And with the proliferation of low-code-no-code solutions, digitally capable SMB leaders will have an even greater technology advantage.
Our previous research established a strong link between SMBs' digital savviness, their trust in enterprises, and consequent willingness to spend more on enterprise products and services. So this new generation of SMBs represents an especially promising customer base.
Next-gen SMBs are unique. Treat them that way
Everything we've learned leads us to conclude that this new generation of small & medium business owners is different. So different that we believe they represent a completely new SMB segment. To successfully attract and foster relationships with these SMBs, platform & enterprise partners need to:
- Stress your value proposition, highlight your proven track record with SMBs, and focus on being a long-term partner | All SMBs want a trusted relationship with the enterprises they rely on to run their business. If you want to be a core partner for this next generation of SMBs, it is especially critical to focus on building a long-term relationship that will set their business up for success.
- Enhance customer support & customer success techniques and materials | As an enterprise, you will now need to support many different sub-segments of SMBs. This new segment / next generation expects more and is quicker to consume information. Enterprises need to make sure there is information catered to these businesses and support them as they grow these businesses into their primary income.
- Provide favorable and differentiated pricing models | Since these SMBs are currently personally funded – they will value pricing relief. Again, focus on the long-term relationship, thus think about a pricing model that locks SMBs in for the longer term. Enterprises need to be on the growth journey with these SMBs.
- Meet these SMBs where they are | Promote product discovery through both traditional channels (search engine, company website, word of mouth); and through new, next-gen 'pro-sumer' channels (social media, digital ads).
- Rethink Your Current Engagement Model |
Enterprise companies can no longer rely on the “traditional” ways to engage. These new SMBs will not only expect more but they will demand it. There will be no forgiveness for not having a comprehensive approach to engaging with SMBs. It is important for companies to provide both digital and self-service options along with extensive human interaction options through chat, phone, and scheduled calls when needed – providing SMBs with the “right engagement at the right time”. It is also critical to develop user-friendly and personalized portals including dashboards for SMBs where they can see relevant data regarding their business 24/7.
As mentioned, our research shows that this new brand of SMBs is here to stay and will continue to grow in number as more potential founders rethink what they do as well as where and how they do it. And because of their digital savviness, this new SMB segment represents a massive growth opportunity for platforms & enterprises that can uniquely support these founders to turn their passion into a reality. We are all excited to continue to monitor this Next Generation of SMBs, welcome them to the block, and help them pursue their passions – Accenture will continue to keep a close eye on this segment and how to ensure their success.
1 Accenture Proprietary Research. Next Generation SMB Survey, November 2021