Recession recovery and resilience
Whenever there are rumblings of an economic downturn we immediately jump to thoughts of doom and gloom. But there’s hope, according to our recent research in partnership with the Centre for Economics and Business Research (CEBR).
Our research shows that historically, many small- and medium-sized businesses (SMBs) have managed to find a way to buck the trend and move forward, growing their business and the economy as they go.
But how did these businesses thrive? By using 2 key methods: embracing a digital strategy and accessing the right governmental support on offer.
This article will explore what we can learn from their success and shed light on their future, using the data from our new report.
Innovate and grow
Data from the 2007-2009 recession, one of the worst in modern history, found that at the end of this period SMBs across 8 markets (with selected sectors in the US and Canada, and 6 countries in the EU) reported surprising growth results.
Even after the devastation caused by the housing market crash and aftershocks felt around the world, SMBs kept on growing, a trend we’ve started to spot in post-pandemic results too.
- Although it varies according to industry, here are some of the findings from the report that show SMBs rallying to drive economic recovery: In Canada, the number of SMBs rallied from the 2007-2009 recession, rising above pre-crisis levels quickly in 2010.
- In 2015, 1.1 million Canadian SMBs employed 13.2 million individuals, this was 47,000 more businesses and 745,00 more individuals than in 2010.
- In the US and Canada combined, there were 211,000 more SMBs in 2015, that employed 937,000 additional workers.
- Employment within Canadian SMBs in the professional, scientific, and technical sectors increased by 38% between 2005 and 2015, to total 829,000 people.
- During the same period, Canadian SMBs in health and social care increased employment by 144,200.
The recession ultimately created an opportunity for SMBs to innovate by realigning their values, re-evaluating customer’s needs, and catering to them in a more flexible way. When the customers are at the heart of a business, it will flourish.
Digital conversion gains
The creative and technology sectors in all 8 countries made strong gains from digitalization. Whilst these sectors may be more suited to converting to a digital-first approach than say, the agricultural sector which showed a small contraction during the same time period, there are many ways where going digital can help any business.
From creating a website for your business, using smartphones to send an invoice immediately, or booking appointments through WhatsApp, to offering digital meeting-based consultation services to reach remote clients, you can shift even the most bricks-and-mortar business towards a new digital frontier.
The rise in AI-powered solutions and availability of cloud-based services, allow even the smallest business to accomplish more with fewer employees, saving on time, premises costs, and employee numbers.
Additionally, the ability to keep financial data organized and updated quickly can improve any business for the better.
Using some form of software as a service (SaaS) can help businesses stay flexible during the hardest economic periods because of how easy it is to pivot and access available governmental help.
Having your business information stored digitally and available at-a-glance can mean easier and faster access to these services and more accurate results reporting. It’s now easier than ever to future-proof your business, guaranteeing it can remain in step with further fluctuations.
Superpowered SMBs need super-fast access to services
During a recession, governments will provide a range of services and information to help keep businesses afloat. They may also adjust policy, including changing tax and interest rates to stimulate economic growth.
For example, in 2022, Canada launched the “Canada Digital Adoption Program” (CDAP). This was aimed at helping SMBs leverage e-commerce opportunities, upgrade or adopt digital technologies, and digitize their operations to stay competitive in the digital marketplace. The $4 billion promised over 4 years will be accessible through grants and loans for SMBs to then spend on digitization.
However, not all policy is perfect. For example, also in Canada, Sage has identified the need for higher exemption thresholds for the Small Business Tax Rate and Employer Health Tax, while indexing them to inflation annually. This will help give SMBs an even bigger boost.
Finding the right business partnerships is essential to ensuring your strategy takes these policy changes into consideration. Working with partners who will advocate for SMBs to government can help your business weather not just economic changes, but government policy or new tax laws with ease.
“Business owners face many challenges, yet they continue to stay resilient in times of economic crises, paving the way for recovery as generators of employment and through economic growth. Despite SMBs representing 99.8% of businesses in Canada, they won’t drive growth by osmosis and need continued support to ensure business resilience amid the economic crisis.” Mark Hickman, Managing Director in Canada for Sage.
What’s next for SMBs?
The number of SMBs across all of the countries studied in our report is forecast to grow by an average of 1.7% each year between 2022-2025.
In the US and Canada, SMBs are forecast to employ an extra 1.3 million people in 2025 compared to 2022. This will spur employment by SMBs to reach 14.6 million in Canada by 2025, while employment by US SMBs is projected to reach 63.3 million people by 2025.
That’s a lot of growth and customers to look after that can help to bolster the economy, or cause issues navigating new services and clients, which is where our expertise and customer advocacy comes in.
Preparing your business to find its flow and move forwards in any economic situation can be as simple as finding the right software partner for your business.
Aziz Benmalek, North America President at Sage says: “In the midst of an extremely challenging economic period, we wanted to quantify the importance of SMBs in bringing economies into recovery. While we do not underestimate the challenges that these business owners face today, they are arguably better positioned to adapt to the changing economic landscape and it’s encouraging to see their vital role in driving worldwide growth continuing.”
Prioritize your digital business with a lasting partnership that will help you every step of the way. At Sage, we believe in each business’s potential, whether you’re a sole trader or a mid-sized business, you can get 1-2-1 advice, or benefit directly from our advocacy to governments, ensuring the needs of SMBs are front of mind when making big decisions on policy.
In the meantime, we’d love to hear your thoughts on our report, so please tag us in comments and social posts to join the conversation and let us know how you feel about our latest research.
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