Xero data shows SMB growth linked to technology spend

Xero, the global small business platform, has released new data from Xero Small Business Insights that shows technology investment is directly associated with business growth, highlighting that Australian small businesses that increase their investment in technology grow their revenue and create jobs faster than other businesses. 

Sharing the data for the first time to coincide with Xerocon Brisbane, Xero Australia and Asia managing director Trent Innes has warned of the danger of a digital divide emerging between small businesses and large enterprises and highlighted the advantage small business has in being agile in adopting new technology.

The data update, 'Wired for Success: the impact of technology spending on small business', is based on anonymised and aggregated data from Xero Small Business Insights and was prepared by AlphaBeta Advisors.

It finds that small businesses:

• that increase their spend on information and communications technology (ICT) are 68% more likely to be growing 
   
• with higher ICT spending growth grew revenue 3.5 percentage points faster than those with lower ICT spending growth 
   
• with higher ICT spending growth grew employment 5.2 percentage points faster than those with lower ICT spending growth 

It was found that, on average, Xero subscribers in Australia spend less than 1% of total revenue on ICT each year.

This expenditure relates to categories including: Internet, telephone, mobile, computer, telecommunications, broadband, NBN and ADSL.

The roll-out of the NBN is also helping businesses to access faster broadband, and driving greater levels of digitisation and growth opportunities.

Xero Small Business Insights data has found that, among businesses on Xero, those in mature NBN regions grew employment by one-third more (2.6 percentage points) than businesses in non-NBN regions in 2017.

"In Australia, we are at an inflection point for technology adoption for small business and we have to ensure that they surf this wave," says Innes.

"Small business is best placed in terms of size and agility to take advantage of new ways of working. Australian ranks third in the OECD in terms of the percentage of small businesses purchasing cloud computing services. This gives them a powerful start, and Xero's data indicates a direct link between technology investment and growth.

"Xero is calling on small business to take a fresh look at their investment in technology to ensure they are in lock-step with big business, taking the first mover advantage where possible. Access to advanced technologies has also never been more prevalent or democratised - from cloud computing to digital ecosystems -- putting powerful services and tools into the hands of anyone with a mobile or laptop.

"While we see large enterprises well on their way to digital transformation, taking advantage of a range of powerful new technologies from AI to blockchain, we have to avoid the dangers of a new digital divide -- one between small and big business. Having a two-speed tech economy would be a disaster for Australia's productivity and growth, particularly given small businesses generate a fifth of GDP and employ nearly half of all workers.

AlphaBeta Advisors director Andrew Charlton adds, "Small businesses have a huge opportunity to take advantage of increasing broadband connectivity and harness cloud-based business productivity tools. Among Xero users, 35% of medium-sized businesses and 44% of larger small businesses are connected to third party apps delivering valuable insights and time savings to business owners.