Bracing for Economic Downturn, U.S. SMBs Bet on Tech
Almost half of U.S. SMBs are changing their tech stack to adapt to the current economic climate, according to new research from Codat, the universal API for small business data.
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The State of Small Business Software report is based on research carried out by YouGov in May 2022 which surveyed more than 500 founders, owners, and directors at micro, small, and mid-sized businesses across the U.S. It found that 40 percent of SMBs are changing how the use and think about tools and software in the face of the current business environment.
Of this 40 percent, the most common changes businesses are making are changing suppliers (49 percent), seeking time savings (42 percent), increasing reliance on software used to manage finances (41 percent) and choosing tools which integrate with each other (36 percent).
The findings highlight a divide between larger SMBs and micro businesses (< 10 employees) when it comes to their tech stack. Where 71 percent of medium sized businesses (> 100 employees) are reviewing their tech stack as a result of the economic climate, just 27 percent of micro businesses are doing the same. What's more, 61 percent of micro businesses do not use any software at all to help with business planning and operations compared to just 15 percent of medium businesses.
This demonstrates a high degree of digital inertia among micro businesses which is exposing them to higher levels of risk than their larger counterparts as inflationary, interest rate and supply chain pressures grow. The research also shows the potential value of software integrations (the ability for organizational systems to exchange data) to SMBs. When integrations were explained alongside a use case, 60 percent of respondents said connectivity would be an important factor for them when making future software purchase decisions. This rises to 88 percent for medium businesses.
"It's good to see a significant proportion of SMBs recognising the positive impact that a connected tech stack can have on their business but there is still a gap in education," said Pete Lord, CEO and Co-Founder of Codat. "The challenge will be ensuring that all SMBs, even the smallest, can leverage the full potential of integrated applications and don't miss out on the opportunity to streamline growth with automated data flows."
Codat's State of Small Business Software report digs deeper into what today's SMBs value when it comes to their tech stack, which providers they are choosing and what's driving their purchase decisions. To learn more, download the full report.
Codat is the universal API for small business data. The real-time connectivity that Codat provides enables software providers and financial institutions to build integrated products for their small business customers.
Codat clients range from lenders to corporate card providers and business forecasting tools and use cases include automatic reconciliation, business dashboarding, and loan decisioning. Codat was founded in 2017 and has offices in London, New York, San Francisco and Sydney.
The company has raised over $160M to date from investors including JP Morgan Growth Equity Partners, Canapi Ventures, Shopify, Plaid, Tiger Global, PayPal Ventures, Index Ventures and American Express Ventures.