Small Business: Digital Growth

The potential for internet and mobile technologies to transform small business

Small Business: Digital Growth

The potential for mobile and internet technology to transform small businesses

Small business use of mobile and internet technology is currently limiting their ability to reach their full digital potential.

PwC modelling estimates
$49.2 billion
of untapped economic potential (NPV, 10 years)
53% of this benefit could be realised in rural and regional Australia

Small businesses and the economy generally, can realise significant benefits by embracing mobile and internet technologies to transform their operations.

Powered by PwC’s Geospatial Economic Model (GEM), our analysis shows that small businesses can unlock an additional $49.2 billion of private sector output over the next ten years by making better use of these technologies. 1 2

In each State and Territory across Australia, small businesses have the potential to help grow the economy. The economy of each State and Territory is underpinned by different economic drivers. As a result, each has opportunities to contribute differently.

Looking at this same figure in geographic terms, nationally every Federal electorate would contribute almost $327.7 million of economic output over the next ten years (or approximately $33 million per year). This would be roughly the same as a significant capital project like a major roadway or a hospital update.

And the benefits are not limited to large businesses, tech-companies, or those based in capital cities. Small and medium businesses across a wide range of industries and locations stand to benefit.

GEM provides unparalleled insights into where potential economic gains are located. For the first time, an economic analysis allows us to explore where potential economic gains are located, down to every State/Territory and Federal electorate.

Our modelling shows that while all regions and industries have much to gain, some have more to gain than others. For example, 53% of the potential economic benefit can be made by small businesses located outside Australia’s inner metropolitan centres. Furthermore, 17% of Federal electorates (or 25 of the 150) could account for 50% of the potential private sector boost to the economy.

For more information on PwC’s GEM, go to: http://www.pwc.com.au/consulting/analytics/gem.htm
2 Gross value added (GVA) in net present value (NPV) over a ten year period.

The benefits of internet and mobile technologies are not just for large cities; all Australian small businesses stand to gain. Have a look at a snapshot of your local area.

The benefits of internet and mobile technology is for all Australian sectors; not just for technology companies.

In the Accommodation and Food Services industry there are approximately:

$15.4 billion

current private sector output

(2014, base year)

$1.5 billion

potential boost to the economy

over the next 10 years

60,000

small businesses

In the Manufacturing industry there are approximately:

$38.2 billion

current private sector output

(2014, base year)

$3.8 billion

potential boost to the economy

over the next 10 years

46,400

small businesses

In the Administrative and Support Services industry there are approximately:

$16.6 billion

current private sector output

(2014, base year)

$1.8 billion

potential boost to the economy

over the next 10 years

35,900

small businesses

In the Mining industry there are approximately:

$19.0 billion

current private sector output

(2014, base year)

$6.2 billion

potential boost to the economy

over the next 10 years

3,300

small businesses

In the Agriculture, Forestry and Fishing industry there are approximately:

$9.5 billion

current private sector output

(2014, base year)

$1.6 billion

potential boost to the economy

over the next 10 years

46,200

small businesses

In the Other Services industry there are approximately:

$12.2 billion

current private sector output

(2014, base year)

$1.3 billion

potential boost to the economy

over the next 10 years

48,400

small businesses

In the Arts and Recreation Services industry there are approximately:

$3.3 billion

current private sector output

(2014, base year)

$0.6 billion

potential boost to the economy

over the next 10 years

8,800

small businesses

In the Professional, Scientific and Technical Services industry there are approximately:

$36.4 billion

current private sector output

(2014, base year)

$3.7 billion

potential boost to the economy

over the next 10 years

109,700

small businesses

In the Construction industry there are approximately:

$39.1 billion

current private sector output

(2014, base year)

$4,2 billion

potential boost to the economy

over the next 10 years

133,400

small businesses

In the Rental, Hiring and Real Estate Services industry there are approximately:

$4.9 billion

current private sector output

(2014, base year)

$2.0 billion

potential boost to the economy

over the next 10 years

31,700

small businesses

In the Education and Training industry there are approximately:

$22.6 billion

current private sector output

(2014, base year)

$3.0 billion

potential boost to the economy

over the next 10 years

12,100

small businesses

In the Retail Trade industry there are approximately:

$28.4 billion

current private sector output

(2014, base year)

$2.3 billion

potential boost to the economy

over the next 10 years

76,000

small businesses

In the Financial and Insurance Services industry there are approximately:

$25.7 billion

current private sector output

(2014, base year)

$4.7 billion

potential boost to the economy

over the next 10 years

31,800

small businesses

In the Transport, Postal and Warehousing industry there are approximately:

$23.2 billion

current private sector output

(2014, base year)

$2.9 billion

potential boost to the economy

over the next 10 years

38,700

small businesses

In the Health Care and Social Assistance industry there are approximately:

$35.4 billion

current private sector output

(2014, base year)

$4.3 billion

potential boost to the economy

over the next 10 years

52,400

small businesses

In the Wholesale trade industry there are approximately:

$23.9 billion

current private sector output

(2014, base year)

$2.3 billion

potential boost to the economy

over the next 10 years

39,500

small businesses

In the Information Media and Telecommunications industry there are approximately:

$14.4 billion

current private sector output

(2014, base year)

$2.8 billion

potential boost to the economy

over the next 10 years

7,000

small businesses

Four key areas where small businesses can act to achieve these gains

Internet and mobile technologies benefit a wide range of business activities.1

  • Better understand your customers and competitors. Approximately 46% of small businesses use the internet to monitor the market or competitors, and 54% of small businesses report a positive impact from social media via good customer feedback, increased sales and better networking and advertising opportunities.
  • Lower the cost and risks of trying new things. Businesses like Pozzible, Indiegogo, Kickstarter, and RocketHub make innovation easier by connecting individuals who pool money, technical expertise, and other resources to support projects and launch business ventures.
  • Save time, lower cost and improve your understanding of your business. Cloud based bookkeeping and accounting services such as MYOB and XERO help small businesses reduce the time spent on administration.
  • Increase annual revenue. Small businesses that have high-levels of digital engagement (e.g. use search engine optimisation and marketing and multiple digital technologies) have better business outcomes compared to those with lower engagement, with some studies suggesting a 20% increase in annual revenue.

Internet and mobile technologies enable small businesses to significantly improve their supply chains, particularly by lower the cost find new suppliers and making better use of employee time.2

  • Get faster access to more suppliers. The internet allows small businesses to access more suppliers through web search and marketplace websites (e.g. Alibaba, EBay, Gumtree) to source cheaper inputs.
  • Lower labour costs.  The internet lowers the cost of finding new employees (e.g. through Seek, CareerOne, LinkedIn) and provides access to temporary or contingent workforce options (e.g. Sidekicker, Freelancer, Airtasker). Emerging cloud based tools enables more efficient scheduling of employees.

Internet and mobile technologies enable small businesses to significantly increase their customer reach.3

  • Maintaining a web presence. Two thirds of small businesses already have a website. Leading internet companies provide a wide range of new website building tools to further reduce website development and maintenance costs (e.g. Wordpress, Squarespace, Material Design Lite). Having an online presence does not require a website. Free tools such as Google My Business allow businesses to be found online without a website, while social marketing services (e.g. LinkedIn and Facebook) also provide opportunities to connect with customers.
  • Use the internet and mobile to boost sales. More than half of Australian small businesses use online channels for sales, which account for more than a third of all sales. While most online sales are to customers in local markets, more than a quarter of small businesses sell to overseas customers online.

Internet and mobile technologies create opportunities for small businesses to rethink how they produce products and/or deliver services.4

  • Improve workflow and collaboration. Mobile and cloud based technologies are changing the way work is done. Small businesses can use project tools such as Google Docs, Asana and SmartSheets to better coordinate work. Tools like Google Hangouts, Yammer, Skype and Slack provide cheap, instant communication between employees, or with customers.
  • Do away with paper. Mobile and cloud based technologies are changing the way work gets completed and invoiced. Emails can be read on the road, and invoicing, banking and reporting can all be done through mobile devices at the point of delivery (e.g. tradies can invoice a client at the job site).

Bay Fish N Trips

Sandra and Stuart use Google AdWords and various social media to compete, and thrive in a mature market, against competitors who were established decades ago.
Read their story

Bay Fish N Trips

Sandra and Stuart use Google AdWords and various social media to compete, and thrive in a mature market, against competitors who were established decades ago.
Read their story

Small business digital leaders

Small businesses across all industries are growing through increased use of internet & mobile technologies. Have a look at these great examples of small businesses who are leading the way.

What can be done to unlock small business potential?

Unlocking the benefits of internet and mobile technologies will need a coordinated strategy from government, peak bodies and businesses built on three key pillars.

Small businesses are known to be very time poor. They know new technologies are available, but evidence suggests they may be relatively late adopters. Therefore when looking for ways to provide support: 5

  • Find the right small businesses. Newer business (eg in operation for less than 2 years) may be more willing to adopt new technology to accommodate customer demand.
  • Have the right message. Small businesses consider the total cost of adopting new technologies, so value propositions about new technology should be framed appropriately. For example, messages should include costs relating to training, maintenance and, if applicable, compliance.
  • Use a messenger that small businesses trust. Small businesses often turn to their peers or professional advisors (e.g. accountants, IT providers) to learn about potential technology solutions and determine whether these would be appropriate for their needs. Industry bodies and networks can be the most effective at communicating digital technology awareness because they are seen as trusted sources of advice.
  • Reduce regulatory barriers. Given the clear benefits of technology for small businesses, we need to reduce barriers that get in the way of innovation. Commercial solutions are to be preferred and if regulations are necessary, then they should be proportionate, flexible and balanced.

Small businesses are less confident about their knowledge and use of digital technology when compared to larger companies. 6

  • Provide targeted training. Small businesses should be trained in digital skills across the entire implementation spectrum. For example, leadership and management models are changing with the rise of digital technology and skills programs will need to adapt.
  • Make training flexible. Small businesses generally train only a single employee due to the perceived effort and costs associated with training. Small businesses should be encouraged to train several of their employees with necessary digital skills to provide flexibility and redundancy.
  • Take a partnership approach. No single stakeholder can solve Australia’s digital skills problem. For example, the European Grand Coalition for Digital Jobs is a multi-stakeholder partnership between business, government and education providers, in both the public and private sectors.

Small businesses will only realise the benefits of internet and mobile technology adoption if the underlying infrastructure (and the software running on the infrastructure) provides them with a suitable level of reliability. 7

  • Improve broadband quality, particularly in regional areas. PwC’s GEM has allowed us to overlay the economic analysis with data from the Department of Communications on broadband infrastructure quality. That data suggests that broadband infrastructure quality varies markedly between Federal electorates, with Federal electorates covering major urban areas having better broadband infrastructure than Federal electorates outside those areas.
  • Consider how broadband roll-out can help generate economic opportunity given a Federal electorate’s unique profile. The government is currently rolling out broadband nationally, so we can expect overall infrastructure quality to improve over time. Our modelling suggests that each Federal electorate has different economic drivers and therefore a different digital potential. For example, bringing better quality broadband infrastructure to the Federal electorates of Hunter, Newcastle, Perth and Swan could potentially unlock $2.6 billion over 10 years.

Methodology

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This report/microsite has been prepared by PricewaterhouseCoopers Australia (PwC) under a contract with Google Australia & New Zealand.

The information, statements, statistics and commentary (together the 'Information') contained in this report/microsite have been prepared by PwC from material obtained from the Australian Bureau of Statistics, the Commonwealth Department of Communications, and from other industry data sources. The Information has not been subjected to an Audit.  PwC may at its absolute discretion, but without being under any obligation to do so, update, amend or supplement this report/microsite.

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