It’s official – the next generation of 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.
Accenture surveyed 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 ambitions. The new small businesses they created are quite different from their predecessors; they are digitally-savvy, have new goals & priorities, and are predominantly self-funded. Based on the analysis, 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.
To better understand these new SMBs, the Accenture study dove into further analyzing the group of about 580 new founders and their businesses. Here is what they 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 option.
Indeed, 35% of SMB founders are now pursuing their business as a “side-hustle” in addition to their existing employment income. This was particularly the case in 2020 when 42% of SMBs were started as a side business.
This isn’t just business, it’s personal
The #1 reason that motivates small business founders to start a new business is to realize personal goals and passions. The 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 family. 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 small)
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 occupation. And they are persistent with their commitment, with 69% saying they’ll start a new business if their current venture doesn’t prove viable.
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 SMBs.
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 year. 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. The study 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 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.