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One step: Uncovering the mindsets and behaviours holding back small businesses

Posted 3 weeks ago in Advisors by Rachael Powell
Posted by Rachael Powell

It’s been an incredibly tough couple of years for small business owners around the world. Though we’re starting to see signs of recovery, many are still operating under unusual circumstances.

One thing I have been really impressed with as business owners have navigated this ever-changing landscape is how well many of them have adapted their business practices. We’ve seen in-person retail businesses quickly adapt to ecommerce; service providers operating in completely new industries; and an uplift in adoption of digital tools as business owners continue to make the best of challenging circumstances.

But while many businesses are eager to adopt tools and explore new ways of operating, many small business owners still find themselves struggling to get to grips with digital tools – and at Xero, we set out to find out why.

We commissioned behavioural science experts to delve into the human factors that get in the way of small business owners from adopting the digital tools we know will help them to thrive. The resulting report, One step: Behavioural barriers to technology adoption amongst small businesses – and how to overcome them, delivers a unique perspective on the subject. It uncovers three key mindsets that are common in small business owners; delves into the top five behavioural barriers sole traders experience; and offers recommendations about how they can overcome these barriers.

The report also examines the similarities and differences in attitudes across small business owners, with more than 4,200 small business owners surveyed across Australia, New Zealand, the UK, the United States, Canada, and Singapore. Read the report for detailed regional insights.

One step is full of rich insights into why small business owners make the decisions that they do, backed up with facts and figures from our markets around the world. The insights are valuable for even the most digitally-savvy business owners, so we encourage you to read it in full. 

The three mindsets of small businesses

The research surfaced three mindsets small business owners have when thinking about adopting new technology:

  1. What I am doing is good enough, so I’d rather just stick with it
  2. All I can see is risk and short-term losses
  3. It’s too hard to compare, understand and choose between all the options

We learned that it’s not a lack of information or choice that are the biggest hurdles to harnessing technology that small businesses face, but deeper anxiety and concern about how complex and costly the change process might be. Small businesses may understand the benefits, but the idea of adopting new technology feels deeply uncomfortable and even threatening. 

What’s your technology adoption mindset?

Our research uncovered two distinct groups of small business owners. Adopters – those who actively seek out and invest in new technology solutions; and Delayers – those who consistently fall behind on the technology adoption curve. 

We found that adopters enjoyed on average 120% higher revenue and 106% higher productivity than delayers – and were substantially more likely to find excitement and purpose in their work. Yet globally, adopters only made up one in every five small businesses, while delayers accounted for almost one in every three.

We’ve created an interactive quiz for small businesses to understand what mindset they have towards technology adoption. This is a fun way to learn more about your mindset, and perhaps may inspire small business owners to read our One step report keeping their own mindset and relevant recommendations in mind.  

Strategies and recommendations

We’ve come up with five possible strategies advisors can use that target mindsets at their core, along with four small steps that small business owners can make to get themselves on the path to overcoming barriers. We explore these thoroughly in the report in the hope that these will resonate with small business owners and their advisors, and drive behavioural change.

Five possible strategies for advisors that target small business mindsets:

  1. Encourage small steps, not giant leaps
  2. Celebrate small business peers 
  3. Don’t get left behind
  4. Measure benefits in a relatable way
  5. Narrow and simplify choice

Four recommendations for challenging behaviours and overcoming unproductive mindsets:

  1. Use a decision matrix
  2. Clarify risks with a pre-mortem
  3. Conduct a rational cost-benefit analysis
  4. Set aside time to learn from others

We hope that these insights into what makes people behave the way they do can help small business owners to make better decisions, drive profitability, and save time. Ultimately, we hope that driving a better understanding of small business behaviours will have flow-on benefits to not just small business owners, but also to their employees, families and wider communities.

2 comments

MC Carter
November 17, 2021 at 12.47 am

This is a great initiative. Well done Xero. For any venture that’s marketing technology to small business, the first two mindsets mean that the benefits (what’s in it for the small
business) have not been communicated well enough (tech vendors tend to focus too much on features), and the third mindset means the technology provider’s messaging isn’t simple enough to cut through the noise. Sure, comparing competing offerings is complex, but the vendors who achieve simplicity in their messaging will tend to win.

Xero in reply to MC Carter Xero
November 18, 2021 at 3.01 pm

Hi, we’re glad you’ve found our research useful. Thank you for sharing your perspective and approaching these mindsets with a different lens. We want to make sure small businesses aren’t left behind and can focus on high value tasks, that’s why it’s vital they understand their own mindsets. Thanks again for your comment.

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