Many Small Businesses Losing Out on Technology

A new report shows that small businesses in New York aren't taking advantage of the tools at their disposal.
August 30, 2012

Too few small businesses are taking advantage of technology, suggests a new report.

New York's Center for an Urban Future spent five months researching and interviewing for the report, called "Smarter Small Business." The research also includes a survey of more than 230 small-business owners across the city's five boroughs.

Just over 90 percent of the businesses in New York have fewer than 20 employees, a higher percentage than all but one of 363 metro regions in the U.S. Barely two-thirds of them have a website or use social media to advertise their business.

Generation Gaps

The older the business owner, the less likely he or she is to have taken to the Internet, according to the report. Young entrepreneurs are much more likely to be tech-savvy, of course, because they've grown up with the Internet and are fluent in social media—most use it in their daily lives. Owners of businesses with higher incomes also were more likely than those with low to moderate incomes (which the report defines as those with household incomes of less than $55,000) to have a website: 81 percent versus 59 percent.

Neighborhood-based retail and services firms, especially those owned by low and moderate income New Yorkers and those outside the city's central business districts, were the least likely to be capitalizing effectively on technology—the report estimated fewer than 20 percent were.

Observes the report: "This is not only a missed opportunity for countless small businesses across the five boroughs. It is a competitive threat for New York at a time
when small businesses are only becoming more important to the city’s economic future."

Operations and Marketing

The study also found other technology gaps: Just half of the firms surveyed with three or more employees use an automated payroll service. And barely two in five (37 percent) of businesses in the retail and hospitality fields used an automated point-of-sale system. Per the report, "countless" small companies don't engage in online marketing, while "very few bodegas use technology to track changes in their inventory so they can make better decisions about which items to stock on their over-crowded shelves."

“Technology is no longer an option for small businesses to remain competitive. It’s absolutely essential in today’s digital age,” says Jonathan Bowles, the CUF's executive director. “Adopting even the most basic technology tools will help level the playing field for small businesses and enable more small firms grow to the next level.”

Cost Prohibitive

One obstacle: "In one of the biggest ironies that small-business owners face with respect to technology, many in our survey pointed toward the cost of technology as being one of the main impediments to their adopting it more widely."

Other findings of the report: Barely half of those surveyed felt that they were using technology to a sufficient degree to be competitive. Most small businesses overall appear to be using computers, e-mail and high-speed Internet, but low- to moderate-income proprietors  are far less likely to do so. Of those using e-mail, just 60 percent had a professional domain name tied to their business name (as opposed to, say, a Yahoo address).

Two-thirds of those surveyed used social media, but again, "substantially fewer" low-to-moderate income owners did than those with higher incomes (55 percent versus 75 percent).