FreshBooks Unveils a Digital Adoption ‘Report Card’ for Small Businesses
As students sharpen their pencils and crack open new textbooks this fall, FreshBooks asked Canadian small business owners to hit the books as well. We surveyed 500 owners across the country, asking them to self-assess the degree to which they’ve implemented digital solutions across various areas of their business. We averaged the results and assigned a letter grade based on the responses. The results show that most Canadian small businesses are far from the head of the class when it comes to digital readiness – coming in with a moderate ‘C+’ average.
What do we mean when we say ‘digital readiness’ or ‘adoption’ in small businesses? The definition extends well beyond a business maintaining a website or purchasing paid social media ads. Rather, we define digital readiness as the integration of a comprehensive stack of digital solutions or technologies into various areas of a business, such as information storage, financial management and security.
While our study identifies areas where small businesses have room to improve their digital capabilities, it also highlights untapped resources to accelerate a business’s digital journey. Specifically, 50% of those surveyed say they are unaware of external funding sources, such as the federal government’s Canadian Digital Adoption Program (CDAP), which offers grants, loans and access to expert advice aimed at helping owners with the costs related to adopting digital technologies.
“Our mission is to help small business owners grow. The more we understand the obstacles on our customers’ path to digital maturity, the better equipped we are to guide them towards success,” says Mara Reiff, Chief Customer Officer at FreshBooks. “We know that leveraging digital technologies, like cloud-based accounting, invoicing, expense management and payments is key to our customer’s ability to scale. A strong digital foundation doesn’t just refine operations; it offers the agility needed to adapt in an ever-changing market. It can help organize businesses and elevate customer experiences, setting the stage for sustainable growth.”
Digital Grade Breakdown
The study finds that a solid majority of Canadian small businesses (70%) have fully embraced digital billing and invoicing solutions. Similarly, 65% offer their clients and prospective customers consistent, high quality experiences across both mobile and desktop platforms. As well, 60% say they have digitally organized their financial information in one place for analytics and tracking purposes.
When it comes to cybersecurity, a slim majority (54%) of owners agree they are mostly or fully ‘up to date’ on technologies and processes that safeguard both their business and customer data. Just under half of owners (48%) say that their website content and technology have been fully updated in the past three years. Additionally, 46% report they store most of their critical business information securely in the cloud instead of local servers or personal computers.
Collectively speaking, Canadian small businesses are digitally weakest in the following areas:
Firstly, only about one-third of owners are harnessing digital SEO and SEM techniques to ensure optimal visibility for their business in search results. An even smaller segment has started experimenting with Generative AI to understand how it can be leveraged for efficiencies or to give them a competitive edge. Perhaps most importantly, only 41% of Canadian small businesses have a comprehensive digital adoption strategy, plan and/or budget for becoming more competitive.
The Digital Divide
FreshBooks’ Digital Adoption study is representative of small businesses across the country, spanning a variety of industries and revenue brackets. Unsurprisingly, larger businesses with annual revenues of $125K or more got a higher overall digital adoption grade. Yet, they still only scored a ‘B’ average across the 10 assessment areas.
The digital gap between larger and small businesses varies in specific areas of digital solutions. Smaller businesses are almost neck-and-neck with larger businesses in adopting digital billing, mobile platforms, and analytics tools. However, they trail noticeably in embracing Customer Relationship Management (CRM) and sales management tools, search optimization techniques, and AI solutions.
A for Effort
While owners received only a ‘C+’ average for digital readiness, it certainly isn’t due to a lack of effort. The study finds that small business owners spend a full day per week, on average, to strategize and implement digital initiatives within their businesses. Further, they dedicate an average of 16% of operational expenses to digital advancements.
Roadblocks in the Digital Classroom
Despite the allocation of budget towards digital tools, 39% of owners cited a lack of funds as an obstacle to becoming more digitally competitive. This is closely followed by 34% indicating they don’t have enough knowledge about digital solutions to implement them effectively. Businesses in the higher revenue brackets aren’t as limited by finances and time, but say their primary roadblock is the lack of a well-defined digital strategy.
“Financial constraints and a lack of experience are barriers, but they don’t have to be deal-breakers when it comes to embracing digital solutions,” says Mara. “Programs like CDAP provide funding for software, like FreshBooks, and other digital solutions that simplify critical business tasks and enable you to make smarter decisions. For owners looking to up their digital game, my advice is to start with a couple of valuable use cases that will most benefit your business. Think about what you’re struggling with, or what’s bogging you down, and how digital solutions can help. And remember, before diving in and implementing tech solutions, have a solid plan outlining what you’re aiming to achieve.”
Extra Credit: Government Programs
While only 10% of small business owners have raised their hands and applied for government or other types of programs aimed at boosting digital adoption, including CDAP, there’s a significant number of owners who’ve added this to their to-do lists. 45% say they’re “very likely” to explore these types of support opportunities within the next two years.
When asked where they’d allocate any future government support, business owners have their sights set on a few key areas. Digital marketing tops the list, with 52% saying that’s where they’d invest. E-commerce followed at 37%, and a close 35% on digital operations and finance. Cybersecurity and risk management round out the priorities, with 31% of owners keen on boosting those initiatives.
As students settle into their new academic year, some Canadian small businesses may also want to hit the books when it comes to learning the benefits of digital adoption. While many are progressing in certain areas, about one-quarter of those surveyed say they’re not sure that adopting more digital technology in their business can make them more competitive. Overall though, our survey shows a collective willingness to get ahead using digital tools, bolstered by the prospect of government support programs.
Learn More & Apply
The Canada Digital Adoption Program (CDAP) helps businesses adopt digital technologies to increase competitiveness. Eligible businesses will receive a grant to adopt new digital technologies–and your FreshBooks subscription or adoption of online payments may be eligible.
FreshBooks designed and fielded an online survey of approximately 500 Canadian small business owners from across the country with fewer than 40 employees. Participants were sourced via an online panel and represent a wide range of small businesses by industry, revenue and employment. The study’s margin of error is +/- 4.4% at 95% confidence.