How SMBs Can Grow Despite Macroeconomic Trends
We’ve all seen recent coverage about job creation and rising vacancies at businesses across the country. On one hand, job creation numbers are underwhelming. On the other hand, companies are struggling to find the staff to meet demand. Reading the WSJ earlier this month, we see yet another opinion piece bemoaning the difficulty for companies to hire. Apparently in some states a family with two unemployed adults can make the post-tax equivalent of $100k. With the average family income in the US quite a bit lower than that, there’s little financial incentive to go back to work.
As a result, companies are having to pay higher wages and get more flexible with their requirements towards new hires. According to this New York Times article, the share of job postings that say “no experience necessary” is up two-thirds over the last two years.
Stepping back, the broader policy that’s being pursued is to force businesses to pay workers more. Whether it’s a higher minimum wage or inflationary fiscal stimulus, the effect is the same. And we must be prepared for this policy to continue.
The drag on SMBs
At Provana, we work with many SMBs to help them leverage business process outsourcing as a driver of productivity and compliance. As business partners, we get to know them from many sides, and I personally have relationships with dozens of business owners among our customers. I can’t overstate how often I hear SMB owners express their fears about a minimum wage hike. The impact will go far deeper than anyone they happen to hire for less than $15/hr. A rising tide lifts all boats, so those making $20/hr will also want a raise. This becomes unsustainable for the small entrepreneur to run a profitable business.
The current macro environment is already having the same effect. Business owners must hustle, take on extra work themselves, push their existing employees and lower the bar for new staff while paying everyone more. Of course, I agree we should figure out to raise pay standards for. It is an important issue in our country. But I also know that SMBs are the key economic engine for America. We need to be careful not to stifle this engine or make it choke. The current gravity for American SMBs adds a new level of relevance to Provana’s mission. We’re not just making SMBs more productive, we’re helping them survive and navigate the macro headwinds caused by our path to post-pandemic recovery.
The big boys have the best toys
To help the SMB, we must address their structural disadvantages. We believe SMBs have been missing out on two main drivers of large enterprise productivity. The first is globalization, where SMBs don’t have access to global resources. The second is technology. SMBs can’t afford to piece together world class tech for their business processes. Both are big handicaps.
Large enterprises have already figured out how to take advantage of global labor markets. They get the best labor rates for tasks that don’t have to be done in their home office. They can hire in different geos when labor markets get tight. They can spend millions of dollars on sophisticated IT organizations that deliver them custom solutions to streamline operations. And they can do all this while maintaining large, sophisticated compliance teams to adhere to strict industry regulations.
Even a midsize enterprise, like a 300-person law firm or a small regional hospital, cannot get access to global resources or custom tech. But there’s no reason that should be the case. This is precisely where we can even the playing field.
A new operating model for growth
Tapping into global resource pools and getting pre-customized tech solutions for core business processes creates a completely different playing field. A midsize lender or a law firm today can get completely bottlenecked by resource constraints. Automating some call center, compliance, and document processing tasks or quickly adding new global resources or both can supercharge operational capacity. The lender or firm can increase their business intake, knowing they have a solid back office to handle the volume. More importantly, they can flex their delivery capacity in line with business demand, which can move up or down for many reasons, as we’ve recently seen with the pandemic.
It takes a lot of overhead to enable a global model and build technology solutions. Overhead that most SMBs unfortunately don’t have the scale to deploy on their own. With today’s cloud and communications technologies, however, it is entirely possible to make these resources available and affordable for companies of all sizes. This is our mission and our passion. A well-honed model for delivering the right mix of back-office support and off-the-shelf products can make SMBs competitive with the big boys. And we feel good about arming the small businesses in our industry to continue to be the growth engine of America.
