As a result, these businesses reported missing out on an average of £61,000 in additional revenue. That’s equivalent to 12.5% of income each year. 

The survey of 1,000 small and medium sized business leaders found that almost half (46%) of the smallest businesses have experienced burnout and stress because they are taking on too many roles at work. On top of this, almost one-third (32%) say they can’t take on new staff or grow their business because they are too distracted by operational duties.

Kate Hayward, UK Country Manager, Xero, said: “The smallest firms are missing out on so much. Losing half of their working week juggling so many support roles is not only costing them revenue, but costing our economy much needed jobs and productivity gains. We need to stop grouping all SMEs together, and give the smallest businesses more tailored support to free up more time for them to focus on growth.” 

Not all SMEs are the same 

These challenges are not restricted to the smallest businesses – medium and large SMEs (50-250 employees) also experience similar time pressures. But they have the resources to employ people across non-core business functions.

For example, 93% of medium and large SMEs (50-250 employees) employ a finance or accounting specialist, but just 37% of the smallest businesses have invested in one. This gap in resources is costing the smallest and sole trader businesses (0-9 employees) twice the productivity gains of larger SMEs – 12.5% extra turnover annually compared to 6.39%. 

The smallest firms want to be heard 

As well as having more resources to hire dedicated staff, larger SMEs (50-250 employees) also feel much better understood and supported by governments, industry and professional bodies. 

Almost half (44%) of the smallest businesses and sole traders (0-9 employees) say it’s difficult getting the right advice and support for a business of their size. And only 42% feel their industry, trade or professional body understands the pressure on them, compared to 74% for larger SME firms (50-250 employees).

This isn’t just constrained to industry, trade or professional bodies though: only 20% of the smallest businesses and sole traders believe governments and policymakers understand them, and only 33% feel tech firms do, compared to 54% and 69% respectively for larger firms. 

Hayward added: “This is what we call the ‘SME fallacy’;  the damaging assumption that all ‘SMEs’ are the same, have the same challenges, and require the same support.”

It’s widening the digital divide too 

The research also reveals a slower adoption of technology among the smallest firms and sole traders (0-9 employees): just 58% use finance and accounting software, compared with 84% in medium and large SMEs (50-250 employees). But when these small firms are using technology they are finding it effective; 85% who use finance software, 84% who use sales and marketing software, and 80% who use HR platforms.

Xero previously found via its ‘Digital Drag’ research, that if all small businesses digitised at the same rate as the top 20% of tech adopters, it could add £77 billion to the UK economy. 

How can we work together to fix the problem?

Policymaker action: when bringing in new policies or legislation, specifically consider the Government policy on the smallest of small businesses and publish this as part of the wider impact assessment.

Make advice relevant: small business champions should tailor what they do to the smallest firms, to help them make the 12.5% productivity gains.

It’s time to speak small business language: tech helps the smallest businesses juggle multiple hats, freeing up more time for the core business. It's crucial that tech companies understand what small businesses need and speak their language.

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