How AI could give SMEs a competitive advantage over larger businesses
For an SME looking to grow, taking on more customers, developing new services or expanding operations often requires significant investment in people and resources. The costs involved can make it difficult for them to pursue opportunities, even when there is clear commercial reward.
But developments in generative and agentic AI are starting to change this. By automating administrative work, supporting market research, and increasing the capacity of existing teams, for example, AI can allow smaller businesses to expand their capabilities without increasing their costs at the same rate.
This could have significant implications for how SMEs compete. Therefore, rather than simply thinking about how AI can make them more productive, SMEs should consider how it can reduce some of the financial and operational barriers that have traditionally limited their growth.
Business growth with a small team
One of the biggest limitations for SMEs wanting to grow is workforce capacity. Taking on more business often means recruiting additional employees to manage enquiries, process orders, handle admin tasks, and support day-to-day operations, often before the financial gains associated with that growth are realised.
As a result, for small businesses operating with tight margins, committing to new hires can represent considerable financial risk, particularly before additional revenue is guaranteed.
AI can help reduce some of this pressure. For example, generative AI can already assist employees with activities such as preparing documents, analysing information and responding to routine enquiries. Agentic AI takes this further by enabling systems to undertake sequences of connected tasks with limited human intervention, while retaining appropriate oversight.
For example, an SME providing professional services could use AI agents to support client onboarding, gather information, check documentation, prepare initial paperwork, and flag issues that require an employee’s attention.
This could allow existing teams to manage a larger volume of work without requiring a corresponding increase in staff.
The goal is not to avoid recruitment altogether. As businesses grow, they will still need people with the right expertise to manage important relationships, make decisions, and deliver services. In a survey carried out by Goldman Sachs, 87% of small businesses reported that AI was supporting their workforce rather than replacing it.
AI could also influence the types of employees SMEs need to recruit. According to OECD research, 20% of SMEs using generative AI reported an increased need for highly skilled workers.
This suggests that AI could allow SMEs to focus recruitment on specialist expertise that supports business growth, rather than simply expanding teams to manage growing administrative workloads.
Accessing expertise that was previously out of reach
Large businesses are often able to employ specialist teams across functions such as data analysis, financial planning, marketing, and business development.
SMEs, on the other hand, often lack the resources to employ dedicated specialists in each of these areas. Instead, responsibilities may be shared between employees whose primary expertise lies elsewhere, or businesses may rely on external providers.
But AI could now help narrow this gap by making certain analytical and research capabilities more accessible. For example, SMEs could use AI to examine sales data, prepare financial forecasts, analyse competitors’ offerings, or gather market intelligence.
These activities still require human judgement, but AI could help SMEs gain a clearer understanding of their commercial performance and the opportunities available to them, without relying on dedicated teams for every aspect of research and analysis.
This could be particularly valuable when exploring new products, services or market, allowing smaller businesses to access customer demand, identify emerging trends, and make more informed decisions about where to focus their investment.
Removing barriers to business growth
For smaller businesses, winning a major contract can be a significant milestone, but delivering it can present an equally substantial challenge. A company may have the expertise to provide a service, yet struggle with the operational resources needed to handle a larger volume of work.
AI can help address this by enabling smaller teams to manage some of the administrative demands associated with larger contracts, including processing documentation, tracking progress, and coordinating routine activities.
This can give SMEs greater confidence when bidding for work that might previously have stretched their resources, while allowing employees to concentrate on the specialist aspects of delivery.
The same principle applies when introducing new products or services. AI could support the research, planning, and administrative work involved in testing a new offering, allowing businesses to establish whether there is sufficient demand before making a substantial investment.
Of course, businesses must still be realistic about what they can deliver. AI cannot compensate for a lack of specialist knowledge or remove the need for appropriate oversight. However, it could help SMEs pursue more ambitious opportunities without placing the same pressure on their existing teams.
Rethinking the cost of growth
Ultimately, the value of AI for SMEs will be determined by what businesses achieve with it.
The opportunity is to translate improvements in efficiency and access to information into tangible commercial outcomes, whether that means securing a major contract, launching a new service, or identifying an untapped source of revenue.
Businesses will still need a clear understanding of their customers, commercial priorities, and where opportunities exist. But those that use the technology to support these objectives will find themselves better placed to pursue their ambitions.
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