Small Businesses Are Suffering From a Lack of Data Sophistication

BIZTECH: How would you characterize small businesses’ ability to use data today — advanced, functional or mostly reactive?

Morrow: It’s the latter two, and maybe a combination of it. You have some small businesses that are doing a good job. But the reality is most of them are going to be using simple databases or Excel.

Wade: They talk to peers, understand what types of data are typically useful for their operations, and apply it in those familiar ways. For most, the approach remains functional. Time is the primary constraint when it comes to developing new, potentially beneficial ways of using data, and small business owners often lack the bandwidth to explore those alternatives.

Jones: Most small businesses that are not tech-centric are going to struggle with data. Their information is often spread across many different systems, making it difficult to get a clear view of how things are performing across areas like sales, marketing and operations. Bringing that data together into a single, usable view is a common challenge.

Kerrigan: It is mostly reactive but moving quickly to functional, given their rapid adoption of technology tools to help them use their data for more actionable purposes. Small businesses understand the importance of data; they’re simply data fragmented and overwhelmed with other things.

BIZTECH: Do small businesses typically have a data strategy? What does that typically look like for them?

Morrow: Not usually. A lot of them don’t have a formal, written strategy, but they do use data as best they can. What I encourage small businesses to do is to think of their data strategy as their business strategy, because that’s all the data strategy really is.

Wade: Small businesses tend to rely on the data that is most readily available and easy to use, such as repeat customer behavior or basic customer demographics, to guide marketing and operations. For most, the approach remains basic, often building on what they have historically done, with incremental adjustments as new tools become available.

Jones: What they’re doing is mostly ad hoc. They’re commonly looking into the most critical data, such as financial data or sales performance, on a regular basis, but they might be flying blind with many other kinds of data that would help them out.

Kerrigan: More of them understand the importance of having a data strategy. Small businesses certainly know they sit on a lot of valuable data. It’s just a matter of prioritizing that data and putting it to use. At this point, strategy is sort of siloed rather than having a broad-based data strategy.

BIZTECH: Where do you see small business data strategy falling apart most often? Collection, access, analysis or culture? All the above or somewhere else?

Morrow: I think it’s all the above — but it’s not just small businesses that struggle with this. Large enterprises and medium size firms all do. For lots of small businesses, data sits at the bottom, so when they try and push a culture initiative, they hit roadblocks.

Wade: Many small businesses have information they collect one way or another; they just lack the tools to sift through that information and use it strategically. They usually don’t have employees dedicated to these kinds of initiatives, even if they could be beneficial. As a result, many remain unconvinced that investing in data strategy will meaningfully move the needle, especially compared to larger organizations with the flexibility and capacity to approach data in more strategic and impactful ways.

Jones: A major challenge is that their data is spread across disconnected systems, such as accounting tools, CRM platforms and web analytics. That makes it difficult to connect insights or understand cause-and-effect across the business.

BIZTECH: How is AI changing the ways small businesses are thinking about data?

Morrow: AI helps level the playing field for small businesses. You might not need to hire five data engineers to help create better data architecture or data engineering. Maybe you only need to hire one who can use AI to help drive it.

Wade: While there is broad recognition that AI will be important in the coming years, adoption remains gradual as businesses weigh costs and wait to see which tools deliver clear value. Newer companies generally move faster because they can build AI into their operations from the start.

Jones: Many are using tools such as ChatGPT or AI features built into platforms like accounting software to ask questions and generate insights, rather than manually pulling reports. This lowers the barrier to entry for basic analytics, though most small businesses are experimenting with these tools rather than building more advanced, integrated AI systems.

Kerrigan: AI is accelerating curiosity and urgency around data and operationalizing it. It’s allowing small business to make smarter decisions; for example, we have seen growing use of AI pricing tools among small businesses to make pricing decisions more aligned with the marketplace and what their business needs are.

BIZTECH: Are small businesses in a place with their data where they’re able to capitalize on AI?

Morrow: I’m not sure they are, but it doesn’t mean you don’t start doing. That’s one of the things that halts organizations from jumping in appropriately. Just because your data isn’t perfect doesn’t mean you shouldn’t be cleaning it, architecting it, etc. If you sit by and wait for data to be perfect, you’re going to fall behind even further.

Wade: While some small businesses are positioned to take advantage of AI, many have not yet fully considered how to apply it to their data. In some cases, their data environments could support AI use with relatively little effort, but adoption remains limited as many are still in a wait-and-see mode — even as they recognize it will become increasingly important over time.

Jones: Small businesses can use AI to analyze individual data sets, but their ability to fully capitalize on it is limited by fragmentation. Because data is typically spread across disconnected systems, AI is often applied in isolated ways, such as analyzing accounting or sales data separately, rather than delivering cross-functional insights. This makes it difficult to leverage AI’s broader pattern-recognition capabilities across the business.

Kerrigan: Most small businesses will say that one of their weaknesses is that they’re not in a place where they can leverage AI across the enterprise. The broader issue is that while they have data that is siloed, they’re also using AI tools that are siloed.

BIZTECH: What should small businesses be doing to get more value from their data?

Morrow: Small businesses should be diving into upskilling and reskilling the literacy side of things. That’s going to help you understand the data collection, the data management, the data governance, the AI prompting — all these things that you can be doing so as your upskilling and reskilling proceeds forward, you can take on these other tasks that get your small business competing in a more effective way using data and AI.

Wade: Small businesses can get more value from their data by learning from peers and industry groups. Conversations with other business owners, trade associations and even employees can help surface practical ideas for using data more effectively. This kind of informal, collaborative approach allows small businesses to identify what is relevant and achievable, helping them move past the initial barrier of getting started.

Jones: Over time, a more strategic step is to consolidate data into a centralized environment, such as a cloud-based data warehouse, to enable more holistic analysis. While this requires time, effort and often external expertise, it creates a foundation for connecting data across the business and unlocking more advanced insights.

Kerrigan: Start with decisions, not dashboards. Focus on two or three core business questions — such as which customers drive repeat revenue or where margins are being lost — and tie data directly to revenue, costs or growth. Build a “good enough” data foundation and use it in daily operations, not just reports.