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Why small businesses must digitalize if they want to survive Written by Alexander Henn on 25. April 2016

The digitalization of the economy is inexorably on the rise. It questions long-standing business models and is becoming a massive driver of economic upheavals. Not surprisingly, small service providers with limited budgets are still quite hesitant when it comes to the use of digital solutions. Hair Salons, restaurants, craftsmen and other service providers are often reluctant to use comprehensive digital solutions. There are two main reasons: A lack of technical knowledge and awareness of the opportunities they offer, and skepticism in terms of costs. But digitalization will unstoppably find its way into the small service provider’s everyday business – thus opening the doors for new business models in innovative startups.

How digitalization opens doors

What are the reasons behind that? On the one hand, customers are increasingly active online. They search for information on their smartphone, shop online and organize as many things as possible using the internet – anytime and anywhere. Small service providers have to adapt this trend. They have to learn that digitalization is becoming an important instrument to make them stand out from their competitors.
Furthermore, another trend will increase the importance of digitalization for small service providers. The small learn from the big. Of course a hairdresser doesn’t have to care about every new trend, like the semantic web. But the awareness that the digitalization is linked with great chances will increasingly spread. Most digitalization tools were first used by leading companies. Now they will find their way to small service providers. This trend will yet again accelerate within the next years.

Online Appointment Booking

An example of the advantage of digital solutions is online appointment booking. Online, in this case stands for independence from time and space. Let’s take the example of a wellness provider. Imagine while sitting on the sofa late in the evening, you can check the availability of an appointment for a massage. For the service provider there is no disturbing phone call. Furthermore, other options are imaginable, for example the automated appointment reminder via short message or e-mail. The reduced number of no-shows alone is sufficient to cover the cost of an appropriate software solution. It is very likely, that online booking becomes mainstream within the coming years; especially service providers that are new to the market will rely on it.

Customer Management

A further example is customer management. Compared to the outdated index card systems, there are significant advantages that can be achieved with an intelligent software. For example, a hairdresser can have a comprehensive overview and will immediately know, when their customer was last in the salon, whether they prefer their coffee black or with milk, etc The hairdresser can take a picture of their customer being particularly happy with a certain hair color or the customer can send one. For example, if they are interested in having the same hairstyle of a certain celebrity. Taken individually, these options may not seem like a big thing, but in total they will cause a higher customer satisfaction and in turn more revenue.

New ways to provide feedback

Moreover, digital customer management offers new ways of providing feedback. For example, there is the possibility to ask the customers for feedback the day after their appointment – fully automated via e-mail or text message. Most of the customers feel more valued when asked for feedback on their degree of satisfaction. For the service provider, this has two advantages. Firstly, the provided feedback is often more honest, comprehensive and valuable than the feedback directly on site. Secondly, it reduces the risk of unhappy customers expressing their disappointment on an online platform. Moreover, by receiving negative feedback directly from the customer, the service provider can immediately get in touch with them.


Also in marketing, service providers can now break the mold, while in the past being limited to an ad in the local newspaper due to restricted budgets. Social Media is one thing, but, there are other ways to communicate with their customers. For example, they can be contacted by text message or e-mail. A restaurant could, for example, send out their lunch menus on a daily basis or call attention to special offers to make sure that the frequency of customer visits increases. There is a high potential for customer contact here just like when communicating with customers during dining.

Online Visibility and Reach

In this context, online visibility and reach is a factor that is strongly gaining in importance, especially for potential new customers. The number of consumers, that keeps tabs on special offers in the web is growing and growing, which is also related to the increasing number of smartphones. An appealing and mobile-friendly website is important, but, moreover, it is of great significance to appear in the top search results when people Google for a certain service. For example, there are solutions today, that make sure, that service providers are automatically present in the most important online partner directories. Thereby, improving their search engine ranking.
These are only a few examples that could be utilized unlimitedly. In 5 to 10 years the described digital solutions will be a crucial business factor also for small, local service providers. Those who seize the opportunity will be more successful in the future. Especially for aspiring startups, there are great opportunities to take advantage of this change by providing both innovative and affordable solutions.
[divider]About the author[/divider]
Alexander Henn is the Founder and Managing Director of Shore, founded in 2012. As Managing Director, he operates the startup that offers a wide range of digitalization solutions for small, local service providers. Among other solutions, this includes online appointment booking, a CRM system and a digital cash solution.