Boosting Productivity in Small Businesses: Insights from the Latest Research

Small businesses keep economies running. That’s not news. But what’s often overlooked is this: despite their impact, they lag far behind large firms when it comes to productivity. And that gap isn’t shrinking fast enough.

The good news? We’re learning what works — and what holds small businesses back. The research is telling, and the path forward is clearer than it used to be.

A 2025 report from the Bank of America Institute showed a bump in U.S. small business productivity — about a 5% jump year-over-year. Encouraging, yes. But here’s the catch: small businesses are still only about half as productive as their larger peers.

In emerging economies, the gap’s even more extreme. On average, small firms there produce just 29% of what big firms do. That’s not a small gap. It’s a chasm.

Why does this matter? Because the world is moving fast — and being slow isn’t an option for long.

What’s Helping — and What’s Holding Businesses Back

The research points to four big levers:

1. Tech Adoption Still Trails

Larger companies are twice as likely to adopt advanced tools like AI. That matters. AI, automation, and digital systems don’t just sound cool. They free up time, cut down on errors, and help you make smarter decisions.

That being said, there’s a shift happening. The tiniest firms (1–4 people) are showing some of the highest expectations for using AI in the near future. They’re small but ambitious.

2. Investment Makes a Difference

Productivity grows when businesses invest in the right things — software, better equipment, space that works. The post-pandemic surge in new businesses has actually helped here, pushing overall productivity trends upward.

But not everyone’s keeping pace. Small firms still struggle to consistently make these investments.

3. Too Many Distractions, Not Enough Focus

According to a 2024 Slack study, small business owners lose 96 minutes a day to context switching and searching for information across tools. That’s not just annoying — it adds up fast.

In response, over half of them introduced new tech just to stop the chaos. When tools talk to each other, your brain doesn’t have to jump around so much. That’s a win.

4. People Matter More Than Ever

Training, performance management, upskilling — larger firms have systems for this. Small businesses often don’t. That limits long-term output, even when the team is talented and committed.

Four Research-Backed Ways to Boost Productivity

If you’re a small business owner, here’s what actually works — based on hard data, not buzzwords.

1. Set Daily Goals

A 2025 study out of Tilburg University found something deceptively simple: when workers set daily goals, productivity goes up. Specifically, output rose by 16%, and firms saw a 13% bump in labor performance — no bonuses required.

Goals help people focus. They give structure. And they don’t cost a thing.

2. Use Technology That Makes Sense

You don’t need a data science team. But adopting the right tools — especially ones that automate repetitive tasks or simplify decision-making — changes everything. Teams move faster. Customers notice. And you don’t have to remember 14 different logins just to get your job done.

3. Motivate with Meaning

Research highlights three motivators that matter: strong relationships, fair pay (especially with performance bonuses), and regular recognition. You don’t need to throw cash at every problem. But people want to be seen. They want to grow. That matters more than any fancy ping-pong table ever will.

4. Rethink Remote Work — Don’t Just Tolerate It

Remote work can work beautifully for small teams — but only if you’re clear about what success looks like. Don’t track things like how fast someone replies to an email. Measure project outcomes, quality, and contribution. That’s what really matters.

A Final Thought

It’s tempting to think small businesses just need to “scale smarter” or “embrace innovation” (whatever that means). But the real story is simpler: clear goals, fewer distractions, better tools, and stronger teams.

Do that, and productivity improves. Not overnight. But measurably, meaningfully.

And when small businesses thrive, so does the economy around them.