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Unpicking the claims behind the attention grabbing headline

The claim that small firms without a web site were losing substantial amounts of money attracted the attentions of Billy MacInnes who wanted to work out just where the numbers had come from

“Small Business Technophobes lose £1 Billion Every Day” screeched the headline accompanying a press release from Approved Index, a B2B comparison site for business services, which claimed that “some 1.98 million SMEs currently have no online presence, costing them a mammoth £343 billion every year”.

At first glance, that’s a staggering figure. Then there's the astounding assertion that those companies could increase their turnover by an average of £173,769 if they introduced a website. Equally surprising is the finding that small-sized businesses with 10-49 employees could gain £106 billion per year in revenue if they “introduced a website as part of their marketing strategy”.

Commenting on the findings, Cameron Blair at Approved Index stated: “Our findings prove that businesses who continue to ignore the importance of a website run the risk of losing millions of pounds to competitors.”

While very few people are likely to argue with the assertion that companies without a website could suffer in competition with rivals that have an online presence, the figures produced by Approved Index appear astonishing.

I was intrigued by the release so I asked for some more detail on the methodology the company employed to arrive at those figures. The answer from Approved Index, using the example of the Primary/Construction Industry sector, was that it had multiplied the number of companies without a web site (653,453) by the average turnover per business in that industry sector (£329,823.66).

This gave it an overall figure for the turnover of businesses that did not have a web site (just over £215bn). Next, to arrive at a figure for how much extra turnover could be generated if those companies introduced a web site, it calculated 48% of that overall turnover figure (£103bn). As to where that 48% figure came from, Approved Index said it was from Statista’s ‘Impact of introducing a company website according to small and medium enterprises’.

Some people may have noticed that there could be a small problem with this calculation. Namely that it is unable to make a distinction between companies that don’t have a website and those that do because it is based on average turnover for all companies, irrespective of whether they have a website or not.

Given that the average turnover figure is the basis for every other calculation, anything that springs from it can’t really provide any accurate information regarding companies without a website. The average turnover figure does not distinguish between companies with websites and companies without so, to all intents and purposes, they have exactly the same turnover. If we follow the assumption that companies without websites will be able to increase revenue by 48% after introducing a website then, because Approved Index is using an average for all companies, that suggests their turnover will be 48% higher (£488,139.0168) than companies that already have websites! Now that really would be incredible.

I’ve been trying to think of a simple analogy to illustrate how strange the figures are. Say, for example, there are 1,000 ice cream vans and the average overall turnover per van is £20,000 which makes it a £20m industry. Now, 40% of those vans don’t sell soft drinks but it’s estimated that adding soft drinks would result in a 20% increase in turnover. So, using the Approved Index calculation, the “lost” turnover for that 40% is £1.6m. Except that’s based on a figure where they start with the same turnover as vans that already sell soft drinks. So, to follow the reasoning to its logical conclusion, this means that by adding soft drinks, their turnover will become 20% higher (£24,000) than vans that already sell soft drinks.

When I asked whether the figures it had provided were reliable, a spokesman for Approved Index defended them “as a broad representation of something that is purely theoretical” (which is true), adding “the data is intended to highlight the potential size of the pie that businesses without a website are missing out on”. The data may well be intended to show the potential size of the pie, but the pie it shows is much bigger than it ought to be.

As for the headline, he added: “This is hyperbole.” The dictionary definition for hyperbole is “exaggerated statements or claims not meant to be taken literally”. Enough said.

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