David Ortiz, CEO of Siigo, Shares Insights on How Technology Empowers Small and Medium Businesses in Latin America
Small and medium-sized businesses (SMBs) are essential to Latin America’s economy, yet their survival and growth remain precarious. Representing 99% of companies in the region, SMBs account for 67% of employment and 25% of GDP. Despite their economic importance, nearly 40% close within their first year, and only 30% survive beyond their fifth. A significant factor in this struggle is a reliance on informal practices and a lack of access to digital tools, which hampers their ability to adapt and thrive.
At Leading Entrepreneurs of the World, David Ortiz, CEO of Siigo, explores how digital transformation can address these challenges. The tools SMBs need are neither overly complex nor out of reach; they are simple, accessible, and capable of driving profound change when approached thoughtfully.
The Challenges Facing SMBs in Latin America
SMBs in Latin America operate under a dual burden of informality and inefficiency. Many rely on manual processes like handwritten invoices, cash transactions, and paper-based inventory management. These outdated practices result in poor financial oversight, missed opportunities for growth, and a lack of trust among stakeholders.
This informality creates a vicious cycle. Without proper records, SMBs struggle to access financing, attract skilled employees, or expand their customer base. Business owners often feel overwhelmed by the demands of running their operations and are forced into reactive, short-term decision-making.
The Path to Digital Transformation
Digital transformation is not about introducing complexity; it is about solving practical problems. SMBs do not need elaborate systems; they need solutions that meet them where they are and help them take manageable steps forward.
The first step is often the most important. For many SMBs, this involves adopting electronic invoicing, which is increasingly required by governments across Latin America. This small change sets off a chain reaction. With invoicing digitized, businesses can begin to track cash flow, monitor inventory, and gain insights into their operations. Over time, these incremental improvements build confidence and open the door to more advanced tools, such as e-commerce integration or online payment systems.
It is critical to address the fear and resistance many SMB owners feel toward adopting technology. For many, the idea of digital transformation conjures images of expensive, complex systems that require specialized skills. By framing technology as an enabler rather than a disruptor, we help SMBs see its value and reduce the psychological barriers to adoption.
The Impact of Formalization
Formalizing SMB operations does more than improve efficiency; it transforms how these businesses are perceived and how they operate within their communities. Formal businesses can access financing, hire better talent, and build trust with customers and suppliers.
Consider the example of cash flow management. Without visibility into receivables and payables, SMBs often rely on informal loans with high interest rates to cover short-term gaps. Digitizing invoicing and tracking payments eliminates much of this uncertainty, allowing business owners to plan more effectively and negotiate better terms with suppliers and lenders.
Moreover, formalization enables SMBs to participate in broader ecosystems. With proper records, they can qualify for government programs, secure contracts with larger firms, and integrate with supply chains. These opportunities create a multiplier effect, improving not just the SMB’s prospects but also the livelihoods of its employees and the strength of the local economy.
Lessons for Driving Digital Adoption
Efforts to bring digital tools to SMBs in Latin America highlight several important principles for fostering meaningful change:
- Start Small:
Digital transformation does not have to be an all-or-nothing proposition. Encouraging SMBs to take a single step—such as adopting electronic invoicing—creates momentum for further innovation. - Build Trust Through Simplicity:
Solutions must be intuitive and easy to use. SMBs are more likely to embrace technology when it feels accessible and aligns with their existing workflows. - Tailor to Local Needs:
Each country in Latin America has unique regulatory, cultural, and economic contexts. Digital tools must account for these differences to ensure relevance and usability. - Support the Ecosystem:
Accountants and advisors play a pivotal role in SMB success. Training these stakeholders to use digital tools amplifies their ability to support business owners and drives broader adoption. - Emphasize Long-Term Benefits:
While immediate gains are valuable, the real promise of digital transformation lies in its ability to create sustainable growth. This perspective helps SMBs see technology as a strategic investment rather than a short-term expense.
A Vision for the Future
The potential of SMBs in Latin America is immense, but realizing this potential requires a shift in mindset. Digital transformation is not a luxury for these businesses—it is a necessity. By formalizing operations, improving financial visibility, and embracing technology, SMBs can overcome the barriers that have long held them back.
The journey is not without its challenges, but the rewards are clear. Formalized SMBs contribute to stronger economies, more stable communities, and better opportunities for employees. As business owners gain confidence in their ability to navigate the digital world, they also gain the tools to shape their future.
Digital transformation is not about adopting the latest trends; it is about empowering SMBs to do more with less, make smarter decisions, and build lasting resilience. By starting small, staying focused, and supporting each step of the journey, we can unlock the vast potential of SMBs and help them drive meaningful progress across Latin America.
