How Small Businesses Can Use AI To Compete with Larger Firms?

Running a small business previously felt like bringing a knife to a gunfight. Why? Because competing with big companies that used AI for everything was difficult. Also, AI was reserved for tech giants with steep pockets.

But fortunately, that has changed. 98% of small businesses now use AI-enabled tools. Even better news is that most of these businesses spend less than $100 a month on these tools.

Dozens of small business owners have always thought that AI was out of their reach. “That’s for the big guys,” they’d say. Or the common one: “I barely have time to check my email, let alone learn about artificial intelligence.” 

If these statements sound familiar to you, then this guide is for you. We will show you how artificial intelligence can help small businesses owners compete with larger firms. The focus will be on the practical ways to use AI that won’t break the bank or require a computer science degree.

Let’s get started.

12 Ways to Use AI in Your Small Business

You’ve heard the basics about AI, but what you really want to know is what it can do for your business. Here are 12 practical ways you can use AI to grow your business:

1. Set Up AI Customer Service

In a survey carried out by Tidio, they found out that 82% of customers would rather use a chatbot to try to solve their problems first before waiting for a human intervention. This is so that they can have faster response times – this is a 22% increase from 2022. Here’s how you can also set up an AI customer service: 

First, pick a tool like Intercom or MobileMonkey (both offer small business plans under $100/month). To set up your AI assistant:

1. List your top 20 most common customer questions
2. Write clear answers for each one
3. Add your business hours, contact info, and basic policies
4. Connect it to your website with a simple copy-paste code

The AI will automatically handle common questions like: “Are you open today?” “Where’s my order?” and “Do you deliver to [location]?” When customers ask something the AI can’t handle, it’ll pass them to you or your team. Small businesses using this method have cut their response time from 12 hours to 5 minutes. Your AI assistant can:

• Book appointments
• Track orders
• Answer product questions
• Collect customer info before passing it to your team

We advise that you start with just your FAQ answers and add more capabilities as you get comfortable. Most businesses master the basics in about a week.

2. Make Your Social Media Actually Work

26% of small businesses are already using AI or automation for social media, and 91% of those businesses report that AI has made their operations more successful. Here’s how to set this up:

1. Start with a tool like Lately or Hootsuite’s AI features ($29-50/month)
2. Give it access to your best-performing posts
3. Upload any blog posts or articles you’ve written about your business
4. Set your posting schedule (start with 3-4 times per week)

The AI model will then:

• Turn one good post into multiple variations
• Pick the best times to post based on when your audience is online
• Suggest trending topics in your industry
• Tell you which hashtags actually work for your business

Our tip here is to let the AI analyze your last 3 months of posts – it needs data to learn what works for your specific audience.

3. Fix Your Email Marketing

AI-powered emails are getting 32% higher open rates than regular business emails. Here’s what to do:

1. Pick an AI email tool like Constant Contact or Mailchimp’s AI suite
2. Import your customer list
3. Tag customers based on what they buy
4. Upload 5-10 of your best-performing past emails

The AI will:

• Write subject lines people actually open
• Sort your list into groups based on buying habits
• Tell you the best time to send to each customer
• Create personalized product recommendations

Start with one simple campaign to a small group of your best customers.

4. Use AI to Get Paid On Time

Businesses using AI billing get paid 35% faster on average. Here’s how:

1. Choose an AI billing tool like QuickBooks’ AI features or FreshBooks
2. Connect it to your bank account
3. Upload your unpaid invoices
4. Set your payment terms

The AI system will:

• Send smart payment reminders at the best times
• Predict which customers might pay late
• Suggest the best days to send invoices
• Track which reminder messages work best

Start by using it for your 10 largest accounts first, then expand.

5. Make Your Website Convert Visitors to Customers

Implementing AI can potentially increase eCommerce conversion rates by up to 30% and customer satisfaction up to 20%. Here’s how to set it up:

1. Choose a tool like Optimizely or Google Optimize
2. Add their code to your website (usually just copy-paste)
3. Pick what you want to improve (sales, sign-ups, etc.)
4. Set up 2-3 different versions of your homepage

The AI will:

• Show different versions to different visitors
• Track which version gets more sales
• Adjust your site based on whether someone’s on phone or computer
• Tell you where people are dropping off

Start with your homepage first – it’s where most people land anyway.

6. Predict Your Busy Times

McKinsey reports that AI-driven forecasting can reduce errors in supply chain management by 20-50% and cut warehousing costs by 5-10% while making more sales. Here’s how:

1. Get started with tools like Xoopah or Homebase AI
2. Input last year’s sales data
3. Add your business hours
4. Connect your point-of-sale system

The AI will tell you:

• Which days you’ll need extra staff
• When to expect rush hours
• How weather affects your business
• How many sales to expect each day

Begin with a two-week forecast and adjust as you learn the system.

7. Use Your Business Data

Businesses using AI analytics see 27% better customer retention. Here’s your game plan:

1. Pick a tool like Zoho Analytics or Tableau
2. Connect your sales data
3. Import your customer list
4. Set your main goals (more sales, repeat customers, etc.)

The AI shows you:

• Which products people usually buy together
• Who your best customers are
• Which products make the most profit
• When customers might stop shopping with you

Start by analyzing just your last 3 months of data.

8. Protect Your Business from Scams

Small businesses using AI security catch 89% of fraud before it happens. Here’s how to protect yourself:

1. Choose a tool like Crowdstrike Small Business or Cisco Meraki
2. Install it on your main business computer
3. Connect your online store (if you have one)
4. Set up basic security rules

The AI will:

• Spot fake orders
• Block suspicious emails
• Protect customer data
• Alert you to weird login attempts

Start with protecting your payment system first – that’s where most scams hit.

9. Speed Up Your Paperwork

The average employee could save over 4 hours per week by utilizing AI tools and assistants. This adds up to over 200 hours or 25 full work days per year. This applies to small businesses too. Here’s how to get started:

1. Choose a tool like Adobe Acrobat AI or DocuSign AI
2. Scan your most-used business documents
3. Upload your common forms and contracts
4. Set up your basic templates

The AI will:

• Turn paper documents into digital files
• Fill in repeated information automatically
• Catch missing signatures or information
• Sort and file documents for you

Start with the paperwork you handle most often – maybe it’s invoices or contracts.

10. Handle Your Taxes Year-Round

Small businesses using AI tax tools catch 55% more deductions. Here’s how to set it up:

1. Pick a tool like TaxBot or FlyFin AI
2. Connect your business bank account
3. Take photos of your receipts
4. Set your tax categories

The AI helps by:

• Sorting expenses automatically
• Finding tax deductions you might miss
• Organizing receipts by category
• Warning you about tax deadlines

Begin with just your current month’s expenses and expand from there.

11. Screen Calls and Meetings

Businesses using AI scheduling tools are saving 9 hours per week on meeting management. Here’s what to do:

1. Get started with Clara AI or Calendly’s AI features
2. Set your available hours
3. Add your meeting preferences
4. Connect your calendar

The AI will:

• Schedule meetings without back-and-forth emails
• Screen spam calls
• Reschedule meetings automatically when you’re running late
• Send reminders to everyone

Start by using it for just your client meetings first.

12. Track Your Competition

Small businesses using AI competitor tracking spot market changes 4 days faster than manual monitoring. Here’s how:

1. Choose a tool like Semrush AI or Kompyte
2. Add your top 3-5 competitors
3. Pick what you want to track (prices, ads, social posts)
4. Set important alerts

The AI tracks:

• Price changes from competitors
• New products they launch
• Their social media activity
• Their online ads

Begin by tracking just your biggest competitor for the first month.

Tip: For all these tools, most will offer a free trial. Try them out before you commit. And don’t feel like you need to use all 12 – pick the one or two that would help your biggest headaches first.

Conclusion

After reading these 12 different ways on how to use AI, you might be thinking, “This all sounds great, but I barely have time to eat lunch, let alone learn new tech.”

That is okay, but if you think about it, we were all nervous about using social media for business ten years ago. Five years ago, it was online shopping platforms, today, it’s AI. But small businesses that took the plunge early are still around, and they’re thriving.

Small businesses using artificial intelligence are serving customers faster, making more sales, and saving serious money. If you don’t feel like you need to transform your entire business overnight, pick one thing that’s giving you the biggest headache right now. It could be the hours you spend on customer service, or the constant worry about running out of stock. Start there and give it a month.

AI isn’t about replacing the human touch that makes your small business special but giving you more time to focus on what you do best, which is running your business and taking care of your customers.

The big guys are using AI to get even bigger. But now you have the tools to keep up with them – and maybe even outmaneuver them in your own backyard.

Frequently Asked Questions

Q: How can AI be used for small businesses?

AI can be used in small businesses to handle your everyday tasks like customer service, inventory management, and email marketing.

Q: How can artificial intelligence help businesses gain competitive advantage?

AI helps you match the capabilities of big businesses without investing heavily. You can use AI to predict customer behavior, automate routine tasks, and make data-driven decisions.

Q: Is AI too expensive for small businesses?

Not anymore. Most AI tools cost between $29-85 monthly – about the price of a cell phone plan. Many of them offer free trials and basic plans as well.

Q: How can I ensure the security and privacy of my data when using AI?

Choose AI tools that have SOC 2 certification and offer data encryption. Most reputable AI platforms now include security features that used to be available only to large corporations. Always read privacy policies and opt for tools that store data in your own country.