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Aims: This study examines how strategic planning, financial and resource management, business innovation strategy, and market adaptation strategy relate to the perceived financial performance of small and medium-sized enterprises (SMEs) in Zanzibar. It further tests digital transformation as a moderator and specifies geographical location as a proposed source of spatial heterogeneity, subject to verification of the Rural/Urban field.

Study Design: Quantitative cross-sectional explanatory survey.

Place and Duration of Study: The study covered registered SMEs in Zanzibar operating in agriculture, tourism, and trade. Questionnaires were administered in printed and electronic formats during the authorised fieldwork period from 17 February to 17 May 2026. Of 365 questionnaires distributed, 350 complete responses were analysed (95.9% usable-response rate).

Methodology: The population comprised 4,144 registered SMEs. A stratified random sample was drawn from the registered-SME frame covering tourism, trade, and agriculture. Five-item Likert scales measured each construct. Composite scores were analysed using hierarchical ordinary least squares regression with HC3 heteroskedasticity-robust standard errors. Continuous predictors were mean-centred before interaction terms were created. Because the supplied analytical file contains no field-observed location variable, Rural/Urban results remain provisional and cannot support geographical inference until verified locations are substituted and the models rerun.

Results: All four strategic practices were positively associated with perceived financial performance: strategic planning (b = 0.228, P < .001), financial and resource management (b = 0.190, P < .001), business innovation strategy (b = 0.249, P < .001), and market adaptation strategy (b = 0.261, P < .001). Digital transformation had the largest direct association (b = 0.810, P < .001) and strengthened the associations of financial/resource management (b = 0.130, P = .032) and business innovation (b = 0.162, P = .006) with performance. The provisional location-interaction block added only ΔR² = .002 and was not significant, F(5,334) = 0.63, P = .677; this spatial result is not interpreted because the location labels were not field-observed.

Conclusion: Strategic and digital capabilities jointly explained substantial variation in owner/manager-reported financial performance. Digital transformation operated as both a strong direct capability and a selective complement to financial/resource management and innovation. The study retains geographical location as an important theoretical boundary condition, but no geographical conclusion is publishable until verified business-location observations replace the provisional labels.