Penelitian ini menganalisis pengaruh Digital Capability terhadap Digital Business Transformation dan dampaknya terhadap Small Business Performance di kalangan Usaha Kecil dan Menengah (UMKM) sektor makanan dan minuman di Manado, Sulawesi Utara. Variabel penelitian mencakup Digital Capability, yang merupakan kemampuan UMKM dalam mengadopsi dan memanfaatkan teknologi digital; Digital Business Transformation, yaitu proses perubahan yang diinisiasi melalui adopsi teknologi digital untuk meningkatkan efisiensi dan inovasi bisnis; serta Small Business Performance, yang diukur melalui Financial Performance (kinerja keuangan), Flexibility Performance (fleksibilitas operasional), dan Quality Performance (kualitas produk dan layanan). Data dikumpulkan dari 295 responden melalui survei dan dianalisis menggunakan metode Partial Least Squares-Structural Equation Modeling. Hasil penelitian menunjukkan bahwa Digital Capability berpengaruh signifikan terhadap Digital Business Transformation, yang kemudian memainkan peran penting dalam meningkatkan Business Performance, khususnya pada aspek Financial Performance, Flexibility Performance, dan Quality Performance. Digital Capability juga terbukti memiliki pengaruh langsung yang signifikan terhadap ketiga aspek kinerja tersebut. Selain itu, Digital Business Transformation berperan sebagai mediator antara Digital Capability dan kinerja bisnis, memperkuat hubungan tersebut. Implikasi manajerial dari temuan ini menunjukkan pentingnya peningkatan literasi digital dan adopsi teknologi oleh Usaha Kecil dan Menengah guna memperkuat daya saing mereka di era digital./This study analyzes the influence of Digital Capability on Digital Business Transformation and its impact on Small Business Performance among Small and Medium Enterprises (SMEs) in the food and beverage sector in Manado, North Sulawesi. The research variables include Digital Capability, which is the ability of SMEs to adopt and utilize digital technology; Digital Business Transformation, a change process initiated through the adoption of digital technology to enhance business efficiency and innovation; and Small Business Performance, measured through Financial Performance, Flexibility Performance, and Quality Performance. Data were collected from 295 respondents via a survey and analyzed using Partial Least Squares-Structural Equation Modeling (PLS-SEM). The results show that Digital Capability has a significant influence on Digital Business Transformation, which plays an important role in improving Business Performance, especially in Financial Performance, Flexibility Performance, and Quality Performance. Digital Capability also has a direct and significant impact on these three performance aspects. Furthermore, Digital Business Transformation serves as a mediator between Digital Capability and business performance, strengthening this relationship. The managerial implications of these findings highlight the importance of enhancing digital literacy and technology adoption among SMEs to strengthen their competitiveness in the digital era.