Looking Ahead At Small Business Trends For 2023
Whichever way you cut it, the economic landscape is looking pretty bleak for American small businesses as they enter 2023. Rising costs, inflationary pressure, and unpredictable supply chains are just some of the hurdles they face in the year to come. But face them they do, with adaptive strategies, positive outlooks, and strong revenue growth.
Below, we look at some of the small business trends for 2023, including everything from blockchain to borrowing rates, to see how the next year might shape up for SMBs. We’ll look at the potential pitfalls they face as well as promising strategies to create more robust enterprises as we enter the new year.
Trends In Business Strategy
Your business strategy considerations are likely to be further-looking than just 2023, but there are a couple of major points that any small business should be considering on a day-to-day basis in the year to come.
First, people are increasingly concerned about the rapidly unfolding climate crisis, and sustainability must now be a core part of any small business’s strategy. Investors and consumers are looking to give their money to businesses that have the right social and environmental policies, making this one of the most important small business trends in 2023. Make sure any strategy changes are genuine – lip service won’t cut it in 2023.
Second, businesses must fold new technologies into their 2023 strategies. The digital transformation is continuing. Starting long before COVID-19, but undoubtedly sped up by stay-at-home measures, remote and hybrid work will continue to be a major consideration for small businesses in the year to come both logistically as well as in regards to talent acquisition and retention.
We are also seeing rapid disruption from technologies such as Artificial Intelligence (AI) and the rise in Web3 protocols and associated applications. These innovations will impact small businesses, whether directly or through a knock-on effect, such as via creative fields in marketing and branding.
There are plenty of other strategic considerations for 2023, many of which are industry specific, but these two are likely to impact SMBs across the board.
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Small Business Trends in Operating Expenditures
The operating expenses of small businesses have been driven up in recent months, and the aftershocks of this will likely still be felt into 2023. A recent report by Kabbage from American Express found that while the businesses surveyed nearly doubled their revenue year-on-year from July 2021 to July 2022, their profits remained stagnant due to increased expenses.
The increase in operating expenditures has been felt across the board, with 75% of the small businesses surveyed reporting that they felt impacted by “inflationary pressures” and more than half expecting those pressures to continue until at least next summer.
One of the major trends in small business operating expenditures is rising energy prices. Energy is often one of the three biggest expenses for small businesses, and increased prices have been a major drain in 2022, and this isn’t likely to change as we go into the new year. Gas for vehicles has been a significant source for these increases, with the price of regular gasoline increasing almost 50% in the first half of 2022; however, there are plenty of other operating expenses that are equally affected, from heating and cooling to delivered goods.
Business Trends in Employee Experience
The employee experience as we enter 2023 is one of great change. Throughout 2022, we saw what was referred to as “the great resignation” and quiet quitting, as employees left long-term roles to reassess. This pushed small businesses to offer a better work environment, including a shift to digital solutions as we discussed earlier. This trend is likely to continue as we move into 2023.
The shift to remote or hybrid work for employees at every level has been a game changer in the past couple of years and small businesses will have to continue adapting in 2023. One way is through increasingly affordable small business software, which can help connect teams for better workplace collaboration to drive productivity as well as worker satisfaction. Where once small businesses may have needed a meeting room and a whiteboard, nearly all employee experiences are now online, so having collaborative virtual spaces, as well as more traditional communication channels, is vital.
That said, with inflation driving up the cost of living, and putting the squeeze on businesses, we are seeing larger companies letting go of workers, so the labor market may still shift in 2022.
Trends in Tax Rates
In terms of tax trends for small businesses in 2023, the most notable is probably the proposed increase in the corporate income tax rate from 21% to 28% as part of the Fiscal Year 2023 Budget. Additionally, that same budget introduced new taxation in relation to partnerships, which may affect some small businesses depending on how they are structured.
Another tax trend for small businesses that work in, or are looking to work in, the Web3 space is the introduction of cryptocurrency taxation, including digital assets now falling under securities loan rules and the mandatory reporting for digital asset transactions.
Of course, all businesses will be affected differently, and you should consult a tax professional about any tax trends in the coming year.
Trends In Customer Experience
The customer experience has changed in similar ways to the employee experience. That is, it has been hit by the digital transformation. Customers are now demanding better communication channels from small businesses, including everything from email to social sites to online chat capability.
However, this trend shouldn’t be a concern since services such as online chat, video conferencing, group messaging, and web hosting for small businesses are now extremely accessible, so companies of any size are able to build an independent web presence to craft a customer experience that’s unique to them.
That experience has never been more important, with small business trends pointing to ever-more immersive customer interactions. The metaverse may still be some way off, but customers are looking to be taken on a journey when purchasing goods in a way they never have before.
The Impact of Inflation
While prices are expected to level out by 2023, high inflation in 2022 has already done a lot of damage. As we mentioned earlier, inflation in 2022 led to an increase in operating expenditure for many small businesses, but there are numerous other effects too.
First, there has been a shift in shopper spending that is likely to continue into 2023. A survey in early 2022 that examined where shoppers intended to cut back in the case of continued pressure from inflation discovered that:
52% of respondents would cut back on dining out
42% would cut back on driving
40% would cancel a trip or vacation
All of these cutbacks could impact small businesses from restaurants and diners to hotels and gas stations.
Some other areas in which people predicted cutbacks, such as dropping a monthly subscription (36%) and switching from a name-branded product (32%) are less likely to directly impact small businesses, but it could still have a knock-on effect – for freelancers working at larger firms, for example.
Additionally, small business loans have of course been affected, with interest rates being hiked in an attempt to tame inflation. On a positive note, many expect that interest rates will peak by early 2023, which could mean a return to a more positive business financing landscape by the summer of next year.
Some experts have pointed out that rising inflation could mean a recession on the horizon, but small businesses don’t seem flustered with 80% of respondents to the June 2022 Small Business Recovery Report confident they could withstand a U.S. recession.
What to Expect: Small Business Trends For 2023
From customer experience to employee expectations, 2023 is set to be an interesting year for small businesses. While inflation remains high and a recession looms, small business owners remain defiant and have the revenues to back it up.
Technology remains the red thread throughout many of the small business trends we’ve looked at for 2023, and with a rapidly digitizing work landscape, that’s no surprise. Small businesses are in a great position for this change, however, by being agile enough to make fast changes and simultaneously having access to increasingly affordable digital tools.
The future of email is here,
are you ready for it?
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