Small businesses need to adapt to a constantly changing market. To meet the needs of your customers and stay one step ahead of the competition, it’s critical to monitor the trends that affect your business’s operations, and there’s no better time to reflect than the start of a new year. To help you do so, we connected with experts in finance, marketing, tech and human resources to find out what you should expect in the coming year and how to position your small business for success.
Experts predict that these trends will affect financing for small businesses this year.
For many business owners, loans might not be an option, especially for businesses that incurred significant financial loss in the tumult of the past few years. In those cases, alternative sources of funding, such as alternative lenders and investors, might be vital to attaining much-needed funding.
“Alternative sources of capital will likely also play a pivotal role in keeping businesses solvent,” said Courtney Lawless, venture capitalist and co-host of the Amazon Prime series Wolf PAC. “Alternative sources would include … grants, fintech, venture capital, angel investors, peer-to-peer lending and crowdfunding, to name a few. These are important because many businesses that actually need the capital will not be able to meet the requirements of traditional funding sources.”
As part of an aggressive effort to curb inflation, the Federal Reserve raised interest rates four times in 2022. While inflation has started to fall, rising interest rates are expected to continue into 2023, which could cool the economy and even push it into a recession. Rising rates make borrowing more expensive for businesses and their customers.
Those added costs can drag on small businesses’ willingness to invest in growth, take out loans and otherwise deepen their risk exposure. At times like these, it can make sense for businesses to slow their spending, and they can expect their customers to do so as well. Federal Reserve Chair Jerome Powell has said he expects to lower rates in 2024, but that could change depending on inflation and other economic conditions.
In 2023, experts predict increased investment in social media, user-generated content and entertainment.
The leading social media platforms cumulatively have billions of users, so it is no surprise that social media has been a growing target for marketers. That growth is likely to continue, but slow somewhat, in 2023. An estimate from ad agency Zenith Media predicts social media will increase from 55% to 57% of overall global ad spend next year.
While social media advertising is increasingly important, it has become more competitive as well. Small businesses should focus on a multichannel organic approach to build an audience and brand awareness. While ads can bolster organic growth, small businesses should avoid getting into a social media arms race with competitors when organic approaches like content marketing could have a better return on investment.
Amid uncertain market conditions, look for marketers to turn to their most devoted customers as a source of revenue. By relying on existing customers who exhibit signs of brand loyalty, marketers will hope to drive sales to buoy businesses against economic headwinds.
“A great and cost-effective way to identify and take advantage of your biggest brand advocates is through strategic UGC [user generated content] efforts,” said Zarnaz Arlia, chief marketing officer for customer experience platform Emplifi. “Brands can maximize the value of UGC by promoting it through exciting offers, branded hashtags, contests and even via their e-commerce website.”
User-generated content is often less expensive than more traditional marketing efforts, and the results can be impressive. “Authenticity is what modern consumers are craving,” Arlia said, “and there’s nothing more authentic than the voice of the customer.”
As brick-and-mortar retailers fight to bring back customers, look for marketers to make shopping more exciting. Gorana Seeley, vice president of global retail for ARHT Media, said “consumers want to be inspired to purchase.”
For example, ARHT is betting that hologram displays will be a big draw for foot traffic. Leveraging emerging technology to captivate and delight potential customers will continue to be an effective way to capture their attention.
“You can beam in celebrities or influencers directly onto the sales floor, where they can interact with consumers in real time” and show off the products, Seeley said.
Look out for the following technologies to transform business in 2023.
Generative artificial intelligence (AI) is the ability for software to produce text, music, images and other creative work from a brief description. Though the technology has entered the mainstream only recently, the implications are enormous for many functions throughout a business. Generative AI can write marketing material, handle customer support requests, help design products and more.
Expect more people to immerse themselves in tools such as ChatGPT and AI art generators as AI becomes a widespread consumer-facing phenomenon for the first time since voice assistants like Alexa and Siri.
Venture capitalists and major corporations are investing billions of dollars in generative AI. No one knows exactly what the implications will be. But small businesses can expect to encounter an ever-growing number of generative AI tools that promise to revolutionize their operations.
Powered by AI, automation will increasingly work alongside tools that businesses already use to streamline a wide range of processes and functions. Logistics functions will pivot toward automated functions, from warehouses to robotic delivery systems, said e-commerce CEO Wolfe Bowart. “Automation helps retailers streamline their operations for maximum efficiency while freeing up employees’ time so they can focus on more creative tasks,” he said.
In addition, expect automation to continue to play a role in creating more personalized recommendations for consumers. By helping businesses understand their visitors based on their previous actions, demographics and other data, automation enables companies to create the online interactions, recommendations and offers that are most likely to appeal to particular users.
Augmented reality (AR) and virtual reality (VR) have been in the zeitgeist for some time now, but they might see more widespread adoption by businesses in 2023. Best of all, small businesses could take the lead on the trend.
“Virtual and augmented reality allow us to experience the world in a different way. And especially during a pandemic, it’s extremely powerful,” said Joe Apfelbaum, founder and CEO of B2B marketing company Ajax Union. “If you want to go to networking events, you can go to VR networking events happening right now. You can create trade show exhibits that are VR and AR experiences in an affordable way.”
Other technologies businesses can’t get away from are AI and data analytics. These two technologies are an ideal match that allows businesses to not only collect massive troves of data but also use machine learning to make sense of that data. The insights businesses gain in this way can be used to target marketing campaigns or find new efficiencies in internal processes.
“You can have a high level of personalization today because of big data,” Apfelbaum said. “You can use it to create a custom user experience, because you know what your customers want in a predictable way.”
AI can do more than simply contextualize business data, Apfelbaum said. “For example, this call is being transcribed by AI,” Apfelbaum said. “If I say ‘action item,’ it will automatically take action items. If I say ‘fifty dollars,’ it will automatically create a section for the money we’re mentioning.”
Getting started with AI is more affordable than you might think. “Depending on what your business is and what you’re looking to accomplish, you can leverage AI and automation in a very affordable way,” Apfelbaum said. “You can just get one personal business license for a lot of the tools out there.”
A common misconception about developing tech is that it’s the realm of big businesses. However, Apfelbaum said the opposite is true.
“If you’re a small business and some new tech comes out, you can implement it immediately,” he said. “A big company has to test and test, and by the time they test and set everything up, they don’t want to change it again because they’ve invested so much.”
That ability to adapt to developing technology gives small businesses an edge, leading them to drive mass adoption of technologies such as AR, VR and machine learning in 2023.
Developing technologies such as AR, VR and AI will start to be adopted by mainstream businesses and consumers. Small businesses will be important in driving this mass adoption.
As the demand for high-quality talent increases, employers will look to more ways to attract and retain the best employees in 2023. Look out for these trends.
With companies still struggling to attract workers, more companies may offer child care benefits to entice parents to fill vacant positions. For parents who have to work late shifts or long hours after the end of the school day, ensuring their children are cared for is a major priority. Businesses that offer parents support in finding and paying for child care may have an easier time attracting job candidates than those who don’t.
“These benefits help employees feel supported and valued, which leads to increased job satisfaction and retention,” said Jessica Chang, CEO of WeeCare, a child care network.
There are numerous options, including search assistance, full or partial stipends, and emergency backup care. Some businesses even offer on-site day care facilities so children can be close to their parents while they work and easily picked up at the end of their parents’ shifts.
Occupational burnout has become a problem for many employees, and when top talent gets burned out, it can damage productivity. That’s why many businesses have chosen to prioritize mental health as part of their PTO policy. Expect this trend to continue in the new year.
“In 2023, there will undoubtedly be a lot of conversations about sick leave,” said Jamie Coakley, senior vice president of people at remote IT provider Electric.
According to Coakley, the increase in remote and hybrid work makes the need for mental health considerations all the more important. Although many people are now working from the comfort of their home at least some of the time, this arrangement makes it easier for them to work long hours without unplugging to take a break, thereby increasing the risk of burnout.
“The traditional understanding of time off doesn’t really apply to the current life we’re living these days with remote work becoming mainstream,” Coakley said.
These are just a few of the many ways business is changing. Amid ongoing technological innovation and an unstable geopolitical climate, change and surprise are constants. But you can be prepared for those changes and position your business for success, even in the most difficult times. By keeping an eye on trends like those above and anticipating what they mean for your business, you can gain a competitive advantage.