Small Business Trends 2023: Overcoming Challenges and Leveraging Opportunities

The current economic environment is unlike any we’ve seen before. Interest rates are rising and a recession is looming, but at the same time businesses are finding success. – The best way to manage uncertainty is being as prepared as possible so you can continue to grow your business.

Every challenge holds an opportunity. When you have the right tools and resources to overcome bumps in the road, you’ll be able to leverage opportunities that arise. Looking at the small business trends for 2023, here’s how to overcome challenges ahead and find competitive advantages.

The current economic landscape

In the year ahead,  we’re moving into a stage that’s COVID-aware, rather than in the thick of the pandemic, which is great news for everyone. There’s high demand for goods and services from consumers, which is a positive for nearly all small businesses. But that demand has also driven supply shortages, fueled high inflation, and caused interest-rate hikes.

Although no economic environment is exactly like others before it, there are enough similarities that you can spot trends. Here’s what’s on the horizon for small businesses.

Small business trends for 2023

With the right tactics you’ll find the opportunities you can leverage for a successful 2023. Here’s what you can do to reduce risks and optimize opportunities:

Trend 1: Get more personal in your communications

Over the past three years, business owners like you maintained and grew their customer base by increasing their digital presence. You may have started taking online orders or improved your email and social marketing to keep your business top of mind.

Now, changes to tech algorithms and over-reliance on mass communications has left some customers feeling disconnected from their favorite brands. How can you efficiently communicate with your customers without losing a human touch?

Leverage the opportunity: Make customer communications a top priority. Make sure your methods focus on better customer service and accommodate tech changes. Find the sweet spot between leveraging tech’s capabilities while respecting your customers’ preferences and privacy. Find the right frequency for communications to make your customers happy.

Tactics: Keep an eye on tech policies and regulations that may impact data-privacy requirements so that your business is compliant. Know that these changes could impact your business’s digital marketing performance.

Do your own research on your customers and their preferences so that you’ll have access to your own information, rather than using third-party data. For example, online or email surveys and phone calls can help you gauge current needs and interests, and many customers appreciate the effort and care.

If you’re selling your products and services online, look at the value you’re getting from the platforms you’re using. Find the online sales and advertising platforms that give you the best return on investment for your business in light of new fee structures, rules, and regulations.

For example, some platforms may have increased the cost-per-transaction fees for listing on their sites. These changes can impact your business if you don’t or can’t change your pricing structure accordingly. Take the time to optimize your digital channels now, even if that means scaling back so that you can increase your investment in others.

Trend 2: Rising interest rates

Since the Federal Reserve started raising interest rates in 2022 to combat inflation, the cost of borrowing has continued to increase. If you don’t have fixed interest rates on your outstanding business debt, chances are you’re feeling pinched by higher monthly payments.

Leverage the opportunity: Now’s the time to see if you can secure a fixed-rate loan to consolidate and refinance your higher-cost business debt. This will reduce your monthly payments and make it easier to plan for your business’s future.

Tactics: Check the annual percentage rates (APRs) on all sources of business funding, from credit cards and lines of credit to any open loans. Make note of the APR for each, as well as your minimum monthly payment.

Then, research lenders to see if you can find a fixed-rate loan with a lower APR. If your business financials are strong now,  keep this information on hand in case you need it in the future.

Trend 3: Lenders will make debt-service a priority

Many pandemic-related loans are coming due and any missed payments on this debt may impact your credit score and ability to borrow in the future. If you took advantage of programs that don’t offer forgiveness like the Economic Injury Disaster Loan (EIDL) program or state-specific programs like NY Forward, update your budget and cashflow projections to reflect the payments. You’ll need to factor principal, interest, and any related fees into your budget and cashflow projections.

Leverage the opportunity: If you’re in a debt crunch, it might be time to consider refinancing. Although many pandemic-related loans have low interest rates, there may be consolidation options with longer repayment terms, which could lower your overall monthly payment. Some of the special loans available during the pandemic can’t be refinanced, but some of your other debt may be eligible.

Tactics: Getting started on this opportunity is easy: simply talk to your current lender and research additional sources to find out what’s available. You want to put your business debt in the best position for on-time payment.

Also, keep in mind that most small business lending is based on personal credit histories, so it’s important to effectively manage your personal credit now.

Trend 4: Fewer grant opportunities will be available for small businesses

Most of the special loan and grant programs that were created during the pandemic have ended. Large scale programs like the Paycheck Protection Program (PPP) and COVID recovery grants aren’t likely to come back. All of that’s to say your business can’t rely on these types of program for revenue replacement.

Leverage the opportunity: There’s no denying that pandemic-related grants were a lifeline for many small businesses over the past few years. As the economic landscape evolves, using up your grant funding without more in the works isn’t necessarily a bad thing. Grants aren’t a source of operating revenue, so if you’re seeking outside financing or investments, potential partners wouldn’t consider that funding. In other words, your grants could actually skew the profitability outlook of your business.

Tactics: Turn your focus to tried-and-true or new and creative ways to grow your business revenue. And if you need a funding boost, look for working capital loans that can help you smooth out cashflow crunches.

Trend 5: Higher expenses are here to stay

You’ve likely already experienced higher expenses for utilities, supplies, inventory, shipping, labor, rent, and just about every other business expense. Most, if not all, of these will likely stay higher. Inflation, supply chain issues, and a tight labor market continue to drive up prices, so it’s time to take a hard look at your profitability.

Leverage the opportunity: When was the last time you really dug into your revenue sources? How many unprofitable goods and services are you offering? Where are you spending marketing funds with little return-on-investment? When your profitability is in question, there’s an opportunity to reassess your strategy tighten your operations, and focus on what’s really driving revenue. Take the time to cut out unnecessary expenses and expensive strategies and you’ll be ahead of your competitors.

Tactics: Now’s the time to refine your revenue and expense lines. Review your offerings to find what’s making the most profit while weeding out unnecessary products or services.
If you added products or services during the pandemic to boost sales or to replace lines that couldn’t be serviced or produced, decide whether you need to continue with them. In many cases, you shouldn’t, but you may also identify some that you could expand further.

You should also review your marketing strategies to see where you’re getting the most for your spend. Shifting to lower-cost, higher-impact marketing tactics can make a big difference in your bottom line.

Pursuit can help you leverage small business trends 2023

The trends for the year ahead present challenges and opportunities for all small businesses. The more prepared you are for what’s to come, the better chance you’ll be able to leverage the opportunities each challenge holds. If you need funding to take advantage of the small business trends in 2023, Pursuit can help! We have more than 15 loan options available for businesses in any stage. Contact us today to learn more.

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