Keep an eye on these developments that will affect small businesses this year.
- Alternative funding sources are becoming more common for small businesses and may be an important option as interest rates rise.
- Look out for more paid media placements in traditional outlets, as well as increased investment in digital marketing.
- Human resources departments are increasingly offering more child care and mental health benefits to employees.
- This article is for entrepreneurs who want to understand the major trends affecting small businesses in 2023.
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.
Small business finance trends
Experts predict that these trends will affect financing for small businesses this year.
Alternative sources of capital will fill unmet funding needs.
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.”
Rising interest rates could cool the economy.
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.
Small business marketing trends
In 2023, experts predict increased investment in social media, user-generated content and entertainment.
Social media spending will increase.
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.
Marketers will leverage their best customers.
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.”
Marketers will seek to entertain customers.
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.
Small business tech trends
Look out for the following technologies to transform business in 2023.
Generative AI will disrupt business operations.
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.
Automation will become more important.
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 and virtual reality will come into their own.
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.”
