How are small businesses likely to fare as 2023 goes on? There are always challenges, but SMEs are in a great place to tackle them as the first half of the year draws to a close.
Small businesses in the US generate almost half of all economic activity and are a major party of the American economy. However, there are times when small to medium-sized enterprises (SMEs) struggle, and times when they flourish. Is 2023 shaping up to be the former or the latter?
Last year put small businesses in an interesting situation. The combination of a smaller workforce and inflation meant staffing costs increased, and it became harder to hire talented people. Although sales growth was fairly steady, around 90 percent of SMEs had negative cash flow for at least one month of 2022.
However, the year ended with a surprising amount of SME confidence. Around 90 percent of small business owners are confident they will still be in business at the beginning of 2024, despite warnings of a potential recession. So how is the year actually shaping up? Here is how 2023 is turning out to be for small businesses.
Challenges for US small businesses
While SME owners were feeling relatively confident at the end of 2022, it seems that hasn’t carried through to 2023. The most recent Small Business Optimism Index from the National Federation of Independent Business found that confidence was lower than it had been since January 2013 amid worries about the economy and shortages of staff.
Hiring problems are perhaps the clearest issue. An analysis of various studies conducted by Forbes found that most small businesses are looking to hire, but as many as 91 percent are struggling to find staff. SMEs may need to start looking at increasing wages in order to attract talent, which can in turn cut into their profit margins.
However, that same Forbes analysis found that despite this, most small businesses are expecting increased revenues over the next six months. This could potentially be used to hire staff or develop in new directions to safeguard against upcoming challenges.
Inflation is another key issue that many small businesses are worried about. It is the main small business concern according to the Small Business and Entrepreneurship Council, followed by recession worries and economic uncertainty. It’s clear that the government needs to step in to reassure SMEs, as these worries are only set to continue as time goes on.
What can small businesses do?
In the face of these challenges, SMEs need to take steps to secure their futures. In many cases, this will mean making small changes to gain back some profitability, safeguarding against inflation. Minor increases in productivity can have large impacts on profits when multiplied over a year, so even small steps should be considered.
For example, something as simple as standardizing all your business’ file types can save time and effort each day, and all this adds up over time. Switching to PDFs, for example, can also save you storage space due to their small file size. Using an online tool to convert PDF into editable PDF could be the key to being more productive and efficient.
SMEs might also want to consider alternative ways of attracting staff. For example, maybe you can’t pay more but you can offer a better working environment that is more considerate to your hires. This could be enough to attract talented candidates away from your competitors.
Given that small businesses make up such a large part of the US business environment, it is important for everyone that they be given the best chances of success. Making minor changes could be the key for SMEs to manage the challenges ahead and come out of 2023 stronger than before.