Small businesses went into beast mode this year. They got leaner, tougher and a whole lot wiser.
It's been eye opening to see so many of our own customers and fellow business owners adapt, change, diversify and develop into new product and service areas with great success.
Xero has put together these small business trends based on surveys with owners in the USA, Canada, the UK, Singapore, Australia and New Zealand. Also, comments come from accountants and bookkeepers in those same regions.
Business trend 1
Gearing up for nearly normal
After putting out fires for more than a year, business owners can see a more stable economy in front of them. Whether it’s a new normal or the old normal, it’s something they can finally plan for.
Small businesses know it won’t be a straightforward rebound. In fact, a third remain concerned about their ability to handle another crisis (Xero, 2021). But overall, optimism is beginning to trend upwards for small businesses.
“Customers are adapting really well and have come out more resilient, future focused and determined” says David Parker of Purple Accounts “They’re looking for funding to grow, tools to and simplify their processes and a trusted expert"
Business trend 2
Budgeting for you
Most business owners pay themselves last, after vendors and staff. Given the cash shortages of the past year, it’s no surprise that 60% are feeling a pinch on personal finances (Xero, 2021).
Businesses must analyse margins and focus on the products and services that generate actual profits as they try to restore cash to the business.
Owners often overlook upcoming business expenses when taking drawings, which creates cash flow issues later. Rather than clearing out the business bank account, they’re better off paying themselves a modest amount at regular intervals.
Business owners have to be honest about what the business can afford. If it’s not enough to support their lifestyle, then they need to create a very specific plan for how to grow that amount. How many more sales/customers do they need?
Want to make better personal income one of your business trends for 2022? Get tips in this guide on how to pay yourself.
Business trend 3
Being (slightly) less scared of spending
While there’s growing hope of a recovery, more than half of businesses are still nervous about how they’re going to pay their bills, and roughly 40% remain in cost-cutting mode (Xero, 2021).
Rebalancing away from a total spending freeze and back toward judicious investment will be one of 2022’s most delicate business trends.
While unnecessary and frivolous spending has reduced and will stay low, we see some increase in digital expenses like marketing and ecommerce.
There will be pressure to spend as markets recover. There is pent-up demand and smart businesses will go after that.
Business trend 4
Rethinking supply chains
More than a year after supply chains practically ground to a halt, 38% of businesses say that getting inventory is still an issue (Xero. 2021).
Supply prices are going up almost monthly and businesses are having to buy months in advance.
As a result, businesses are exploring multiple supply arrangements. They might have an import option and a local option so they’re not beholden to a single supply chain. Some are going directly to manufacturers, too.
Rising prices have discouraged businesses from carrying quite so much stock. As costs go up that slow-moving inventory becomes untenable. It ties up cash, but there’s also the opportunity cost – that 100K could be earning you 8% instead of depreciating in a warehouse.
Whichever approach makes the most sense will change from business to business. But either way, re-organising the supply chain will be a key priority and top business trend for 2022.
Business trend 5
Linking healthy minds to healthy businesses
Going out on your own can be a lonely business. People who do it may have traditionally ignored that sense of isolation, but that’s changing.
Some 43% of small business owners worry about their mental health. A similar proportion are concerned about their employees’ wellbeing (Xero, 2021).
It reflects a wider social acceptance of the emotional ups and downs of being human. A 2021 study by Xero and the New Zealand Institute of Economic Research set out to see how big a deal emotional wellbeing is for small businesses.
It found that "people struggle with poor wellbeing about a quarter of the time,” says Craig Hudson, who championed the research. “That’s 13 weeks of the year they’re not at their best.”
Anything a business can do to get its people – owners included – on an even keel pays dividends. So many dividends, in fact, that wellbeing may just become entrenched as a top business trend for years to come.
A culture of wellbeing creates more resilient, productive and happy employees. They can better cope with setbacks, take advantage of opportunities, and contribute to the business.
Learn more about wellbeing for small businesses in Craig’s blog.
Business trend 6
Kind of making peace with debt
Debt doesn’t sit well with small businesses. Never has - and yet it’s been a massive help in getting through the past year or so.
Debt is an uncomfortable trend for most businesses but seeing as 56% still face cash flow pressure, it’s likely to stick around for a while yet. There are, however, ways to keep it from becoming an unhealthy dependency.
There’s good debt and bad debt. Borrowing for things like equipment and enhanced productivity is good. Bad debt is generally when it’s used to cover cash crunches. You can’t avoid some operating shortfalls, but you don’t want to have a permanent layer of financing.
Inflation can eat into margins, so adjust prices to ensure you have enough cash to service debts.
These debts and help with funding them can be found here
Business trend 7
Getting stuff done with less help
Lots of businesses let people go during the past year and getting them back isn’t going to be easy.
New hires have a growing list of preferences. They want meaning, opportunities and a future with the business – plus other initiatives like flexi hours.
Not every type of business can provide those sorts of perks. As a result, business owners are sometimes replacing staff with their own labour. Unfortunately that means those owners have less time to work on improving the businesses.
Savvy businesses are searching for other ways to improve productivity. They’re learning to integrate technology for things like procurement, sales, inventory management and HR.
Business trend 8
Learning the ABCs of ecommerce
For retailers, ecommerce has been unavoidable for almost two years now. It’s fair to say that beginners have experienced some teething problems.
We asked ecommerce newbies what caused them the most grief in the first six months of their online journey. Roughly 60% had trouble calculating fees and taxes on online sales. A similar proportion found it tricky to make forecasts and manage cash flow (Xero, 2021).
People forget that merchant service providers and marketplaces take a cut of each sale Those fees – which can get close to 5% of revenue – need to be matched with the corresponding sale. The same goes for taxes. It’s a big bookkeeping job and one that the business owner can easily offload, so they can spend more time on growing their business.
Ecommerce really needs partner technologies to work properly. For some, you need to add the right software to help manage the accounting side. Xero is an end-to-end system can automate arduous bookkeeping jobs and show financial results on a dashboard - then you and your accountant can work together to improve your key numbers.
Is your small business trending towards ecommerce? Check out the Xero guide on how to start an online business.
Business trend 9
Integrated marketing - not just digital
Last year’s events compelled a quarter of businesses to consider a move online (Xero, 2020), which means a lot of people are on a crash course in digital marketing right about now.
Only about 2% on average will buy anything/enquire/sign up from your website. However, with expert marketing help this can be much improved to reach, attract and retain the right customers sustainably and profitably.
Helen Parker, professional CIM marketer says not to focus solely on paid advertising or on too many tactics. Learning what to fix, prioritise, ditch or double up on with a few effective tools is key to success.
Business trend 10
Going from cashless to cardless
A lot of the things that used to be involved in shopping aren’t anymore. Use of cash has been reducing for a decade, and now even cards’ days are numbered, at least in the physical sense.
Digital wallets allow customers to save their preferred payment information to their phones. They can pay by tapping their phone at the checkout terminal in stores, or by using solutions like Apple Pay and Google Pay to speed up checkout online.
Security is built into the experience because payments are authenticated through the phone using passcodes, facial recognition, or thumbprints. Offering seamless ways to get paid is a big part of providing a great customer experience. Companies supporting new mobile based payment methods will see an increase in repeat business.
How does Xero know this stuff?
Xero is used by 2.5 million small businesses in 180 countries. This small business trends 2022 report is based on their experiences.
Specifically, data came from these surveys and reports:
Xero 2021 – Voice of Customer, small business survey
Xero 2021 – Global eCommerce report, small business survey
An NZIER study, 2021 – Wellbeing and productivity at work. Research commissioned by Xero and conducted by NZIER.
For expert help with your small business call Purple Accounts on 01925 979500 or email: firstname.lastname@example.org
You can also visit our website and check us out first.