From the broad adoption of digital payments to the steady rise of the conscious consumer, inflation, supply chain disruptions, and the ongoing talent wars, powerful forces buffeted businesses in 2022.
Here’s a look at five strategies business owners embraced in 2022, and why they will remain critical for success in the year ahead.
OPTIMIZE YOUR PAYMENT STRATEGY FOR EFFICIENCY
In early 2022, 73 percent of businesses said accepting new forms of digital payments was fundamental to growth for the year. The growth of digital adoption shows no sign of downshifting.
“Businesses had no choice but to adopt new technologies and methods,” says Steven Martinez, San Francisco Regional Manager at Bank of the West. “As a result, they’re looking for automation or more efficient methods for accepting and making payments.”
A slowdown in economic activity projected for 2023 will make payment optimization all the more important. Amidst slowing sales and rising costs, businesses stand to benefit from a strategy that speeds inbound payments and reduces costs by harnessing digital capabilities.
MARKET YOUR MISSION TO GROW YOUR CUSTOMER BASE
In 2022, consumers continued to throw their purchasing power behind the causes they care about. In fact, 82 percent of consumers reported wanting to buy from companies that support the environment and social issues they’re passionate about, according to Bank of the West’s Money Matters report.
Small businesses can tap into the rise of conscious consumers by focusing on their own values and communication.
“Brands and retailers really do themselves a disservice if they’re not communicating both actively and authentically with their audiences about their brand purpose and what their brand stands for so that consumers can align with them,” says Laura Hills, Director of Client Development at market research firm The NPD Group.
Heading into 2023, it is clear the rise of the conscious consumer is not slowing down. In fact, the Harvard Business Review says, demand for sustainability has become the norm and “there’s no going back.”
SEEK FINANCING EARLY TO MAINTAIN GROWTH
Getting financing is never a quick process—in any year. In 2022, Bank of the West Small Business Credit Manager Roxann Burns notes: “A lot of business owners look for debt financing when they’re a little strapped. Seek funding before you completely run out of cash.”
With rates continuing to rise and economic growth slowing heading into 2023, this advice is even more pertinent. If you’re considering financing, make sure you take into account the potential effects on your business’s finances of softening sales, inflation, and continued supply chain challenges in 2023.
“You need to have a balance sheet, an income statement, and a debt repayment schedule,” Burns says. “The business needs to demonstrate, with reasonable assurance, that it can make the loan payment every single month.”
USE YOUR PURPOSE TO RECRUIT AND RETAIN TOP EMPLOYEES
In 2022, almost half of decision-makers said they would quit or look for another job if their company didn’t support issues that were important to them, according to the Money Matters report.
The current level of job openings is over 20 percentage points higher than the historical average, according to the National Federation for Independent Businesses (NFIB). And looking ahead, a study by the Work Institute predicts that 35 percent of employees may be leaving their jobs each year by 2023.
With the cost of replacing an individual estimated at one-and-a-half to two times their salary, high turnover is a costly problem for a business. Minimizing HR costs by keeping top-performing employees will be an important part of many companies’ strategies in 2023.
Make sure your team knows how their work directly connects to your company’s mission. If your company is truly purpose-driven, then it should extend down to the role level. In addition to weaving your purpose into official job descriptions, direct conversations with your employees will ensure they understand how their work matters and has meaning. Purpose was identified as one of the top three drivers of retention in 2022.
EXPAND YOUR CONTINGENCY PLAN TO REDUCE UNCERTAINTY
The pandemic elevated the importance of business forecasting and preparedness amidst uncertainty and volatility. Even as the pandemic subsides, the range of business risks seems to keep growing.
A contingency plan outlines the actions employees need to take in response to an event that may or may not happen in the future. But along with preparing for things like natural disasters and cyberattacks, some of 2023’s risks are already being anticipated.
More than half of executives in one survey said they do not expect a return to a “normal” supply chain until the first half of 2024 or later. How resilient is your supply chain? Can alternates fill your orders if your go-to supplier can’t deliver? The answers should inform your strategic planning.
Inflation was recently named as the single most important problem facing small business operations. Higher costs are cutting into profits. One recent report found that 56 percent of small businesses expect to continue feeling the inflation pain through at least the summer of 2023.
Your strategic planning should include thinking through how demand for your product or service may be impacted if you try to pass higher costs on to your customers.
Although business owners are a diverse bunch, it’s safe to say they would all agree on one business truism after the last two years: In turbulent times, fortune favors the well-prepared.
Whether you have questions about payments optimization, marketing your mission, or navigating high inflation and slowing economic activity, a good place to start is speaking to a business banker. Making time today for a conversation may better position your business for success tomorrow.
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