Small Business Trends for 2024

 

Experts Share Their Predictions

Anticipating the future is crucial for small business success. But it may be incredibly challenging this year since many innovations and potential changes in areas like community building, personalization, finances, marketing, technology, and more exist.

To help figure it out, I asked several small business experts to share their insights on 2024 trends to prepare you better to navigate our ever-evolving entrepreneurial world.

Small Business Trends for 2024

Businesses should commit to communities as a strategic imperative in 2024

Businesses of all sizes will make fostering the growth of their local communities a top priority in 2024. It's of strategic importance and can provide a competitive advantage. As businesses, we are all responsible for building stronger economies and more resilient communities.

Customer experience

Maintaining a strong brand identity and foothold within the market boils down to how you manage your customer relationships.

The "customer is always right" mantra is one many business owners know, abide by, and incorporate into their company cultures. This is why, in 2024, I predict businesses of all sizes will invest more in the customer experience to keep their clients happy and returning. Entrepreneurs will seek tools to help them go the extra mile for their customers. Businesses will invest in customer experience (CX) teams to ensure clients are happy from start to end and, most importantly, return for future and repeat business.

Personalization will be crucial for continuing to build client relationships.

Managing the client flow process with a personalized touch from start to finish is crucial for success, continued growth, customer satisfaction, and retention. Ensuring clients feel cared for and their unique needs are met is a win-win for independent workers and customers.

The future of marketing is going to be incredibly personal

It's not about a hard sell anymore—you need to create a memorable customer experience that makes [customers] feel a mutual connection to your business. And that gives them a reason to keep coming back for more.

In 2024, I expect small businesses to steer even further into this trend and truly put a personal touch on their marketing communications. They will learn new technologies and leverage them to understand their customers' experiences, preferences, and consumption habits to make them feel like the stars of the show. This approach will create a more intimate and trusting relationship, leading to more clicks, opens, donations, followers, sales, and growth.

Finances

Small businesses continue grappling with significant challenges impacting their growth and sustainability.

According to insights recently gathered by Hello Alice, the struggle to secure capital or find accessible loans remains a pressing issue, with a substantial 31.4% of small business owners reporting this challenge. Moreover, the elevated inflation rate poses a considerable hurdle for these businesses.

Unlike larger competitors, small businesses often lack the purchasing power to handle this escalating issue, facing a dual challenge: navigating inflation's impact while competing in a market where larger counterparts possess greater financial leverage. This imbalance affects their day-to-day operations and restricts their ability to invest in critical areas such as innovation, technology, and expansion efforts necessary for long-term success. However, small business owners are resilient and the backbone of our economy, so they will make it through and lead us all into a more robust economy.

How to weather a recession

We are seeing a steady reduction in inflation while employment levels remain strong. The Federal Reserve's interest rate policy seems to be working, and it is reasonable to assume that inflation will continue to decline from current levels. Given these indicators, we expect the economy to achieve the "soft landing" the Fed has been targeting, which means that if there is a recession, it will be short and relatively minor for most.

Industries that would be most impacted by a down economy:

We expect transportation to be one of the hardest-hit sectors in an economic downturn. The long-haul trucking industry is already struggling as consumer spending has shifted away from goods & toward services in recent months. We also expect auto purchases to dip as financing costs have risen dramatically while used car values have declined. As a result, many car owners cannot afford to trade in their existing cars to purchase new ones.

What small businesses can do to prepare themselves financially for a potential recession in 2024?

 

·        Small businesses should determine whether they will need capital in 2024 and, if so, work to secure it now. Banks have been reducing contact with small businesses ever since the pandemic, & now, with higher interest rates putting pressure on bank deposits & greater regulatory scrutiny, banks are decreasing their loan books even more. Fortunately, several small business lenders have been expanding their ability to deliver small business money in the face of this bank contraction. Small business owners should deliberate exploring options with their banks and non-bank lenders.

·        Small businesses that streamline operations and leverage technology to do more work with less labor will be the best prepared to weather a recession. Many businesses are implementing self-service technologies or outsourcing customer service and accounting functions, allowing them to spend more time running daily operations. Small businesses that can reduce costs without sacrificing customer experience will be the biggest winners 2024.

·        Small businesses should be very judicious when reviewing new projects or plans for expansion. If the company chooses to expand, the unit economics of the expansion should be examined to understand how much it will cost to execute and what profits can be expected. The market must then be assessed to determine the volume of goods sold at these price points. Prices are set where the business owner believes that profits can be maximized while contributing an acceptable level of effort. If the economics appear marginal, the business owner will want to put a hold on expansion plans until the market improves.

Whatever the obstacle, small business owners get creative and find ways to problem-solve and grow their companies.

Last year, according to our small business data, small businesses continued to show a true spirit of resiliency. A key finding from our recent small business owner surveys found that half of the companies surveyed agreed that cash flow management tool consolidation positively impacts profitability, and 71% said it positively impacts efficiency. Small business owners now prioritize their digital financial toolkits to improve their businesses. No matter the challenges, ongoing cash flow management is essential to effectively running a business.

This year, we anticipate cash flow management will remain paramount in day-to-day operations. The need to streamline management to unlock new efficiencies continues with the help of enhanced cash flow tools, including analytics, funding, and banking. Many (41%) of the small businesses surveyed in our inaugural Financial Confidence Report said they "often" or "always" turn down potential growth opportunities because they are unsure about their cash flow. There is a wide array of benefits for small businesses when it comes to consolidating cash flow management tools, and our data indicates the critical role it plays in helping small companies garner additional revenue, time, and productivity in the new year.

Franchising

There will be continued interest in franchise ownership, especially from people who want to change careers. That is nothing new, but ever since the pandemic, the need to do so has increased. Today's employees want more control over their hours and their lives. And a good number of them want to continue working from home. So, look for more home-based franchise concepts to be developed to meet this need.

On the financing front, although the Fed will start loosening things up, don't expect small business loan interest rates to lower in a significant way in 2024. New franchisees must submit solid business plans and make generous down payments for loan approvals.

The franchise sectors that will be the strongest this year are food, fitness, and businesses that service the senior population.

Finally, franchise buyers need to do their homework. But they shouldn't only focus on the numbers. Contacting and visiting franchisees in person must be top of mind for anyone serious about becoming a franchisee in 2024.

Going global

From the creator and sharing economies to e-commerce and traditional brick-and-mortar businesses, 2024 is the year SMBs go global. For businesses of all sizes, the mindset has shifted mainly beyond the local neighborhood to the global digital economy. Some 79% of SMBs [have] cited selling across borders as attention for their growth, and consumers are ready for it—72% said they're comfortable buying from businesses in other countries.

Digital payments are transforming opportunities for SMBs to pay and be paid, making it possible to reach new audiences, easily accept secure payments, track and monitor spending, increase security and safety, improve efficiencies, and grow like never before. With payment innovations allowing for access to earnings in real-time, making it convenient to receive consumer and B2B payments, getting paid has never been easier. Payment solutions like virtual cards also help SMBs with the cash flow, purchasing power, and expense management capabilities needed to thrive in today's digital-first world.

In 2024, we expect small and micro businesses to benefit from increased digitization that speeds and protects payments, making expanding beyond geographical borders more manageable.

Marketing

·        Marketers must continue to innovate and stay ahead of the curve by examining how companies strategically utilize the tools at their fingertips.

 

·        [Our] LocaliQ team identified three key 2024 marketing trends to help best connect with your audience and make an impression.

·        AI is here to stay. Between ChatGPT, Google's Search Generative Experience, Bard, and a whole host of other AI tools cropping up, it's imperative to understand the right way to use AI to your advantage.

·        Zero and first-party data will be critical. With upcoming changes to Google and iOS, companies must be more creative with tracking marketing. Building an email list, sending a survey, and creating a lead magnet are a few ways to collect zero and first-party data.

·        New advertising and content formats will be an advantage. Diversify your strategy to reach customers in new ways, like trying short-form videos, testing OTT ads, and texting your customers to stand out.

·        Marketing leaders will face severe challenges to growing brand value and loyalty next year amid an economic rough patch and changing digital habits. SMBs will need to prioritize communication tools to combat adversity.

·        AI can only take marketers so far; personalization and connection will be critical in 2024. AI will improve performance in three significant ways: optimize media buys, improve dynamic customer journey mapping, and boost SEO performance.

AI is not just a trend but a fundamental shift in how small and medium-sized businesses approach marketing.

AI's integration into marketing strategies marks a new era characterized by data-driven insights, creative innovation, and personalized customer experiences. SMBs and marketers will increasingly leverage AI to uncover hidden patterns and insights, transforming this data into innovative marketing strategies, necessitating a move to understand and actively engage with the data. The role of marketers will evolve, requiring a blend of analytical insight and creative thinking, setting their strategies apart in a highly competitive market.

With AI's ability to process and interpret consumer data in real time, marketing personalization will reach new heights. Our 2023 Holiday Report shows personalized emails have an 87% higher click-through rate. In 2024, we expect AI-driven personalization to emerge as a fundamental aspect of marketing strategies for small businesses. Marketers will harness the power of AI to deliver more intimate and connected customer experiences, fostering deeper customer engagement and loyalty.

Solopreneurs

Independent businesses will continue to adopt and embrace innovative tech to augment their businesses.

AI will not completely replace workers. Instead, in 2024, technologies like AI and automation will augment independent businesses and help them become more productive, giving back time to focus on doing what they love. According to a recent Visa report, 91% of companies would consider adding automation and AI over the next 12 months to elevate their companies over their competitors.

The number of entrepreneurs leveraging passive income will continue to rise.

Independent workers are monetizing their knowledge and exploring diversified revenue streams, like affiliates and digital products, converting their service talent into a digital product to hustle and generate passive income.

More technology will be built specifically for solo business owners to do more with less.

We expect to see an increase in solopreneurs and side hustles this year. In the U.S., 27.1 million small businesses are run by a single owner without employees. Building technology for solopreneurs is critical to their success as they're forced to do more with fewer resources, and technology serves as their extra set of hands.

Technology

SaaS companies will focus on more inclusive technology with intuitive entry points to cater to older business owners.

This year, small business-focused technology companies will focus on products that meet older business owners where they are. Generation X and baby boomers comprise 86.8% of all small business owners in 2023. Older generations didn't grow up with the technology that younger business owners are accustomed to—and today's SaaS platforms will need to include business owners who are slower tech adopters to provide more opportunities and access to new solutions.

SMBs embrace AI and scale back on SaaS providers.

The euphoria of AI will start to fade as the focus shifts to efficiency: As we brush off the newness of AI and automation, companies will begin to phase out of the trial period and start adopting helpful tools and solutions that create meaningful improvements across the front end and back office.

Tentativeness in the market will begin to ease. Coming out of today's volatile economy and the increases in the cost of capital, SMBs will start to invest more across the tech sector, with a significant focus on manufacturing advances across the supply chain.

SMBs are leveling up by scaling back on SaaS providers; if they already haven't, most small businesses will migrate to become digital natives. To reduce costs and increase productivity from a management perspective, companies will seek to limit SaaS providers and target partners that offer multiple solutions on one platform.

Change is the only constant in the small business landscape.

2024 is sure to bring new challenges and opportunities for business owners. Despite the uncertainty, specific trends will continue to impact the small business landscape, including the proliferation of technology in small business operations.

According to Bank of America's 2023 Small Business Owner Report, 80% of business owners digitally optimized their businesses in the prior year. I expect entrepreneurs to continue integrating new technologies into their companies in 2024. Whether artificial intelligence to streamline payroll and bookkeeping or augmented reality to provide clientele with a more immersive experience, entrepreneurs' continued embrace of technology will help them save time, stay planned, and reach new audiences as they grow their businesses in 2024.

Generative AI will transform SMBs

Across various domains, such as climate change, healthcare, education, and transportation, organizations of different scales harness artificial intelligence's power to address intricate global issues. To harness this power successfully, companies must commit to providing inclusive access to generative AI, a technology I consider the most transformative of our era.

To see impact, cutting-edge technology must become more readily accessible, allowing for more opportunities to leverage these tools to impact the world positively—which is specifically relevant for SMBs. By integrating AI into their operations across diverse industries and geographies, I firmly believe that SMBs can leverage advanced technologies like AI to address some of our most pressing societal challenges in 2024 and beyond.