Small businesses are critical to the U.S. economy with more than 32 million small businesses in operation according to the SBA Office of Advocacy. And U.S. small businesses employ almost half of the workforce. The COVID-19 pandemic affected all businesses and today they continue to face many challenges. Thus, it is important for small business owners to understand financial trends to create a solid path to continuing success.
Why It is Important to Understand Financial Trends
To use an analogy from the sport of hockey, it is important for business owners to “stay ahead of the puck” (instead of being hit by it.) Being aware of and understanding financial trends means seeing opportunities, noticing economic effects, and identifying financial and human talent impacts on business. That includes examining key performance indicators and managing cash flow and liquidity measures.
The Future of Small Business
The future of small business is bright because the U.S. economy thrives on small businesses. Small businesses have proven to be very resilient, even during the COViD-19 pandemic because, due to their size, they can be agile. They embrace and are very involved in their communities.
9 Financial Trends Your Small Business Needs to Know
Consider these 9 financial trends that your business should know:
- The current supply chain issues which started with the COVID-19 outbreak are likely to continue for a while and that will mean continuing problems in getting timely inventories, thus impacting production and resulting in possible cash flow problems.
- Rising energy costs will continue to plague businesses in general. That affects the cost of transportation which impacts the costs of goods and services. That may require businesses to change their transportation plans and modify heating and cooling systems in their businesses.
- Inflation and rising interest rates both affect the costs of doing business. That changes the cost of financing too.
- Due to increasing costs, businesses will need to carefully review their pricing strategies and make pricing adjustments in order to maintain profitability while at the same time not adversely affecting customer purchase attitudes and behaviors.
- More business activity, including small business transactions, is shifting online. That requires changes of approaches and staffing in order to be competitive and financially sound.
- Creative financing will be necessary to allow small businesses to thrive and grow.
- Technology and software solutions will increasingly be used to make business processes more efficient.
- A digital presence and online marketing, while considered secondary in years past, are now fundamental to business success. Look to see technology continue to have a larger impact on business.
- Cyberthreats are a serious issue, and they are likely to continue into the future.
Other Business Trends and Conditions to Consider
As the business climate continues to evolve, small businesses must be faster to adapt to new business demands and opportunities. The COVID-19 pandemic impacted most business operating models, shifting to more work at home/offsite, transferring many employees to the “gig economy,” creating more outsourcing solutions, and leveraging technologies of many varieties. It has also shifted purchases to fewer cash transactions. Social media as a marketing tool continues to rise in importance and influencers are filling an outsized role.
Get Expert Accounting and Financial Assistance
Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional accounting and financial assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.