As we settle into 2023, we find ourselves at an interesting point in human history – one where advancing technology and growing economic uncertainty have converged to create a landscape that is both unpredictable and ripe for disruption.
Here are eight trends for small businesses that you can use to support strategic planning as you chart a course for a successful year ahead.
Trend #1: What’s in a wage? Everything
In 2022, allegations of wage non-compliance came to a head for numerous business owners – with some publicly named and shamed, given hefty fines, and even threatened with jail time. While there are certainly cases of intentional noncompliance, the unfortunate truth is that many business owners who underpay staff don’t realise they are doing it.
Yet, the cost of getting it wrong is incredibly high. The same is true for other employee payments such as Superannuation Guarantee and Pay-AsYou-Go (PAYG) withholding, where directors can be held personally liable for any amounts that go unpaid.
With the Australian Tax Office (ATO) announcing increased audit activity, as well as the introduction of Single Touch Payroll Phase 2, the onus will be on business owners to get wage payments right this year.
Trend #2: Your data, your responsibility
Once upon a time, data breaches were little more than an inconvenience for business owners – causing minor disruptions to local systems and usually impacting only a small portion of the business. Today, data breaches have the ability to destroy a business entirely. Modern cyberattacks are ruthless and relentless, with attackers using any means necessary to cause total disruption and data loss (including of backups).
In line with this increase in size and severity, there is growing scrutiny around the collection and use of data by businesses. The Australian Government recently passed the Privacy Penalty Bill which increased the maximum penalty for repeated or serious privacy breaches from $2.2M to $50M. They also announced a full review of Australia’s Privacy Act 1988 which has recently been completed. The changes are now being considered by the Attorney-General and are likely to include stronger mandates around data governance - requiring organisations to better demonstrate that they:
collect only the data they need
retain data only for as long as they need it
store, process and transmit any personal information securely
Currently, the Act only applies to businesses with an annual turnover of $3M or more (with some exceptions).
Trend #3: Make digital transformation work for you
Few businesses were equipped to manage the shift to remote working when pandemic lockdowns began in 2020. But by the end of 2022, almost all had some sort of remote working model in place. Having had time to recover from the mental and financial pressures of this rapid change, business owners have begun taking stock of their new systems and are asking: What can we do now to maximise our return on investment?
For many, this includes a willingness to re-design internal practices and processes to make the most of these new systems. It also includes leveraging technology to cut costs where possible, be it through:
reducing office space
increasing automation
replacing outdated or siloed applications
using flexible work to drive retention
This trend is likely to gain momentum in 2023 as business owners look for more ways to use technology to enhance their businesses.
Trend #4: Use data to get clarity
Data-driven decision making is the cornerstone of a modern business and vital to maintaining an edge over your competitors. Every system in your business houses valuable data. However, on its own this data is mildly useful at best. When all data across all systems converge to create a “single source of truth”, you suddenly have access to insights that could completely change how you see your business and its future.
When this data is coupled with automation and artificial intelligence (AI), the possibilities are endless. Imagine having financial, sales and operational data blended so you could:
see the impact of decisions on profit and loss in real time
be alerted when certain conditions (or red flags) are met
automate ordering, invoicing, customer communications, and more
Depending on your sector, you may also wish to incorporate external data – such as publicly available medical data (to aid diagnosis and disease management), weather data (temperatures, rainfall) or Census data (demographics and geographies) to your analytics. This provides valuable context which can significantly support decision making at all levels of your business.
Trend #5: The dark web is only getting darker
According to the latest report from the Australian Cyber Security Centre, a cybercrime was reported every seven minutes in the 2021-2022 financial year.
Another humbling statistic is that over 60% of small to medium enterprises don’t survive a cyberattack or data breach. On average, a basic breach will cost a small business $39,000 while serious breaches have been shown to cost Australian businesses approximately $3.35M.
The dark web (where stolen data is traded) is now said to be the third largest economy in the world. Consider that: after China and the United States, the dark web is the place where the most money in the world is traded.
Cyber security is no longer a “nice to have” for business owners… it’s a serious priority. From basic security hygiene such as password protection and spam filters, to robust backups and dark web monitoring, every step you take could be the difference between a failed attack and a successful one
Trend #6: Help! I need staff.
In 2022, we saw Australia’s unemployment rate drop to its lowest level in almost 50 years. This has been especially difficult for small businesses, which have struggled to compete with attractive employee packages on offer from the big end of town.
Although we’re expecting an increase in immigration this year, it’s unlikely to have an immediate impact on the current skills shortage. This means small businesses must find innovative ways to attract and retain employees…or get by with less of them.
This isn’t as difficult as it once was given recent advancements in technology. Automation and artificial intelligence have proven they can manage a lot of the hack work for us – freeing staff to focus on higher value tasks at a time when consumers are increasingly embracing opportunities for self-service.
With inflation already raising the bar on profit margins, this represents an exciting chance to further boost revenue and empower existing staff with more meaningful work. According to a Xero study, embracing automation could also give you more time and energy to pursue growth which is a familiar challenge for many small business owners.
Trend #7: Boost cash without borrowing
Alongside staff and time management, cash flow is one of the biggest stressors of running a small business. A recent study found over a third of small business owners lost sleep due to cash flow worries, saying it affected their physical wellbeing and put a strain on their personal relationships.
When cash flow is tight, it’s natural to think immediately about investment or loans as a fast source of income. However, there are other ways to boost cash flow… some of which can be quite lucrative and don’t always require the funds to be paid back.
Depending on the nature of your business, there are various types of government incentives which provide valuable cash injections. For instance, the Research and Development (R&D) Tax Incentive is available to any business that invests $20,000 or more in eligible R&D activities. Business owners can make a claim at the end of a financial year and receive a cash return, or use it to offset a tax debt if the business is in profit. In some circumstances, companies can also borrow in advance against the refundable offset (called R&D factoring).
Another incentive available to small businesses are the “temporary full expensing” measures. These allow business owners to claim a deduction for the full cost of eligible assets in the year they are purchased. While this incentive is set to end on 30 June 2023, it could prove very useful if you had to buy capital items for your business this past financial year or will do so before 30 June.
In addition to tax incentives, there are also a host of government grants which are designed to boost innovation in certain sectors. From regional tourism to clean energy solutions, job creation, or building Australia’s sovereign Defence capability, a government grant could be your ticket to loanfree funding
Trend #8: Virtual CFO services on the rise
It’s no secret that many small businesses suffered enormously during the COVID lockdowns. A report from the Reserve Bank of Australia showed they were twice as likely to record a large decline in revenue compared to large businesses.
While the recovery continues, the importance of paying attention to finances cannot be overstated. Cash flow monitoring and forecasting is notoriously undervalued by small business owners, yet is one of the most essential activities for a profitable business.
Particularly as the economic landscape becomes more uncertain, knowing where you stand financially could make all the difference between surviving and thriving over the next 12 months.
There are numerous ways to forecast cash flow, but the 3-way model is usually the best. It includes a comprehensive analysis of your business’s profit and loss, balance sheet, and cash flow to provide a rich picture of immediate and future cash flow needs.
Most importantly, this model allows you to stress test any assumptions you have about your business and how it will perform over the next 1 to 3 years.
While change isn’t always easy, it can be enjoyable for anyone willing to step out of their comfort zone and explore new horizons.