Small Business In 2023: Experts Predict Trends And Challenges (2024)

By Rieva Lesonsky

Many small business owners expected 2022 to be a year of recovery after two years of struggling to survive a global pandemic. But inflation, fears of a recession, a still unreliable supply chain, and a nation at nearly full employment resulting in a tight job market all loomed large, dampening many of our goals.

As we enter 2023, the outlook seems somewhat brighter for small business owners. I talked to several small business experts to get their advice, insights, and predictions for small businesses in the new year.

Small business outlook for 2023

Impact of a recession on SMBs

"Nobody knows whether a recession will occur, but it’s certainly fair to say that small businesses are dealing with several economic obstacles right now. Fortunately, small businesses are resilient. Even if a recession does develop, our 2022 Small Business Now report shows that 90% are confident that they will still be in business a year from now. We also often see lots of small businesses get started during recessions.

"However, some sectors would likely be impacted more than others. The consumers we polled said that, during a recession, they would cut back on spending at “convenience,” “lifestyle,” and “entertainment” businesses first. I strongly encourage those business leaders to begin their recession planning now to be safe."

—Dave Charest, Director of Small Business Success, Constant Contact

What the small business environment will look like in 2023

“2023 will be a year of small business owners betting on themselves and focusing on the elements of business ownership within their control. Between the pandemic, inflation, supply chain issues, and labor shortages, running a business over the past few years has been incredibly challenging.

"Still, through research and conversations with our clients, it's clear that most business owners are resolute and optimistic heading into 2023. While business owners anticipate a recession may force them to raise prices and reduce spending, entrepreneurs are focusing their efforts on marketing and promoting their businesses, investing in new technology, and boosting head count.”

—Sharon Miller, President of Small Business/Head of Specialty Banking and Lending, Bank of America

"Of course, inflation is the biggest [concern] I’ve heard from small business owners. They are concerned that higher prices will drive away customers. But consumers are very willing to support the businesses in their communities as long as the value is clear and the company cultivates a relationship with them.

"The bigger challenge I see extending into 2023 is staffing. According to our research, about 40% of small businesses are struggling to attract new employees, and another 21% are concerned about retaining current staff. I expect small businesses to get creative about what incentives they offer employees to keep them engaged and invested in the business."

—Dave Charest, Director of Small Business Success, Constant Contact

Outlook for startups

“Whether or not there’s a recession, startups will continue to flourish. More and more individuals will take control of their own destinies rather than be at the mercy of large corporations.”

—Nellie Akalp, CEO, CorpNet

Overall outlook for small businesses

"Though a recession is uncertain, the warning signs are there, and small businesses should begin preparing for whatever new economic challenges may come. There are a few ways they can do this. One is to improve the way they communicate with customers. It’s never been more critical to build an email or text list, which are still cost-effective ways to deliver helpful information to customers.

"They should also lean into their strengths—their connection to their communities and the great experiences they can provide customers. Bigger brands may have bigger budgets and more exposure, but they can’t offer the same inventory, customer service, or experience that a small business can. Despite what you might read in the headlines, small businesses are tough and will get through whatever 2023 has to throw at them."

—Dave Charest, Director of Small Business Success, Constant Contact

"Small business owners have proved that they’re resilient and nimble enough to handle any challenge the economy throws at them. A recent Hello Alice survey found that 73% of owners predict their businesses will grow in 2023. [They] are buckled in to continue their fight against inflation—their top challenge predicted for 2023. Surveyed owners identified price hikes and adjustments to product offerings as two effective strategies that helped them combat inflation in 2022.

"However, these tactics contribute to two of the owners’ biggest fears for 2023: losing customers due to price increases and the inability to acquire customers. In response, small business owners must learn best practices and explore software solutions to optimize their marketing efforts for the coming year."

—Elizabeth Gore, Cofounder/CEO, Hello Alice

More articles from AllBusiness.com:

• How to Successfully Start a Business During a Recession
• How to Incorporate a Startup Business

Small business finances in 2023

“In 2023, small businesses will be even more focused on managing costs to manage an increasingly challenging economic environment. Small businesses already leveraging fintech offerings will be prone to scrutinizing whether those they have are exactly what they need to run their business. We expect many to look at consolidating services, which will increase demand for cohesive financial platforms that help small businesses manage their money end to end.

"When financial services like payments, business banking, and lending are integrated and embedded intelligently to meet the money needs of a small business owner, it can unlock unparalleled cost and efficiency benefits. Faster access to money provides more opportunities to invest in growth; real-time insights aid with more informed strategic planning; and seamless integration across money-management tools removes complexity to enable streamlined business operations. Arming small businesses with the technology that fuels these capabilities will be especially critical in the new year as small businesses navigate an uncertain macroeconomic environment.”

—Rob Daniel, Director of Product Management, Intuit QuickBooks

Buying and selling small businesses in 2023

“Based on how we’ve seen the small business market react to rising interest rates, I expect the theme of 2023 will be seller financing. The Federal Reserve is staying firm on its mission to fight inflation and has indicated that multiple rate hikes may be in store this year.

"Time will tell if that truly is the case. However, I expect these conditions to motivate more buyers to ask for, and sellers to accommodate, at least some percentage of seller financing in order to close deals. In terms of transactions, with so many buyers in the market and baby boomers on the brink of retirement, I expect transactions to continue at the same accelerated pace we’ve seen over the past two years, with financing being the core hurdle for entrepreneurs to overcome.”

—Bob House, President, CoStar Group (BizBuySell)

Trends and challenges that will impact women entrepreneurs

“Women’s business ownership has rapidly grown over the past decade, and I expect that trend to continue in 2023. Equal access to capital will always be essential in accelerating growth—and there’s still much work to be done, but access to education is similarly critical. The 2022 Women & Minority Business Owner Spotlight found that 75% of women business owners wish they were more knowledgeable about small business finances. I believe the number of educational resources available to women entrepreneurs will continue to grow in 2023 and beyond.”

—Sharon Miller, President of Small Business/Head of Specialty Banking and Lending, Bank of America

“2023 will be pivotal for women and access to capital. Nearly 70% of small business owners told us they plan to apply for funding to combat inflation this year. Yet, we know that women face barriers that limit their access to loans, credit, and other vital business capital. We should focus on ways to ensure every woman has the financial tools to respond to unexpected challenges and grow their business."

—Elizabeth Gore, Cofounder/CEO, Hello Alice

Small business trends in cybersecurity

“Attacks on small businesses will increase in 2023. SMBs already make up over 41% of data breaches, but as large enterprises spend more on cybersecurity and adopt more robust frameworks, attackers will increasingly turn their attention to small businesses. Cybersecurity will also be a major differentiating factor in sales and partnerships for SMBs. Organizations increasingly want to work with vendors that have mature security and compliance programs.”

Why businesses should implement a BYOD (Bring Your Own Device) policy

"Even if you prohibit your employees from using their own devices, some employees will choose to use them anyway. The key advantage of establishing a BYOD policy is ensuring that any device that could potentially be connected to your company is properly secured.

"The top place where BYOD policies fail is an ineffective onboarding stage. Sending employees a list of instructions may be challenging to follow but can be remedied with a live onboarding plan for every device. At a minimum, your BOYD policy should include mobile device management and remote monitoring, endpoint and network security, and personal data breach monitoring."

—Amir Tarighat, Cofounder/CEO, Agency

About the Author

Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small businesses and entrepreneurship for over 30 years. Get more insights about business trends by signing up for her free Currents newsletter.