2023 promises plenty of challenges and opportunities for small businesses

Small business owners are wondering what 2023 will hold for their small businesses. As they battle with load shedding, the world continues to recover from the pandemic and South Africa’s economic outlook for the year remains lacklustre.

“The best way for small businesses to prepare for the year ahead is to remain agile. Business owners must be ready for plan A, but keep plan B (and C) in your pocket to ensure you have viable alternatives close at hand should you need them,” says David Morobe, executive general manager for impact investing at Business Partners Limited.

He urges small businesses to buckle up for a bumpy ride.

“As always, stay true to the reputation of the proudly South African brand of entrepreneurship, which has proven to be decidedly resilient.”

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Caught between recovery and recession?

“Experts remain conflicted about what this year will hold for South Africa. The topic of recession seems to feature in the minds and conversations of economists, who predict that the knock-on effects of the unstable geo-political climate, tensions in Europe and load shedding will sour South Africa’s chances of post-pandemic economic recovery.”

Morobe says others are cautiously optimistic, pointing to the resilience of the local mining and manufacturing sectors as indicators that South Africa will continue its modest climb upwards.

However, as experts agree, Morobe says, there are many moving parts. “The progress of energy self-generation, the state of freight rail infrastructure, decisions around the basic income grant and political developments in the lead-up to next year’s elections and their subsequent impact on the economy all play a part.”

These aspects of socioeconomic development remain in limbo as the country waits for signs that positive change is indeed on the horizon.

However, Morobe points to a few certainties that will continue to make a positive impact on the SME sector in 2023 and for which entrepreneurs can reasonably prepare, such as a strategic approach to pricing, finding alternative lenders and participating in social commerce.

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Rising costs needs a strategic approach to pricing

SMEs will face headwinds from various directions where the cost of production is concerned, he says.

“Rising interest rates will bump up the cost of credit and inflation will see the cost of living continue to climb, placing increased pressure on consumer budgets. Petrol hikes will also put more strain on SMEs, impacting both personal and business operations.”

The key for SMEs to overcome this hurdle will lie in strategic pricing.

“With customers becoming more cash-strapped, the price of goods and services must strike the perfect balance between remaining competitive in the market and maintaining a healthy level of profitability. Now might be the ideal time to enlist the help of a business strategist or pricing expert to ensure that your product or service can withstand the prevailing cost pressures.”

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Tech-driven disruptors

While banks and other traditional financial institutions will remain relatively risk-averse as we make our way through 2023, given the challenges they face on the socioeconomic front, fintech disruptors, independent lenders and non-bank risk SME financiers will continue to provide viable funding alternatives throughout the year.

“Small business owners must explore their options and weigh up the pros and cons of realities, such as higher interest rates, profit-sharing transactions, negotiations that involve investors becoming part-owners and longer, more flexible financing terms,” Morobe says.

His advice is to brush up on your negotiation skills and invest time and resources into drawing up a business plan that is compelling and attractive to potential investors.

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Social commerce to pave the way

Social media platforms, such as Instagram and WhatsApp, substantially invests in bolstering their e-commerce functionality and Morobe says social commerce will take centre stage in the year ahead, especially for small businesses that may not have large marketing budgets.

“SMEs will need a dedicated person (or two) for live interactions with customers on social channels or risk missing out on crucial conversations and the chance to optimise client service and centricity.”

He says with the increasing integration of brick-and-mortar retail and various forms of online retail, taking an omni-channel approach to marketing and selling goods and services will be the best way to enhance your SME’s success in the months ahead.