2022 SME Business Trends

business-trends-2022

Our 2021 Business report revealed that many businesses are concerned about losing government support in 2022. In fact, one third of respondents stated this was their biggest concern. A quarter flagged rising costs as their number one worry, and 24% believed that attracting and recruiting the right talent will be a major challenge in the coming year.

There’s no doubt that 2022 is still a dark horse for many. The ongoing pandemic, Brexit, rising living costs and the Great Resignation are all causes for concern. On the flip side, these same challenges present new opportunities for businesses. This is especially true of small businesses and start-ups, whose agility will help them adapt quicker to rapid-fire market changes.

We’ve reached out to business owners and experts with their ears to the ground for their take on what 2022 has in store.

1. Recruitment, Retention and Remote Work

Steve Witt, Co-Founder, Not Just Travel

A growing number of individuals want the flexibility to work from home, and to work around their lives and families. The trend for franchising and self-employment will only grow as well. More people want to create a business for themselves, rather than for others. 

People have seen the effect of the Pandemic on the traditional work environment. It has changed the way we work, and the way we want to work, forever. More of us are looking at what we want from a career, and thinking about what we want our work/ life balance to look like than ever before. Homeworking is here to stay. 

Petra Smith, Managing Director, Squirrels and Bears

As hybrid working is forcing businesses to establish an office culture without the office, business owners need to create a connection with their employees and a culture that goes beyond the premises and will outlive the pandemic. This requires looking beyond the usual benefits and valuing the individual contribution of each employee to the success of the business.

Giving employees a voice and allowing them to build their personal brands at work can increase their confidence in themselves, whilst being equipped with the right skills and knowledge naturally increases motivation and creates a sense of belonging. In addition, focusing on individual growth and development directly impacts business growth. As people buy from people, employees are the best ambassadors who are the face of the organisation and know more about the business than anyone else.

Peter Boolkah, Business Coach and Mentor

We are learning to live with Covid and it has undoubtedly changed the way we do business. It is clear that working from home will turn into hybrid working. I see ‘Head of remote working’ roles becoming prevalent within HR departments in big businesses. I also see more companies, from SME to large organisations, investing more in AI and technology to enable remote workers and customers to access their services. I believe this will mean companies can grow and recoup some of their losses

Todd Davison, Managing Director, Purbeck

The Great Resignation may present an opportunity for small businesses to acquire staff with new skills, capabilities and experiences. Clearly, there is a time/cost drawback of acquiring, training and developing staff and also risk of lost expertise so succession planning and clear planning will be key.

David Whitfield, Co-Founder & CEO, HR DataHub

Companies will recognise that in the ‘war on talent’, monetary reward alone is not enough to attract and retain employees.

70% of businesses told us they already implement and promote flexible working practices in an attempt to attract new talent. A further 16% are looking to implement this in the next 12 months and 16% said they would consider it. In addition, only 7% of those questioned said they would not consider additional wellbeing benefits as part of their plan to attract new talent. 50% said they already use additional wellbeing benefits in their strategy to attract new talent, 14% are implanting this in the next 12 months and nearly a third (31%) would consider it.

Enhancing development appears to be a key strategy businesses are implementing to retain the best talent. 54% said they already have this in place, more than a quarter (28%) plan to implement it in the next 12 months and 20% said they would consider it. Notably, developing leaders was the fourth highest strategic priority for HR teams in 2022.

2. Brexit and Supply Chains

Todd Davison, Managing Director, Purbeck

Following Brexit there are new barriers to trade overseas post 01/01/22 for importers who now need to make full customs declarations on goods entering the UK from the EU or other countries. Prior to this, importers were able to delay completing the full customs declarations on goods for 175 days.

Inevitably, there may be teething problems with importers and supply chains adopting the changes ,but many small businesses will continue to be reliant on imports due to cost and labour advantages of doing so.

Ollie Brand, CEO, Zupa

With the arrival of the Omicron variant, there is still a distinct air of uncertainty around how further Covid spikes could impact trade for small businesses in 2022. This is a concern for many, particularly those that are operating within the supply chain. 

The by-product of previous lockdowns, combined with Brexit, has resulted in shortages of HGV Drivers, supply chain bottlenecks and problems around staff availability and retention. Essentially, businesses and staff are having to do more with less resources and increased pressures around customer service. This, compounded with mounting supply chain issues and new regulations being introduced around product labelling, the landscape is complex. 

This year, small businesses will be looking towards technology to solve some of these supply chain problems, such as keeping one step ahead of changing regulations via live data updates and using automated trading platforms to reduce workloads and enable their staff to do more with less people. 

In terms of rethinking how we operate within the supply chain, businesses should take time to build stronger supplier relationships. This is especially relevant in the current climate. Centralising supplier agreements and increasing transparency through using live price tracking will also help to improve and maintain long term relationships with your supplier network.

Lee Thompson, Managing Director, Fulfilmentcrowd

Many SME eCommerce retailers are increasingly seeking out the positives from supply chain delays and shortages. They are reviewing their supply chains and utilising rich stock inventory management data to reconsider the returns on what they sell. 

Driver shortages, competitive and costly international freight and border delays have really put the value of time and resource into perspective. We’re working with many eCommerce retailers to really scrutinise the profitability of each item of stock – a trend that will gather pace in the next few months. Retailers will utilise quieter, post-peak periods of demand to pore through supply chain and stock inventory management data to find efficiencies, ways of minimising margin dilution and methods of achieving optimal retail selling prices. This will lead to rationalise and streamlining of stock, with low return items stripped out of sales and supply chain strategies to improve resilience and returns in 2022. 

The review of stock performance will also drive trends of premiumisation and personalisation. SME eCommerce retailers will trade up to stocking more premium, higher margin products, which offer higher returns on valuable transportation space. They will also utilise sales and stock inventory data to develop more bespoke, personalised marketing and services for shoppers. By better understanding what is selling and who is buying it, they can quickly and cost-effectively up and cross sell across ranges.

3. Customer Loyalty and Data Protection

Nick Barthram, Founder and Strategy Partner, Firehaus

Be competitor-aware: a unique innovation doesn’t mean a new business category. Businesses are competing on problems, not products, which means their competition is anyone who also solves that problem, no matter how they do it. That’s not an easy mental shift to make when you’ve spent your early days honing your product to be the best it can be. But it’s vital if you want to compete for attention. Having a stand-apart widget rarely means creating a totally new category.  Time to move on from what worked for your early adopters as your business scales 

Start-ups’ early adopter audience is engaged and motivated to translate your product features into a benefit for them. But to grow, companies need to tap into a wider audience who are more risk-averse and less engaged. That means switching from product features to becoming known principally for the problem you solve. Start-ups shouldn’t wait for their sales to plateau in 2022 before doing this.  

Yvonne Filler, Marketing Manager, Good Innovation

The need for corporate purpose is not going away.  As much as many organisations would like it to fade with the pandemic and marketers debate its role, there is no denying that a strong corporate purpose is reaping dividends (metaphorically and literally) for organisations that have it at the heart of strategy. 

These organisations are working at speed to change, something most organisations find hard to do.  Collaboration, innovation and starting small but aiming big seem to be having the most impact. Authentic impact is essential to drive growth, engage employees and keep customers loyal.

Achille Traore, CEO, White Label Loyalty

One trend we’ll see for businesses of all sizes in 2022 is that direct to consumer (D2C) will flourish. According to eMarketer’s estimates, D2C generated $111.54 billion in the U.S. alone, making up 14.0% of total retail eCommerce sales.

This trend is likely to continue into 2022, especially as companies have already invested heavily in new direct channels – having proximity to customers is particularly critical to SMEs. This is especially the case when you consider that D2C has some incredible benefits aside from the revenues – such as access to first-party data, understanding of customer behaviour and direct communication lines. 

As a result, we’ll also see data-driven loyalty become essential. It’s no longer sufficient to stick to rewarding customers for transactions only. The companies betting on creating solutions that go beyond just transactions and leading on long-term relational and emotional loyalty driven by data and consumer needs and wants will ultimately take home the prize. In 2022, that will make the difference between increasing LTV by keeping a customer around and merely getting the ROI on your retention efforts.

4. Spending and Borrowing

Todd Davison, Managing Director, Purbeck

Many small businesses may not have accessed external debt finance prior to the pandemic i.e. those that have bootstrapped and funds introduced by the owners. Small businesses may now be more confident in accessing business finance and developed new professional relationships (for example, with commercial finance brokers) to utilise debt finance to accelerate business growth.  

It’s also important to note that those firms that replaced revenues with business interruption loans now have weakened balance sheets so many will be in scale up mode in 2022 to recover cash flow and rebuild their businesses. The Recovery Loan Scheme may have been extended from 31 December 2021 to 30 June 2022, but it is not attractive or indeed accessible to many businesses. We expect uptake to remain muted, as alternative credit solutions return to the market.

I think this will be predicated on a sectoral basis. There’ll be those that wish to continue to maintain the status quo following the disruption caused by the pandemic and fear of future lockdowns/variants. Others may be investing in sales, marketing, personnel and other income generating initiatives to drive revenues back to pre-pandemic levels or to pivot into new emerging markets.

David Whitfield, Co-Founder & CEO, HR DataHub

Our research suggests that companies may turn to increased levels of monetary reward in recruitment efforts. To attract talent, 17% said they already pay above market pay and almost half (49%) would consider it. Whilst more than a fifth (21%) said they already pay a sign on bonus and 37% said they would consider bringing one in.

To retain talent, over half (52%) are considering the unprecedented move of paying their employees above market average pay increases, 9% said they will implement this in the next 12 months and 14% said they already have this in place.

Andrew Dark, Co-Owner and Director, Custom Planet

There’s always an element of risk in any aspect of business. However, personally I don’t see spending loans and finance on investment in your business as risk, as long as these are being spent strategically on the right things.

The COVID loan schemes were a lifeline for many businesses, and these could be used to stimulate growth moving forward. If the government were to continue providing cheap finance for investing in the business, or to help keep smaller companies afloat during the most testing times, it could provide a massive boost to the wider economy in the coming years.

5. Going Green

Adam Bastock, Founder, Small99

We’ll see more pressure from suppliers in regards to Net Zero commitments, especially those who supply other businesses. Typically large corporations are made up of lots of smaller suppliers doing specialist tasks, and this is where the pressure will come from. They may start with their larger suppliers to have an impact quickly – but these “medium” suppliers will also then start checking their small suppliers, and so on – hence the ripple.

To reach Net Zero as per their TCFD commitments, they also need to decarbonise their supply chain. If they’re a bread supplier, for example, this means making sure their bakers use renewable power, the delivery vans are electric, that their HR team use Zoom rather than flying unnecessarily, etc. (For more on this topic, see here).

David Whitfield, Co-Founder & CEO, HR DataHub

Outlook 2022 has illustrated an astonishing shift in employee strategy amongst the UK’s biggest businesses. Over half of the companies we surveyed said they will be looking to increase their headcount in 2022, which means the talent marketplace is only set to get feistier.

It is encouraging to see more than half have already shared their commitment to ESG as part of their strategy to attract and retain talent. However, employees have become increasingly cautious about joining and staying in workplaces that pay lip service to ESG efforts. Leaders must ensure these pledges are not empty.

Steve Witt, Co-Founder, Not Just Travel

We are all more environmentally aware and conscious now. It’s not enough for companies to say they are green; they need to show a true commitment to change and direct action. That’s why we teamed up with Mossy Earth for our Climate Heroes project. Our holiday makers donations will create a real change – across the UK with pond and forest restoration and around the world, with research into the impact of tourism on sea otters and research into how termites can stop desertification. People want to know that their actions are making a real and measurable different in the world.

Lee Thompson, Managing Director, Fulfilmentcrowd

2022 is a big year for delivery packaging. The Green Claims Code will be enforced from January and the UK Plastic Packaging Tax becomes effective from 1 April 2022. The Code is designed to encourage more truthful and accurate environmental messaging on packaging, while the new Tax aims to improve the use of recycled material in plastic packaging. 

Together, these changes require brands to increasingly think about the environmental footprint of their packaging and are also likely to drive further consumer demand for more sustainable packaging. This will redefine packaging strategies for eCommerce brands and retailers, as sustainability becomes critical to the success of ‘unboxing’.  

Packaging must become ‘greener’ as companies aim to use less material and more recycling-compliant solutions. It’ll become ‘cleaner’ as packages become less cluttered with eco claims and brands find more innovative ways to engage consumers with their sustainability credentials.

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