Now that we have entered 2024, our accounting team has been making their predictions and discussing how best to advise our clients on preparing for upcoming challenges.
Before we make predictions on SME prospects for 2024, however, let’s look back on last year to provide some context.
We feel that UK businesses are still recovering from several major economic events like the pandemic, Brexit, and multiple Prime Ministerial changes.
All these elements have drastically affected the business landscape, which is likely to continue this year – unfortunately.
Similarly, the sudden introduction of Artificial Intelligence (AI) systems, and the scramble of businesses to react to it, significantly influenced the economic landscape during 2023 which will no doubt continue this year.
With that in mind, here are some of the predictions our team have made regarding the next 12 months and our advice on how to react to these challenges.
Continued political and economic uncertainty
We think that, with a general election on the horizon, political and economic uncertainty is inevitable in 2024.
SMEs should try to brace themselves for potential policy shifts and their impacts on taxation, energy costs, and funding by maintaining robust financial practices.
The key, in our opinion, is to stay flexible and ready to adapt to new government policies and economic scenarios by having a higher level of liquidity than would usually be recommended.
Increased use of AI in everyday business operations
Generative AI is poised to change the fundamental way in which small businesses operate.
Whether that’s by automating customer service or enhancing product design, AI is going to offer you opportunities for efficiency and innovation that are yet to materialise in a meaningful sense.
We suggest that you embrace these changes and investigate the applications that AI might have within your business model.
Invest wisely and don’t just jump at the first AI product that comes your way – but nonetheless analyse whether an AI investment could help you grow.
Soft skills are going to become more valuable
As automation and AI take over routine and mundane tasks that humans were previously responsible for, the human element of service is going to become more valuable.
Skills like emotional intelligence, effective communication, and creative problem-solving will be at a premium.
Small businesses can gain a competitive edge by nurturing these skills within their teams as well as employing individuals who are naturally good at these things sooner rather than later.
Having said this, the skills shortage in many sectors is likely to remain a significant challenge in 2024.
Small businesses can either focus on upskilling and reskilling their workforce, particularly in areas related to new technologies or invest in new technologies that AI could provide to solve this problem.
Collaborating with educational institutions and offering in-house training can be effective strategies in organically growing the skilled workforce upon which you can recruit in your area.
Another option might be to outsource or recruit remote/digitally based colleagues into your business.
Remote and digital workspaces
Continuing the discussion of employee and staff challenges, SMEs need to look at digital and remote working solutions this year.
The trend towards remote and distributed work hasn’t changed since the end of the pandemic, as many thought it might.
Many employees now prefer (and actively look for) jobs that provide them with the ability to work from home or have a flexible working pattern.
SMEs can benefit from this trend by having access to a wider talent pool when offering flexible working arrangements, as well as possibly reducing costs on physical office space.
Will we see a growth in sustainability?
Some data suggests that customers are drawn to businesses that demonstrate environmental responsibility, whereas it is less crucial in other areas.
We think it’s best to be on the safe side with this issue.
It might not matter to some customers whether you are an environmentally friendly business or not, but others might be actively turned away by your practices if you reject sustainability.
Whilst it might not hinder your profitability, it doesn’t hurt to have sustainability goals and could even benefit you in some environmental tax liabilities.
We think that, in 2024, SMEs should look for ways to reduce their carbon footprint, from sourcing locally to adopting green technologies – you have very little to lose in this endeavour and plenty to gain.
The rise of a data economy
Data became an even more valuable asset in 2023 and will no doubt grow in its usability this year.
Small businesses should look at ways to strategically use data and data analytics to improve operations and create new revenue streams.
This could involve anything from customer analytics to data-driven product development.
As the old adage goes: “Knowledge is power” and an SME with more information than their competitor has a significant edge in the marketplace.
How to achieve your goals this year
To ensure your business survives, thrives and grows this year, we recommend that you adopt several strategies:
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Stay informed and adaptable: Given the political and economic uncertainties, businesses must stay informed about developments and be ready to adapt. This involves closely monitoring news and changes in government policies, particularly those affecting small businesses.
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Embrace technological advances: Invest in technology, especially in areas like AI and data analytics. These tools can streamline operations, enhance customer experiences, and open new revenue streams.
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Focus on skills development: Develop a culture of continuous learning within your organisation. Encourage employees to upskill, particularly in areas relevant to your business's future needs.
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Embed sustainability: Integrate sustainability into your business model. This could mean anything from reducing waste to adopting renewable energy sources. Not only is this good for the planet, but it also resonates with increasingly environmentally conscious consumers.
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Leverage data: Use data strategically to understand your customers better and improve your offerings. Data analytics can provide insights into customer preferences and behaviour, helping you make informed decisions.
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Adopt flexible work arrangements: Consider offering flexible work arrangements. This can help you attract and retain talent and can also lead to increased productivity and employee satisfaction.
Final thoughts
2024 is shaping up to be a year full of possibilities as well as challenges so it is important to speak to your accountant about your plans, risks, liabilities, and investment opportunities early.
We believe that maintaining a slightly higher level of liquidity, a more stable cashflow and retaining more cash to provide quick investment opportunities all represent proactive financial management practices.
We can help you reach your goals in 2024. Please get in touch with our team to formulate a plan for your business’s short and long-term future.