2022 was supposed to be the year everything returned to normal for businesses, after the previous two years were heavily disrupted by the pandemic.
Yet even with the optimism and relief of pandemic restrictions easing, the business climate of last year was difficult in its own ways. The Federal Funds Effective Rate raised significantly from 0.33% to 4.1% to combat inflation, which is a level that hasn't been seen since 2007. Investors and consumers lost large sums of money through several high-profile blockchain company collapses such as FTX and Luna. The Russia-Ukraine war triggered considerable disruption to global supply chains, while rising inflation prompted many to tighten their purse strings.
Under these clouds, much of the focus has been the effect on large enterprises, but thankfully, many SMBs neglected to apply this outlook to their own situations. Small business software company vcita recently surveyed 302 SMBs to find out their attitudes towards technology and change, which sheds light on the prevailing market mood.
The year of upgrading operations
Looking at how small business leaders' perspectives have evolved over the past year, the most dramatic shift relates to change itself. Comparing vcita's survey results from the end of 2021 to those from the end of 2022, a whopping 95% made significant changes to their operations in 2022, whereas only 35% did so in 2021.
While we don't know for sure, it could be the SMBs felt more secure with the restrictions easing and decided to make the changes which they had been delaying. It could also be the unraveling of pandemic-era decisions in favor of more sustainable longer term systems.
Respondents reported a wide variety of operational updates. Some 65% altered the types of services they offer, and 57% adopted new tools to support their daily business operations. The fact many SMBs responded "yes" to several of the options indicates how agile they were in the last year.
While 95% of SMBs made significant changes to their businesses, surprisingly few actually altered their core business models; only 6% reported doing so. This variance implies SMBs are being smart about how they adapt, rather than wildly innovating out of desperation to expand.
Social media disloyalty
In 2022, social media strategy was an area of considerable change for small and medium businesses, especially with regards to the platforms they preferred.
The survey found that 68% of participants managed their marketing presences internally, which is interesting unto itself. It indicates many of the businesses independently came to similar conclusions rather than changes being driven by outsiders.
One aspect which stayed the same was Facebook's dominance as the prime social channel for SMBs, followed closely by Instagram. These two platforms did, however, capture smaller shares of activity compared to 2021, with Facebook dropping from 66.4% to 55.9%, Instagram's drop was more dramatic, as it fell from 62.1% to 42.1%.
LinkedIn was the main upward climber, jumping to third place among the most popular social channels for SMBs, whereas Twitter lost one spot to come in fourth and Tiktok dropping out of the top four.
The decline of both Twitter and TikTok could be attributed to the uncertainty surrounding the platforms. Elon Musk's takeover of Twitter has come with a series of disruptions, and it's understandable for SMBs to be cautious. Data privacy concerns regarding TikTok may not significantly impact the habits of its users, but for forward thinking SMBs with limited resources, it's a factor to consider.
Digital payment becomes the norm
It can sometimes take time for technology to filter down from large enterprises down to mass adoption by SMBs, but if there was any doubt still, it appears accepting digital payments is now part and parcel of running a business.
What was once a breakthrough technology has now become far more affordable, and today's buyers have come to expect the ability to pay with their digital wallets or similar interfaces. Today, there are many digital processing options available for small businesses.
The vcita survey found 75% of SMBs had adopted one or more new digital payment providers in 2022, compared to 71% in 2021. It will be interesting to see what happens in this space in the future.
At some point, a saturation level may be reached, where the incumbent digital payment providers are able to meet all business and customer needs, so SMBs will stop adopting new providers. Instead they will rely on those they are already integrated with to continue innovation.
Summary
To recap, although 95% of respondents made significant changes to their operations in 2022, only 6% made changes to their core offering, indicating innovation rather than desperation. Facebook and Instagram maintained their positions as the favorite platforms for SMBs but their overall popularity dropped significantly. Twitter and Tiktok dropped down the pecking order for SMBs, while LinkedIn was elevated. Some three-quarters of small businesses now accept digital payments.
2022 was a rocky year for SMBs, and the signs from the vcita survey appear overwhelmingly positive, especially for technological-minded businesses.
