Is your small business ready for what's coming in 2023?

Happy December! We hope your month is full of holiday cheer, but we also know that you may be in the throes of business planning for next year. As a small business ourselves, we understand the end-of-year stress owners are under at this time to solidify plans for a great start to the new year (and the resolutions you might make that will ultimately be forgotten - more on that in January ??).

As a small business owner, it's vital to stay ahead of the curve regarding emerging trends and opportunities. This is especially true in an ever-evolving business landscape, where keeping up to date with new technology, industry advancements, or the latest social media algorithm can make or break your operations. But staying on top of these changes can be difficult when so many variables are at play.?

To ensure that you're prepared for anything that could come your way over the next year, let's look at what lies ahead in 2023 and provide some helpful tips so your small business is ready for the road ahead.

COLA updates - Here's what you should know

For those unfamiliar, COLA stands for Cost of Living Adjustment. The most common form of this most people are familiar with is the cost of living adjustments made to Social Security payments. So what is it?

It is a recognition by the federal government that from year to year, prices do change, and there's an overall impact on the economy with those prices changing. They publish data on how much the cost of living adjustment is, a.k.a. what it costs an individual, theoretically, to be able to live in today's dollars versus what it cost them to live last year and last year's dollars.

The adjustments are most typically looked at on an annual basis by businesses. Businesses look at COLA as they're trying to figure out what they need to do to adjust their wage structure.?

So let's give a practical example. If you were paying somebody $20,000 last year and had a 1% cost of living adjustment, 1% of $20,000 would be $200. So if you paid them $20,000 last year, you would want to pay them $20,200 this year to keep them even with the economy. Now, if you don't give them that cost of living raise, they are making less money than they were last year. And that's without merit increase, performance bonus, or impact in terms of this person getting ahead. This is not to get the person ahead, it's just to keep them even.

So what does COLA look like in 2023?

One of the challenging things about COLA is that we have just had two years of the unusually high cost of living adjustments. From 2021 to 2022, the COLA increase was 5.9%, almost 6%. But, as we know, most businesses coming out of COVID were not giving out increases on an across-the-board basis. This year the announcement has come out that the Cola.?

The increase for 2022 to 2023 is 8.7%. So, back to our example, if you have a person making $20,000 and you gave them a cost of living adjustment last year (or should have), you would have been paying them $21,180. Now on top of that, there's an 8.7% increase. That person is now theoretically going to start 2023 with effectively $23,000. That's huge when you start talking about larger salaries.?

So let's talk about somebody that's making $50,000. At the end of 2022, they should now be making $57,556, and somebody making $80,000 should now be making $92,100, per our calculations.

Why is this important?

This is important for business owners to know for many reasons. One reason is that many people switching jobs right now is due in part because they haven't gotten COLA increases.

They probably have yet to get COLA increases, going back years regularly. They have a sense that they can't make ends meet the way they used to be able to. Many people feel that they are getting screwed and may be unable to have fruitful conversations with their employers since this raise has nothing to do with merit. Many small business owners may be oblivious to this because they don't have a standard HR practice telling them at the beginning of the year that they should review all salaries and ensure they’re on par with the economy.?

Whatever the case, the second reason this is important to know going into 2023 is that, like it or not, wages are going up. Let’s face the facts: People will quit if you don’t increase your wages, and you will have to hire new people. So as a business owner, it’s time to prepare for this by raising your wages and prices. Giving raises to multiple employees can equate to thousands of dollars, which must come from somewhere.?

So, where should I start?

We recommend that all of our clients start early and do pricing increases. You need a 13.5% increase to stay even over the last two years. Look at your prices and run them through this same model. So, for example, if a business owner was charging $5,000 for a product two years ago, they should be charging between $5,500 and $5,700 for that exact product this year. And if they’re not, they will lose ground, and it will come out of their profits.?

As you can see, this is a hidden thing that business owners don't know until they get so far down into the spiral that they're in trouble.

“But my customers won’t pay that!”?

Well, we disagree. However, we agree that some customers may want to beat you up over price, and they are not good customers. We must be aware that everybody is talking about inflation, and that's why the government has been raising the COLA in the first place. And so any customer that asks why your prices have been raised is either just a. being obstructive, and they're not a good customer or b. they haven't listened to the news in a year (we doubt that’s the case).

It’s time to start looking customers in the eye and asking them serious questions. What are they doing about the price increases?

Because everything costs more. Not just products but people.

So as you ask your customers to adjust if you don’t want to whack them with the increase all at once, do five increases over five months. That gets you over that hurdle. We advise you to do it before a recession because companies will be more likely to pay it. It would help if you also looked at how closely your product or service matches the values of the business market, which is in high demand.

So will there be a COLA increase in 2024??

We would expect so. It probably won’t be 13%; maybe another 3%. But if your business is aware of these increases now, you can start to plan for that one, too (and the one after that).

In other news

How You Can Prepare Your Marketing Strategies for a Recession

The word recession can send shivers down the spines of small business owners who have never experienced one before.

But your small business can still get by--or even excel--during tough times.

When the economy turns for the worst, why not focus on something you have much control over - your marketing?

There is no such thing as a one-size-fits-all approach when it comes to marketing. The strategy you choose will depend on your current situation and the level of marketing you've been using. If you are at the larger end of the small business spectrum, you may have an entire marketing team and various agencies supporting your business. On the other hand, if you are at the smaller end of the spectrum, you may only have a single marketing manager. Please look at these strategies carefully and adapt them to fit your needs.

Review your marketing contracts.?

Make sure you’re getting what you’re paying for. Take the time to analyze your marketing agreements - it may uncover valuable opportunities or areas for improvement.?

Reviewing your marketing contracts is essential for growth and helps you get the most out of your investments. Knowing all the details and understanding where there's room to negotiate offers a chance for significant returns on investment, so taking some time to review might be one of the best decisions you make this year!

Monitor analytics closely to pinpoint when adjustments in marketing budgets should be made.

Business owners are asking themselves and their marketing teams questions like: If there's a recession, how will that affect our revenue? When times are tough, where should we decrease spending? Where should we increase spending? What metrics can help us measure the success or failure of new initiatives??

?A successful marketing strategy requires a mix of different channels and efforts, with regular check-ins to assess what is most effective, so make sure you’re staying on top of that in 2023.

You can invest more in your brand and personal messaging.?

Businesses are trying harder than ever to differentiate themselves. CEO Lisa Gansky of Global Network Navigator and Ofoto said it best: “A brand is a voice, and a product is a souvenir.”

It’s no secret that companies are investing more in their corporate brand and message. We’ve seen this with tons of companies throughout the pandemic, which shows that when the chips are down, good branding comes in handy to make sales, even when people seem to be guarding their money the most.

So take this opportunity to invest in your website. Invest in developing your presence on social media. Invest in outsourcing the teams/people you need to make your messaging come together. You’ll be glad you did in the long run.?

You can advertise with a purpose and be strategic about your ad spending.

Think about what kind of audience you target, and optimize your ad campaigns to reach them. Utilize the power of data to understand better who will purchase from you. Monitor changes in customer trends so you can tailor your campaigns accordingly. Pay attention to the results you’re getting from each campaign so that you can make changes as needed to get the most for your money. Invest in testing different ad channels and formats to determine which ones give you the best results. Finally, be willing to experiment with new ideas and approaches, as this can result in some of the most influential campaigns.?

On the other hand, it’s ok to put ads on pause during this time if you’re not seeing the results you wanted from them. If you need to readjust your company message and branding, it’s best to hash that out first before throwing up ads willy-nilly.?

Keep your friends close and your money even closer.?

Multiply your resources by working together.

It’s not a good time to do it alone in marketing. Especially if you have a small marketing team (or a one-person wearer of hats), now might be an excellent opportunity to look at your options for outsourcing your marketing efforts instead of trying to figure it all out alone. Partnering with an experienced outsourced digital marketing team can help you extend your resources and stay ahead of the competition during a recession.

Working together is one of the best ways to maximize your resources and obtain information from marketing experts to ensure you reach the right audience with your message. By embracing collaboration and working with the right team, you can ensure that your marketing efforts are as efficient and effective as possible.

Contact us today for more information on Strategy Leader’s outsourced marketing services!

Reduce prospect fear by using social proof from case studies and testimonials to increase loyalty and trust.?

When the market is struggling, everyone's reputation is at stake, meaning every decision counts. Showing case studies and testimonials from customers who have used or are using your product or service is an excellent way to build loyalty and trust.

Provide detailed accounts of how other customers have benefited from working with you. These stories will depict success that potential customers can easily recognize and relate to. It also establishes a sense of credibility, as your customers can see that you have experience in delivering successful outcomes.

Testimonials are also a great way to build trust and loyalty, allowing customers to share their positive experiences with your product or service. These testimonials will give potential prospects insight into the quality of your work and why they should work with you.

Want more marketing tips and tricks? Check out Strategy Leaders CMO Robyn Goldenberg ’s marketing videos on her page. You’re sure to learn something new that could benefit your marketing in 2023!

If you’ve made it this far, thanks for sticking with us! We hope you’ve enjoyed The Owners Game monthly newsletter, and remember to subscribe to us if you haven’t already.?

Happy Holidays and happy planning from all of us here at Strategy Leaders! We’ll see you next year.??