2023 was challenging for businesses, particularly small and medium-sized companies. Supply chain difficulties, inflationary pressures, recruitment and retention challenges, and a host of other demands tested the resilience of small businesses across Canada. So much so that many companies struggled to survive. Company insolvencies in the third quarter of 2023 were up 40% compared to the year prior and higher than pre-pandemic levels, according to the Office of the Superintendent of Bankruptcy.

However, savvy businesses that stay ahead of pressing sector trends may be best positioned to increase resilience and thrive in the coming year. Consider the following key trends that are likely to impact small businesses in 2024:  

Generative artificial intelligence (GenAI)—Technology continues to evolve rapidly, so embracing digital transformation is more important than ever. One groundbreaking technology—GenAI—has come to the fore with many AI tools to help businesses streamline processes, and create efficiencies to support customers. For instance, tools like ChatGPT can help businesses effortlessly write product descriptions, and AI-powered chatbots can handle routine customer questions, freeing up time for more profitable tasks. However, the adoption of AI is not without risks, especially as it pertains to data collection and privacy concerns. Additionally, only 1 in 10 workers have AI skills, according to research by software company Salesforce. Small businesses leveraging AI in 2024 must ensure the technology is rolled out responsibly and employees are trained in its use and understand both its merits and pitfalls.

Skills-based hiring—Although the persistently tight labour market has begun to display signs of softening, competition for talent remains high and small businesses may still experience difficulties hiring and retaining workers in 2024. According to a 2024 Talent Shortage Survey by ManpowerGroup, 80% of Canadian employers struggle to find talent with the needed skills. Businesses may opt for skills-based hiring over traditional recruitment practices to improve attraction efforts. Rather than prioritizing job-specific qualifications, employers who leverage skills-based hiring find candidates with the right skills or competency requirements. Focusing on developing soft skills—such as problem-solving and communication—among employees could help small businesses expand talent pools and compete for candidates in 2024.

The flexible working evolution—The demand for remote, hybrid, or other flexible working options looks here to stay. In fact, 81% of Canadians say flexible working models are the main reason for deciding whether to stay at or leave a job, according to software company Cisco. As such, savvy small businesses are expected to adapt their policies and technologies to embrace flexible working and bolster collaboration.

Sustainability—Consumer buying behaviour is changing, with a demand for products that not only benefit the customer but have a positive impact on the environment. Consequently, sustainable business practices will be a priority for small businesses looking to boost brand reputation and attract customers. Providing fair wages and supporting local suppliers are two simple ways small businesses can be socially responsible in 2024.

Customer connection—To boost engagement, leveraging technology—especially predictive analytics and behavioral data—to create tailored products and customer journeys will be important in 2024, helping small businesses embed personalization into every step of their businesses. However, businesses must be mindful that their connection with customers doesn’t become robotic when implementing technology solutions. There is still a significant demand for human touchpoints; small businesses must ensure their service connects with their customers in a warm “human” way.

Cybersecurity—As businesses become increasingly reliant on technology, there is a greater chance of cyberattacks. Small businesses with scant resources may be particularly vulnerable as threat actors might perceive them as easy targets. Investing in robust cybersecurity measures and training employees on cyber hygiene will be critical for small businesses to reduce losses in 2024.

On the back of a difficult 2023, it’s critical for small businesses to address working practices to position themselves for the coming year. Embracing AI, fortifying cybersecurity, and prioritizing sustainability are all ways small businesses can adapt to the evolving business landscape. However, it remains important to continually scrutinize both the merits and perils of any workplace practice adoptions. Additionally, robust insurance coverage can help protect small businesses from all that 2024 has in store.

For further risk management guidance and insurance solutions, contact us today.

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