Posted on: 02 February 2015

Over the past decade, consumer expectations have been rising like never before. We want better service. We want better value for money. We want more engagement. We want something unique. And we expect to not have to lift a finger to get it.

At the same time, the number of businesses operating in the UK has rocketed up. In 2000 there were less than 3.5 million businesses, compared to over 5 million in 2014 (an increase of 51% over the period1, there’s a lot of competition out there to meet rising consumer demands.

In a nutshell, the small business landscape is more aggressive than ever. So being one step ahead of the competition by being aware of upcoming trends and working out how they could impact you and your business is a vital early step in your new year business and investment planning. At the end of the day, staying ahead of the game will sort the winners from the losers in 2015.

Here are the four trends that small businesses cannot afford to ignore.

1. Alternative finance

The growth anticipated by small businesses in the coming year will, in almost all cases, need funding. Now that there are so many more ways of borrowing money than taking out a bank loan, the rise of alternative finance is destined to be a major factor in determining the success of almost every ambitious SME.

Traditional ways of borrowing, such as credit cards and lease or hire purchase, remain the most popular3. Moreover, many people haven’t even heard of crowdfunding, peer-to-peer lending, export and import finance and mezzanine finance. Alternative finance, the apparent new kid on the lending block, was expected to represent the equivalent of only 2.4% of cross national bank lending to SMEs by the end of 2014.

Despite this, alternative finance, and crowdfunding in particular, is destined for big things in 2015. It has grown from a £0.27bn market in 2012 to £1.74bn in 2014 – that’s an annual increase of over 150% - and is anticipated to grow to a massive £4.4bn in 20154.

What this means for SMEs:

When you’re thinking about how to fund your growth plans, don’t only visit your bank manager. Research all your financing options, including peer-to-peer lending, crowdfunding and invoice trading, to work out which route will give you the best value for money in the long term. Also, don’t disregard the more unusual alternative financing options such as community shares and pension-led funding. Because depending on your business and your market, they may offer you the best way of funding your expansion into 2015 and beyond.

Up to date knowledge is key. Find out what alternative finance options are available to you, today and in 6 or 12 months time, research them (using resources like Nesta) until you could get a degree for your insight and then pick the model that best suits your objectives. Talk to key opinion leaders, advisers and peers, as well as businesses that have borrowed money using your preferred financing models. Learn from their wisdom and mistakes to make the right choice for growing your business.

2. Big data

Data has become a fundamental part of business in the 21st century. Everyone has some, whether it be data about their customers, their market or their own operations, and is analysing it to varying degrees to plan for the future.

Big data is a somewhat larger, more complicated beast that up until now could not helpfully be analysed by you or I. It used to be left to the likes of Amazon and Tesco to invent sophisticated models and applications to use vast amounts of information to decipher what their consumers wanted.

However, the data landscape is set to change in 2015. Thanks to advances in technology, business intelligence (BI – the analysis of information to improve and optimise decisions and performance) is much more accessible to small business owners than before, making predicting the future and, most importantly, what your customers will want much easier.

What this means for SMEs:

SAP(Systems, Applications, and Products in Data Processing) predicts that 42% of the workforce will use predictive tools regularly next year5. If your organisation doesn't employ one of them, your competitors will. Which means they’ll be able to glean better insight into customers, operations and opportunities by linking information from across their business.

Because of their size, SMEs are more nimble and so able to respond more quickly to what they learn from data than their larger, more complicated competitors. For relatively little investment, they can rapidly respond to shifts in the behaviour and spending and so eke out a more than prosperous living from a competitive market.

As well as recruiting people with the skills to analyse your own and purchased data, in 2015 it will be important to invest in the right tools too. One without the other will result in either the misinterpretation of the data (wasting time and money pursuing the wrong opportunities) or expenditure that is never going to be able to repay itself (wasted investment on information that no-one understands).

Businesses that use data to re-market to their customers are already reaping the rewards: once a customer has been to your website, or one like it, subsequent sites that they visit show your adverts to get them to come back. The exceptional businesses of 2015 will use data to tell them when a customer wants their products or services even before they have started looking for it.

3. Mobile payments

The fact of the matter is that people like choice, including how they pay for things. Today, the most common forms of payment are their credit or debit card, PayPal, bank transfer, cheque or cash.

As the number of British people with smart phones increases (61% of UK adults have a smartphone, compared to 51% a year ago6), so does the volume of people expecting to be able to pay for things using their phone: more than a fifth of worldwide payment transactions now happen on a mobile7. Those SMEs that can offer their customers the choice of paying for their products and services using a mobile phone, with systems like Apple Pay and Google Wallet, will be at an advantage when wooing customers.

What this means for SMEs:

The global mobile transaction volume and value is expected to grow by an average of 35% per year until 20178.

Make optimising your website for multi-media devices a priority. Enlist the help of experts if necessary to make sure that, should someone be interested in buying from you, the process through which they have to go is quick and simple.

This doesn't just mean making your website ‘responsive’. It means adjusting the presentation and layout so that those customers that want to contact you can. Make it easy for them to amend their account details and communication preferences. And most importantly, ensure they can complete their purchase seamlessly, including using a mobile payment system like Apple Pay.

4. Marketing and personal data

Today there are almost double the number of consumers willing to share their location with retailers via GPS than a year ago9.

This trend will continue in 2015, with consumers being prepared to share more information as long as what they get in return is personalised, relevant and what they have given the business permission to send them. To be able to do this, businesses need sophisticated systems to analyse the information they have – another nod back to the importance of big data.

What this means for SMEs:

Ambitious SMEs can start to ramp up their targeted marketing activity, as long as they maintain strict control of the data and high standards of how they use it. Perhaps more importantly though, online content is going to play a major role in giving something to your potential customers before they have given anything to you (their money). So getting their attention, and giving them something of value to them personally even before they choose to make a purchase, is going to be vital.

Set clear parameters around how you are going to market to your customers, and treasure the personal information they give you to customise what you send them. Tempt them with offers, ideas and insight to encourage them to tell you about themselves, and then implement targeted and thorough campaign communications to drive them to buy.

[1] www.gov.uk

[2] http://startups.co.uk/46-of-uk-small-businesses-set-for-growth-in-2015/

[3] http://startups.co.uk/46-of-uk-small-businesses-set-for-growth-in-2015/

[4] http://www.nesta.org.uk/sites/default/files/understanding-alternative-finance-2014.pdf

[5] http://www.is4profit.com/small-business-blog/top-five-business-intelligence-trends-aware-2015/

[6] http://media.ofcom.org.uk/facts/

[7] https://www.adyen.com/home/about-adyen/press-releases/mobile-payments-index-april-2014.html

[8] https://www.gartner.com/newsroom/id/2504915

[9] http://www.marketingmagazine.co.uk/article/1317779/key-2015-trends-marketers-act-right

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