Building a business and keeping up with financial trends can be a wild ride.
Many see entrepreneurship as a lever for establishing control in their lives. But while founders control the environment within the business, many aspects are out of our hands. Trends in consumer behavior, technology, and the global economy can significantly impact your business.
Here are seven major financial trends of 2022 and how they can affect your startup.
1. Global Debt
Since the beginning of the COVID-19 pandemic, many countries have spent and spent and spent.
Although debt levels were high beforehand, governments turned to debt-fueled spending to keep businesses running and people clothed, fed, and housed.
Increasing debt typically meant government austerity measures, higher taxes, or both throughout recent history. Economically, both actions can lead to rough times for global citizens.
The worst-case scenario could lead to significant economic turbulence and sovereign debt crises. But even the most harmless scenario probably means higher inflation levels than most are accustomed to.
2. Inflation
Whether we like it or not, inflation is coming. In late 2021, the prices of many things are already starting to increase.
A smaller workforce and increased demand mean higher labor costs, which will also impact your business. The ability to weather higher labor and material rates will help your business make it through unscathed.
3. Bubbles Everywhere
Some analysts are confident that the next recession is just around the corner and that it’s going to be a doozy. Along with high global debt rates and the associated inflation, there are bubbles nearly everywhere.
Prices on new and used cars are skyrocketing, and housing prices are climbing. The constantly growing money supply and loose credit lead to what looks like bubbles in multiple areas.
Some indicators (the low unemployment rate) show we’re due for a pullback in the next couple of years.
4. Bull Cool Down
Outside of a few slight pullbacks, the stock markets have been on a bull run for more than a decade. These typically cyclical markets may be headed towards a correction.
Retail sales seem to be cooling, and consumer confidence might be fading.
What does that mean for your business? Are you well-positioned to make it through a pullback?
In a downturn, securing your business’s fundamentals is critical. Keep some cash in reserve, your production costs low, and your structure from ballooning.
5. Digital Rise
Real-life is going digital and into the metaverse.
It’s not just Facebook’s recently updated name. The metaverse will drastically impact how we live and interact with each other.
But the metaverse will also give people vast new ways to make money. The initial expectation is that it will provide vast marketing opportunities. But it might also level the playing field and promote new equality by granting people new ways to make money through:
- New industries native to the metaverse
- Modern advertising and marketing channels
- Rent on digital properties
- Novel investment vehicles
The timing is unclear, but we might see a massive shift in how people experience life over the next decade.
6. Nomadic and Remote
More and more people live on less, work from anywhere, and become digital nomads.
Accelerated by the pandemic and “shelter in place” orders, more and more aspects of life can happen remotely and online.
Many companies are shifting to either 100% remote or some form of hybrid working arrangement. In the future, the metaverse may even allow for digital workrooms – a virtual space for working together, apart.
But the shift to nomadism isn’t all positive. Some argue that while digital nomads drive:
- Tourism
- Innovation
- Modernization of regulations
- Environmentalism
- Gender equality (e.g., mothers reentering the workforce)
The digital community is often short-term users of resources, not concerned with the long-term health of their host communities.
Whether good or bad, the trend is here to stay.
7. Fintech
In the next few years, digital banking and accounting software tools may clash. Historically there’s been a sense that both are digital but complex to intertwine coherently. Certain banks may choose specific digital accounting software partners or release their own.
Both of those options could leave many users in the dark.
The world is going digital, with the past several years seeing a massive shift to mobile payments and digital currencies. Even PayPal has acknowledged the importance of digital money (like bitcoin).
People of all ages and social demographics are adapting to mobile banking and online financial applications.
8. Ride the Financial Trends
The world is constantly changing. In some ways, you’re either riding the trend and benefitting or fighting the movement and struggling.
In 2022, high levels of global debt may drive inflation. This might lead to one (or more) economic bubbles bursting, causing the decade-old bull market to end.
How will your company prepare and react?
Digital trends are changing how we live. From how we interact to where we work, they’ve had an impact.
Are you prepared to take advantage of that?
To make sure your company is poised for success, you need a partner who’s constantly keeping up with the financial trends. Founder’s CPA can be that partner. Schedule a free consultation with our startup accounting experts to make sure you’re ready for 2022.
