Three business trends SMEs should prepare for in 2025

Last year brought significant challenges and developments for Philippine small and medium enterprises (SMEs). Access to financing remains an issue: banks only lent 4.52% of their loan portfolio to SMEs as of June 2024. In August and October, the Bangko Sentral ng Pilipinas (BSP) reduced its key policy interest rates after four years, making it easier for businesses and consumers to borrow and finance their spending due to lower interest rates.

The passing of the CREATE MORE Act (Corporate Recovery and Tax Incentives for Enterprises – Maximize Opportunities for Reinvigorating the Economy Act) and other landmark legislation also enhanced the ease of doing business by making tax incentives more competitive, reducing red tape, and providing better guidelines on business obligations.

These developments have set the stage for 2025 — a year poised to bring even greater transformation. In 2025, three key business trends will have a profound impact on how SMEs operate and compete. Keeping pace with these business trends will help SMEs maintain growth, profitability, and relevance in an increasingly dynamic and digital marketplace.

1. AI BECOMES STANDARD PRACTICE
Artificial Intelligence (AI) is no longer a futuristic concept — it’s now a standard business tool for many SMEs. By using ChatGPT and Canva AI to create their own marketing materials, SMEs have reduced marketing development costs; chatbots have also improved operational efficiency by enabling 24/7 customer support.

Last year saw tech giants like Google, Amazon, and Netflix, reinvent their business models through deep learning, causing widespread changes in industries, like online advertising, e-commerce, and streaming. In 2025, SMEs are expected to follow suit with generative AI at the forefront. Instead of simply embedding AI into their processes, forward-thinking SMEs will build entirely new products and services powered by AI. This shift will impact sectors like healthcare, manufacturing, and education — unlocking new possibilities and business models.

More SMEs will also use AI for automation, predictive analytics, and personalized customer interactions. Aside from transforming operations, this will create new opportunities for growth and differentiation. However, SMEs must not be too hasty in adopting AI-driven solutions at the expense of displacing employees. Balancing automation with human roles can create a more sustainable growth strategy and preserve workforce morale.

2. CUSTOMERS DEMAND A BETTER EXPERIENCE
Customers are constantly raising their standards. Today’s consumers are vocal on social media — and one poor experience can easily lead to a viral post that tarnishes a brand’s reputation. In 2025, businesses will face heightened expectations for seamless, efficient, and personalized experiences.

To stay relevant, businesses must prioritize customer experience (CX) as a core differentiator — executing it as a holistic approach that covers every touchpoint in the customer journey. Customers expect personalized interactions, frictionless transactions, faster deliveries, and lower delivery costs. Companies that meet these demands will emerge as market leaders.

Modern customers also expect brands to recognize their preferences and interactions across platforms, whether online or offline. In response, businesses must implement more sophisticated omnichannel strategies that ensure smooth transitions between online and offline interactions. For example, customers should be able to return a product bought online to a physical store without any issues, or receive personalized product recommendations online based on their in-store shopping history.

By 2025, CX will be a critical factor in customer retention and brand loyalty. Businesses that create a unified brand experience — whether through websites, mobile apps, or in-store touchpoints — will build stronger customer relationships. Agility will be essential as businesses respond to customer feedback, adapt to trends, and continuously improve their services.

3. RED TAPE HINDERS SMEs — AND ECONOMIC GROWTH
In the Philippines, navigating bureaucratic red tape remains one of the most significant hurdles for startups and SMEs. According to Acclime, the process of registering a business property in the Philippines takes 39 days on average; companies are expected to make 47 tax payments per year. Such regulations and bureaucratic processes can stifle SME growth and limit their contributions to the economy in 2025.

Policy reforms are underway to address these issues. Recent amendments to the Public Service Act, Retail Trade Liberalization Act, and Foreign Investment Act aim to simplify procedures and reduce foreign equity restrictions. Initiatives, like the Philippine Business Hub (PBH) and the Green Lanes for Strategic Investments, offer entrepreneurs more streamlined ways to start and manage their businesses. But in the meantime, entrepreneurs must stay up to date with regulatory changes and make do with available digital tools to comply with business and tax obligations.

For businesses that are able to navigate these regulatory hurdles, the payoff can be significant. Entrepreneurs that keep pace with digital government initiatives and compliance requirements will have a competitive edge. Government reforms, once fully implemented, could foster a more business-friendly environment, enabling growth in the startup ecosystem.

FINAL THOUGHTS
The three biggest business trends of 2025 — AI becoming standard practice, heightened customer experience demands, and the dual impact of bureaucratic red tape — will shape the future of businesses, particularly SMEs. Companies that embrace these trends will be better positioned to seize growth opportunities, while those that resist change may struggle to remain relevant.

The evolution of business trends calls for adaptability, innovation, and resilience. SMEs that stay ahead of the curve by leveraging AI, prioritizing customer experience, and navigating regulatory challenges will be poised for sustainable growth in 2025 and beyond.

To stay ahead of these emerging business trends, SMEs must have access to reliable financial support. A business credit line or flexible financing option can empower companies to invest in R&D, expand operations, and enhance processes. Entrepreneurs looking for financial flexibility can explore solutions like a revolving credit line, which provides accessible funds to seize opportunities and manage challenges as they arise.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.

Benedict S. Carandang is a member of the MAP ICT Committee and is the VP for External Relations of First Circle. This article was co-written with Jess Jacutan, content marketing consultant for First Circle, a fintech company that empowers SMEs through funding and free growth tools.