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5 Trends Every American Small Business Owner Needs to Watch in 2016 Technology will continue to cost less but borrowing is becoming more expensive. Don't expect much substantial from Washington in an election year.

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Heading into an election year means many of the big influences on the US small business market will come from macro-economic conditions and technological changes being implemented in the sector.

Here are a few trends that bear watching over the next 12 months:

The on-demand economy is changing our labor force.

At a time when the level of self employment is rising, small businesses in America are contributing less to the nation's GDP. Between 2002 and 2012, small businesses' contribution to GDP fell from 48.3 percent to 44.6 percent. At the same time, the number of self-employed contractors grew to more than 14 percent of the labor market.

Driving this dynamic is the rise of the freelancing workforce fueled by a plethora of platforms connecting people with work, be it having someone design a logo for you, deliver ice cream, drive you down the street or clean your house. The on-demand economy is thriving.

The labor force has significantly changed. As an example, three years ago independent contracting site Upwork had 1.5 million freelancers registered, now they're upwards of 10 million. With those demographic changes, there is now more competition for employees and it's driving a conversation around minimum wages, paid time off and overtime rules which will all be key election issues. We're going to hear a lot of discussion around these topics.

Over the next 12 months we'll see technology help to streamline the freelancing marketplace, which should help boost productivity in this sector.

Not a lot is going to happen policy-wise.

Entering an election year means whatever fear you have about what policies may change in the government can likely be set aside. That means anything that's going on with tax reform or ObamaCare, for example, isn't likely to change in the near term as election years tend to be dead policy years. Everyone will be trying to steady the ship so their candidate is elected.

The Inauguration is Jan. 20, 2017, which is when you'll see policy changes, if a Republican comes into office. The elections are up in the air right now. It's way too early to predict what is going to happen. It's fascinating to watch.

Related: Brands: Get Up to Date on Federal Trade Commission Guidelines

Funds are tightening.

There aren't a lot of major moves made in US financial markets during presidential election years. Access to capital doesn't look like it's going to get easier for small businesses, while the high cost of healthcare and employee wages will continue to weigh on the sector.

The big question is will the Fed raise rates more? If they do, access to capital will tighten, borrowing will become more expensive and the economy will probably soften.

If interest rates go up, there are going to be other investments which will be more attractive than the stock market. That's important for business owners, as many have savings invested in the stock market. It also means now is a good time to borrow, while interest rates are low.

With no significant legislation expected to come out of Washington this year, there's an expectation that the economy will continue to grow at a moderate pace in 2016 of between 2 percent to 3 percent. The biggest issue out of Washington is the government's ability to repay its debt which has now been kicked back to March 2017.

This lack of movement locally drives home the idea that macro-economic forces will have a bigger impact on the US economy this year.

Related: With Latest Jobs Report Beating Forecasts, Fed May Raise Interest Rates

The falling cost of technology is making life easier.

Previously, businesses had to pay a lot of money for data and analytics. Automation platforms were tools only big enterprise could afford. However, as the cost of tech falls small businesses have gained access to data, analytics and automation platforms once only affordable for big business.

Today, a small business can tell where their interest is coming from and answer queries which could only be executed using millions of dollars worth of infrastructure.

The power of the cloud is finally being realized.

Technology is getting stronger, faster and cheaper each year. In the US, we've talked about cloud for a long time but 2016 will be the final realization of cloud technology. We'll be heavier into the main adoption curve, which means more companies will be able to take advantage of the agility the technology provides.

As new generations come up through the ranks, more companies are moving to cloud technologies. We'll also see more integrations between software players. Many applications which are currently separate, for example collaboration tools or accounting platforms, will start to build deeper links. Slowly but surely the march to cloud is inevitable. It's a big country and a big market but what's going to drive this trend is the younger generation and their push for innovation.

The opportunities for small business and the convergence of technology makes it easier to open and run a business. The cloud, mobile and ubiquitous internet blurs national and state barriers, opening up global opportunities never before available to small businesses.

It's estimated that about 70 percent of the 28 million US small businesses that could be using an accounting platform, don't. But this is starting to change, especially as we see more millennials enter the workforce. The more small businesses use technology to streamline their operations, the more productive they become.

Related: Startups Can Grow Faster When Their Roots Are in the Cloud

Russ Fujioka and Gene Marks

Trends research collaborators

Russ Fujioka is president of Xero in the US. He has more than 25 years’ experience providing strategic and operational leadership to cloud, Software as a Service and technology providers with a focus on sales, marketing and operational management of high growth businesses. Fujioka has held senior executive roles at Dell, Bessemer Venture Partners, J. Walter Thompson and Adobe Systems.

Gene Marks is president of The Marks Group, a 10-person Philadelphia-based consulting firm specializing in sales and marketing technologies. Gene is the author of six books, most recently, The Manufacturer's Book Of List (CreateSpace - October, 2013).

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