Nearly two-thirds of small and medium-sized businesses expect a recession in 2023, according to a new survey, with many reassessing their approach to preparedness.
JPMorgan Chase’s newly released annual Business Leaders Outlook survey reflects the performance of companies, highlighting the growing impact of inflation and workforce challenges.
The report also provides recommendations that businesses can take to prepare for a recession.
“Companies need to be agile and have some key to operating effectively in today’s economy,” said John Simmons, head of middle market banking and specialty industries at JPMorgan Chase. “It shows that we are prepared for different scenarios.”
The study found that despite similar challenges, business optimism is highly dependent on company size.
According to the survey, only 8% of midsize businesses are optimistic about the global economic outlook, down from 34% a year ago.
Optimism about the national economy dropped from 50% to 22%.
Small business leaders have a more optimistic outlook, with almost half expressing optimism about both the domestic and global economies.
Despite economic uncertainty, business leaders feel positive about their companies’ performance.
By 2023, 69% of small business leaders expect revenue and sales growth.
Sixty-three percent of midsize business leaders expect revenue and sales growth, and more than half expect profits to increase in 2023.
Inflation concerns have risen this year, especially among small businesses.
A staggering 91% of midsize business leaders say they are experiencing inflation challenges.
Half of the small businesses surveyed admit that inflation will be their challenge this year. Nearly all reported inflation has affected their spending.
Nearly 38% said their expenses had increased by 11% or more, leaving businesses with little choice.
Eighty-three percent of midsize businesses have offered prices to consumers and buyers, and more than two-thirds (68%) of small businesses have increased prices for specific goods and services.
“Inflation has been a difficult headwind affecting companies of all sizes in all industries,” said Jinder Chambless, head of research at JPMorgan Chase & Co.
“While there have been some encouraging signs that inflation will begin to ease and cool off into 2023, companies may want to consider adjusting their strategy, pricing or product mix to weather the storm in the near term. might think.”
Businesses are already taking that advice. The survey found that 82% of midsize businesses are likely to continue increasing prices to reduce costs.
Human resource development
Despite the rising costs of running a business, companies are still focused on expanding their workforce.
“Companies may be cautious about the economic outlook, but their actions show they are focused on growth and investing in their people,” Simmons said.
More than half of small business leaders plan to increase headcount in 2023.
A rise in wages will likely be accompanied by a wave of new jobs.
Two-thirds of midsize business leaders and 42% of small business leaders plan to increase wages and/or benefits to attract and retain employees.
Upskilling is another way employers are working to attract and retain talent. Nearly half of employers say they provide staff upskilling and training opportunities.
Ben Walter, CEO of Chase Business Banking, said:
“The next economic cycle is always around the corner, so our role is to help small business owners plan ahead and thrive in good times and bad.”
JPMorgan Chase’s Walter et al. suggest that corporate executives continue to monitor economic developments and remain open-minded about recession preparations.
The research report recommends that small businesses “strengthen their balance sheets and find opportunities in volatility.”
Maintaining working capital is also very important with today’s changing economy.
Businesses should consider supply chain financing and dynamic discounting solutions, implement more efficient inventory management, and rework current debt to reduce debt, the report added.