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Most small and midsize businesses expect to see a recession this year. Yet when it comes to business outlooks, leaders of small companies are seemingly more optimistic than those of midsize firms.
That’s according to the JPMorgan Chase’s 2023 annual Business Leaders Outlook survey released this month.
Those concerns are prompting businesses to re-evaluate their strategies around pricing, sourcing materials and running operations.
“Inflation has been a challenging headwind impacting businesses of all sizes, across all industries,” Ginger Chambless, head of research, JPMorgan Chase Commercial Banking, said in a statement.
“While we have seen some encouraging signs that inflation has started to moderate and should cool over 2023, businesses may still want to consider adjustments to strategies, pricing or product mixes to help weather the storm in the near-term,” Chambless added.
The online survey was conducted from Nov. 14-22 for small businesses with annual revenues between $100,000 and $20 million, and from Nov. 29-Dec. 13 for midsize businesses with annual revenues between $20 million and $500 million. A total of 1,79 businesses participated in the survey with an error rate is plus or minus 3.1% for the small business findings and plus or minus 3.5% for the midsize business findings, both at the 95% confidence level.
When it comes to passing costs onto consumers, 83% of midsize businesses have passed at least some increased costs onto consumers and buyers, while 68% of small businesses have raised prices on select or all products and services.
As for rising business expenses, 94% of small businesses say inflation has impacted expenses, with 38% noting that expenses have increased by 11% or more. Leading cost drivers for both small and midsize businesses include wages and benefits costs for hiring and retaining employees, shipping and other supply chain-related expenditures, including costs of raw materials.
Asked about bracing for longer-term increases, 82% of midsize businesses are likely to continue to increase prices to mitigate costs, while the majority of small businesses expect that higher costs for labor, rents, shipping and materials are here to stay.
Still small businesses were more optimistic than midsize businesses in their economic outlook. Small businesses are less likely to have exposure to national and international markets, expressed optimism for the national and global economy at 49% and 45%, respectively, which is similar to last year’s sentiment. But with midsize businesses, optimism for the global economy dropped to 8% from 34% from a year ago, and optimism dipped to 22% from 40% from a year ago.
Meanwhile, leaders of both small and midsize businesses have high expectations for their company’s performance. A full 72% of small businesses and 66% of midsize businesses expressed optimism for 2023. The survey found that 69% of small businesses expect increased revenue and sales in the year ahead and 65% anticipate greater profits in 2023. Similarly, 63% of midsize businesses expect increased revenue and sales in 2023, and 51% predict greater profits.
“Following the challenges of the last few years, it’s encouraging to see the resilience of small business owners and leaders,” Ben Walter, CEO of Chase Business Banking, said in a statement. “The next economic cycle is always right around the corner, so our role is to help small business owners plan ahead so they can succeed in good times and bad.”
This year’s outlook showed that hiring remains a priority, with 51% of small businesses and 50% of midsize business saying they were looking for new employees. The survey found that 67% of midsize businesses plan to increase wages and/or benefits and 43% plan to offer upskilling and training opportunities, while 42% of small businesses expect to increase wages. Small businesses’ primary drivers for full-time hiring plans include expected sales growth and improved financial positions.
“While businesses may be cautious in their economic outlooks, their actions display a focus on growth and investing in their employees,” John Simmons, head of Middle Market Banking and Specialized Industries, JPMorgan Chase Commercial Banking, said in a statement.
“Businesses are signaling that they’re practiced in being nimble and prepared for several different scenarios, which are keys to operating effectively in today’s economy,” Simmons added.
Chase offered these insights for companies as they plan for 2023.
Stay informed on economic trends. While business leaders are undoubtedly familiar with today’s top economic headlines, they will want to keep a close eye on whether current trends related to the Federal Reserve, consumer spending, inflation, labor markets and more continue, abate or reverse in the year ahead.
Recession-proof your business. Regardless of when or if a recession ultimately materializes, businesses can take steps today to remain flexible, bolster their balance sheet and even find opportunities amid volatility.
Optimize working capital. Working capital is a key indicator of businesses’ financial health, and maintaining it is even more crucial in times of economic volatility. To manage working capital more effectively, businesses may want to consider utilizing supply chain finance and dynamic discount solutions, implementing more efficient inventory management and reworking current debt to reduce liabilities.
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Image and article originally from libn.com. Read the original article here.