Nearly two-thirds of small and midsize businesses expect a recession in 2023, with many reassessing their approach to preparation, a new survey shows.
JPMorgan’s latest annual outlook survey of business leaders reflects how businesses are doing and highlights the impact of inflation and growing labor challenges.
The report also offers recommendations that businesses can implement to further prepare for a recession.
John Simmons, head of middle market banking and specialty industries at JPMorgan, said: “Businesses are signaling that they are being agile in their practice and preparing for several different scenarios, which are key to operating effectively in today’s economy. .”
The survey found that despite similar challenges, business optimism is largely dependent on the size of the company.
Only 8% of midsize firms were optimistic about the outlook for the global economy — down from 34% a year ago, the survey found.
Optimism about the national economy fell from 50 percent to 22 percent.
Small business leaders see brighter prospects, with almost half expressing optimism about the national and global economy.
Despite economic uncertainty, business leaders are optimistic about their companies’ performance.
By 2023, 69% of small business leaders expect revenue and sales to increase.
63% of midsize business leaders expect revenue and sales to increase, and more than half expect profits to increase in 2023.
Inflation concerns have intensified this year, especially for small businesses.
A staggering 91% of midsize business leaders say they are experiencing inflationary challenges.
Half of the small businesses surveyed acknowledged inflation as a challenge this year. Almost all reported inflation affects their spending.
Nearly 38 percent of respondents indicated an increase in fees of 11 percent or more, leaving businesses with little choice.
Eighty-three percent of midsize businesses passed prices on to consumers and buyers, and more than two-thirds (68%) of small businesses raised prices on specific goods or services.
“Inflation has been a challenging headwind affecting businesses of all sizes across all industries,” said Ginder Chambless, head of research at JPMorgan Chase & Co.
“While we are seeing some encouraging signs that inflation has started to moderate and should cool in 2023, companies may still want to consider adjusting strategy, pricing or product mix to help weather the storm in the near term.”
Businesses have embraced this advice. The survey indicated that 82 percent of midsize businesses are likely to continue raising prices to reduce costs.
Businesses are still focused on growing their workforce despite the rising costs of running a business.
“While businesses may be cautious about their economic outlook, their actions show a focus on growth and investing in their workers,” Simmons said.
More than half of SMB leaders expect to increase their workforce by 2023.
Wage increases will likely come with waves of new hires.
Two-thirds of midsize business leaders and 42 percent of small business leaders plan to increase salaries and/or benefits to attract and retain employees.
Another way employers attract and retain talent is through upskilling. Almost half of employers said they would provide skills upskilling and training opportunities for employees.
“It’s inspiring to see the resilience of small business owners and leaders after the challenges of the past few years,” said Ben Walter, CEO of Chase Commercial Banking.
“The next economic cycle is always just around the corner, so our role is to help small business owners plan ahead so they can be successful in good times and bad.”
Walter and others at JPMorgan recommend that business owners continue to align with economic trends and be flexible in preparing for a recession.
The survey report recommends that small businesses “strengthen their balance sheets and look for opportunities in volatility.”
Maintaining working capital is also critical to today’s changing economy.
The report added that companies should consider supply chain financing and dynamic discounting solutions, implement more effective inventory management, and restructure current debt to reduce liabilities.