Despite the ongoing pandemic, rising inflation, supply chain issues and labor shortages, a new survey finds small and midsize businesses (SMBs) across the country are predicting a bright future.
JP Morgan Chase’s 2022 Business Leaders Outlook Survey, released Jan. 5, found 83% of midsize and 71% of small businesses said they were anticipating a good year ahead. Among midsize businesses, 81% anticipated revenue and sales growth in 2022, and 63% of small businesses felt the same.
Four out of 10 surveyed SMBs expected an increase in their credit needs in the year ahead, the highest level of anticipation for this change in five years.
“As an economist I’m not surprised,” Jim Glassman, head economist for JPMorgan Chase Commercial Banking said of this apparent optimism. “We have been tracking these folks every six months, so we’ve been seeing the story emerging throughout the pandemic.
“Some of your readers may be surprised there’s so much optimism in the business community when we’re still struggling with this virus,” Glassman added. “The thing to understand is that for most of these folks their business activity is at or higher than where it was prior to the pandemic.”
According to Glassman, this stems from improved vaccination rates and the adaptability that most successful entrepreneurs need to succeed even under normal business conditions.
John Gambardella, managing director and region manager for JPMorgan Chase in Connecticut and the Hudson Valley, felt proud to work with the businesses of the region that have overcome so much.
“If we look at it on a localized basis, the most impressive thing about our client base is quite frankly their resilience,” Gambardella said. “They’ve been through a lot. We’ve seen great leadership from the men and women that own and manage these businesses. There’s lot of uncertainty as it relates to what’s happening around Covid, but they’ve proven to us and, more importantly, to themselves, that they have the ability to be flexible and take new opportunities.
“I think that has given everybody the confidence to be optimistic that whatever is thrown out, they have the ability to face those challenges head on, come out with new solutions, and continue to move forward,” he added
Glassman indicated that while problems persist, issues such as supply bottlenecks, increased competition for qualified employees, and the drive towards online business are all good problems to have.
“All these challenges are a symptom,” Glassman said. “A result of the economy recovering very quickly, much more quickly than a lot of people thought. As a business leader they’re the kind of challenges you’d rather deal with.”
Businesses that survived the early days of the pandemic are now trying to meet demand instead of worrying about existential threats. The new report indicated that 53% of midsize businesses said they are operating at least the same capacity as before the pandemic, and 31% report already exceeding their pre-pandemic levels in the past year.Â
Nine out of 10 of the surveyed midsize businesses expect growth in 2022, and commonly think that growth will be driven by expansion into new markets, innovative or diversified product and service offerings, and an uptick in consumer demand.
For small businesses, the survey revealed that the challenges they found most concerning were economic uncertainty in general, inflation increasing their operating costs and changes in consumer habits. For midsize businesses, those challenges also exist but there was more concern about labor shortages, supply chain issues, and an overall higher cost of doing business.
The report has found that many surveyed businesses have responded to those pain points through supply chain workarounds, ranging from increasing the number of suppliers the businesses use to engaging in stockpiling of necessary resources; 65% of surveyed midsize businesses have started strategically stockpiling and 51% found suppliers in new geographies to avoid bottlenecks.
Moving from a “just-in-time” model where shipments arrive when needed to a “just-in-case” model where stockpiles can cushion the blow of supply chain disruptions is expensive, but according to Glassman it is worth considering.
Many SMBs are worried about hiring and retention, with 38% of small businesses and 81% of midsize businesses have either already increased wages or plan to. Likewise, many businesses are contemplating allowing some employees to continue taking advantage of the flexibility to work where and when they want which has defined much of the past two years. Small businesses are also increasingly offering incentives like health insurance (61%) and 401K programs (37%).
Another major means of adapting for these businesses is to develop new consumer channels. Digital sales are just one part of the equation — 24% of small businesses have implemented contactless payment options, while 22% said they are selling more via social media. In fact, 19% of the surveyed small businesses said they planned to go to 100% e-commerce model this year.
