Summitted by JPMorgan Chase
- Companies express increased optimism for their business performance and broader economic outlooks
- Jumps in revenue and credit needs expected as businesses address challenges and focus on growth plans
January 5, 2022 –Small and midsize U.S. business leaders remain confident in their companies and resourceful in their approaches to confronting macroeconomic challenges that have created growing pains over the last year, finds JPMorgan Chase’s 2022 Business Leaders Outlook Survey released today.
As a new year begins, the majority of business leaders are feeling upbeat: 83% of midsize and 71% of small businesses are optimistic about their own performance in 2022, up from 77% and 63% one year ago, respectively.
Black and Hispanic and Latino small business owners report their biggest challenge has been shifting consumer habits due to COVID-19 (26% & 37%, respectively)
A significantly greater number of Black and Latino business owners are planning all types of changes to their physical space compared to other small business owners in total.
Optimism, especially among Black business owners remains strong, with a higher percentage expecting increases in revenue, sales and profits in the year ahead compared to the national average.
And while both Hispanic and Latino and Black business owners have high expectations for the future, there is significant concern when it comes to finding quality workers.
Both groups are trying multiple approaches (i.e., increased wages and benefits, upskilling/training, improved infrastructure) to attract qualified candidates, more so than all other groups of small business owners.
Business leaders also have increased optimism around their industry performance and local, national and global economic outlooks compared to the start of 2021.
Despite continued uncertainty posed by COVID-19, businesses are setting their expectations high, with 81% of midsize businesses and 63% of small businesses anticipating revenue and sales growth in the year ahead.
In line with these expansion plans, more than 4 in 10 of those surveyed expect credit needs to increase in 2022, representing the highest percentages recorded in the last five years.
“Businesses have been key accelerators of the continued economic recovery through their resolve and ingenuity in finding new ways to deliver products and services to their customers,” said Jim Glassman, head economist, JPMorgan Chase Commercial Banking. “They now have a stronger sense of how to remain competitive in the current economic landscape, which should allow them to build on last year’s momentum.”
More than half (53%) of midsize businesses are operating at least at the same capacity as they were before the COVID-19 pandemic, with nearly one-third (31%) now running at a greater capacity than their pre-pandemic levels, indicating that some businesses have leaned into the disruption and continued to grow. Seventy percent have also seen profits return to or exceed pre-pandemic levels. The return to pre-pandemic productivity is on track to continue as 9 out of 10 midsize businesses expect to grow in 2022, with the most common growth drivers including expansion into new markets or geographies, innovation or diversification in product and services and increased consumer demand.
Navigating Economic & Operational Challenges
The achievements of the last year have not come easy, as businesses of all sizes have had to navigate an uncertain and obstacle-ridden operating environment. Below are the top three challenges cited by small and midsize business leaders.
| Business Leaders’ Top Challenges | |
| Small Businesses | Midsize Businesses |
| Economic uncertainty | Labor shortage |
| Inflation | Ongoing supply chain issues |
| Shifting consumer habits due to COVID-19 | Higher cost of doing business |
In response to today’s challenges, small and midsize businesses have made changes to their business models, including:
- Supply Chain Workarounds: To alleviate supply chain disruptions, nearly two-thirds (65%) of midsize businesses have used strategic stockpiling and over half (51%) have added suppliers from new geographies. A significant number have also allocated more funds to cover increased costs related to moving products (48%), changed materials or manufacturing processes (32%) and replaced or stopped doing business with certain suppliers (30%).
- Employee Incentives: In response to recruiting and hiring concerns, a staggering 81% of midsize businesses and 38% of small businesses have or plan to increase wages. Flexibility is also a key consideration for many business leaders, with 45% of midsize businesses having or planning to give employees flexibility on where they work and 40% of small businesses already offering or planning to offer employees more flexible hours. To retain staff, small businesses have boosted their employee benefits, such as health insurance (61%) and 401K programs (37%).
- New Consumer Channels: While small businesses are concerned about how shifting consumer preferences due to COVID-19 will impact them, they are increasingly taking action to reach consumers via digital channels. Nearly one-quarter (24%) of small businesses have implemented more contactless payment options and 22% have increased selling on social media platforms. In the year ahead, 19% expect to move to a nearly 100% e-commerce model, up from 12% one year ago.
“Businesses today are eager to grow, but are having to navigate the reality of not being able to fill open roles quickly enough and dealing with disruptions in their supply chain that are slowing them down,” said John Simmons, head of Middle Market Banking & Specialized Industries, JPMorgan Chase Commercial Banking. “At the same time, it’s encouraging to see companies’ adaptability and the pivots they’ve made to push through major pain points. I’m inspired everyday by the grit and ingenuity of America’s business leaders, who have continued to shine throughout the pressures of the past 18-plus months.”
The Financial Needs of Small Businesses
In the year ahead, small business leaders are increasingly seeking new ways of financing and funding. Nearly 7 in 10 (69%) report planning or needing financing in 2022, up from 59% a year ago, with software systems and development being the greatest need (23%). To help fund their purchases, nearly half of small businesses plan to use business credit cards (48%), up from 38% a year ago, with line of credit funding being the next most common funding method. A growing number of small businesses (68%) also plan to explore online lending options, up from 56% a year ago.
“We’re pleased to see that small business owners’ confidence level is improving,” said Ben Walter, CEO, Chase Business Banking. “Challenges remain, but our clients are resilient and we are proud to support them as they navigate supply shortages, adapt to shifting local safety requirements, and find creative ways to hire employees in a tight labor market. As confidence improves, we see a greater need for credit, and Chase stands ready to help.”
New Year, New Considerations
Businesses should consider the following as they plan for 2022:
- Embrace Uncertainty: Resilience has been essential to businesses’ survival and success throughout the COVID-19 pandemic, as demonstrated by the survey, making it all the more important for them to examine how they’re deploying their cybersecurity defenses, becoming more agile and digital-savvy, and attracting, retaining and supporting their employees for years to come. Learn more here.
- Remain Patient: As painful as supply chain bottlenecks and rising costs currently are, the flow of goods could return to more normal levels in the coming months as manufacturers ramp up production and demand for goods eases, in turn helping reduce inflationary pressures. Until then, businesses that utilize strategic stockpiling and look to add suppliers from new geographies may be ahead of the curve. Learn more here.
- Consider ESG: Even for small and midsize businesses, examining which environmental, social and governance (ESG) factors are core to their mission and considering reporting on their ESG efforts can help build a well-defined company culture and improve employee retention, particularly in a competitive hiring environment. Learn more about building an ESG framework here.
For more information on the Business Leaders Outlook, please view the midsize and small business reports.
