Most small and midsize U.S. business leaders expect continued growth for their companies this year amid a less robust economic environment, according to the annual JPMorgan Chase Business Leaders Outlook survey released today. Three out of 4 businesses – 76% of midsize companies and 74% of small ones – are optimistic about their own performance, and the majority expect to grow sales this year (70% of midsize companies and 62% of small ones). They’re leaning into this expected growth through measures including more widespread adoption of new technology and increased hiring.
The national and global business outlooks are more cautious, with midsize companies in particular reporting a drop in optimism from 2019. While more than half of midsize (59%) and small (52%) businesses remain optimistic about the national economy, this marks a decline of 14 and 3 points from a year ago, respectively. Optimism about the global economy is also down for midsize companies, which are more likely to have exposure to international markets: 24% are optimistic compared to 39% in 2019. Among small businesses, global optimism is steady at 40% compared to 38% in 2019.
“Businesses are becoming used to a new normal as the pace of economic expansion naturally settles down,” said Jim Glassman, senior economist at JPMorgan Chase. “But it’s important to note that slowing economic growth isn’t a sign of weakness, and many of the concerns business leaders have point toward an economy that’s running at its full potential.”
Leaning into Disruption: When it comes to preparing for disruption, even more business leaders are mobilizing to make changes now compared to 2019: 89% of midsize companies and 61% of small ones report taking actions including purchasing cyber insurance, creating contingency plans and designating individuals and teams to identify threats and opportunities. Businesses are also embracing emerging technologies to increase efficiencies and reach customers more directly.
• For midsize businesses, cloud computing is expected to be the most widely deployed technology for 2020, with 73% planning to use it, followed by data-driven targeted marketing (50%) and application programming interfaces (APIs) at 46%.
• Small businesses are increasingly feeling the impacts of e-commerce disruption, but 57% feel confident in their ability to manage this challenge.
“In an era of rapid technological change, businesses are demonstrating their resiliency and taking steps to future-proof their companies,” said John Simmons, head of Middle Market Banking & Specialized Industries at JPMorgan Chase. “Harnessing new tools and technologies and remaining agile will help accelerate growth in today’s competitive environment.”
Hiring from a Shrinking Talent Pool: Businesses want to hire to prepare for an expected uptick in sales, but a limited supply of qualified candidates is making it increasingly difficult to do so.
• For the second consecutive year, midsize businesses rank this as the #1 challenge, constrained by a lack of applicants and unique skills needed for the job. This is a reality for small businesses as well: 31% report that they are extremely or very concerned about the candidate supply, up from 28% last year.
• Still, businesses are forging ahead: 55% of midsize businesses and 39% of small ones expect to increase full-time employees over the next year. Small businesses also expect a jump in part-time employment, with 38% planning to hire, up 7 percentage points from 2019.
• To retain talent, businesses plan to increase compensation, improve benefits and provide flexible hours.
Setting Sights on Business Abroad: Despite geopolitical and trade-related concerns, midsize businesses remain heavily invested overseas and are continuing to expand into new international markets at earlier stages in their lifecycles. Nearly half (47%) of midsize businesses have sales outside the U.S., with an additional 14% planning to establish international sales or operations in the next three years.
Unexpected Growth is Common: Many small businesses (69%) report having experienced unexpected growth and of these companies, 91% have gone through it more than once. While small business leaders feel largely positive about the growth, they acknowledge having to work longer hours and purchase more supplies and inventory as a result.
“Unexpected growth is a good problem to have but it can be stressful for small business owners,” said Business Banking CEO Jen Roberts. “They have to reassess their short and long-term strategies, which could mean managing their cash flow more efficiently, incentivizing staff, or investing in technology to help them scale.”
Planning For the New Decade:
Businesses should get comfortable with today’s complex operating environment, and keep the following considerations in mind as they plan for the year ahead:
1. Don’t be fazed by the US economy’s new normal. The durability of today’s expansion is unlike anything we’ve seen before. Rather than compare to business cycles of the past, look instead to key metrics like unemployment and inflation to get a fuller picture of the economy’s health. With strong fundamentals and no clear recessionary trigger, it seems likely the expansion could continue at a slower pace for a sustained period. Learn more.
2. Embrace technological change head-on. The most successful businesses are using technology to stay ahead of the competition, drive efficiency and build a seamless customer experience. Evaluate the latest tools to make sure your business isn’t left behind. Learn more.
3. Educate staff on cybersecurity. With the pace of cyberattacks rapidly accelerating, 2020 is the year to make cybersecurity a priority. Defenses are only as strong as your least-prepared employee, so investing in training and controls can help protect against the threat of sophisticated attacks. Learn more.
4. Make your values central to your business. In a tight labor market, defining and investing in your company’s environmental, social and governance priorities can be a differentiator in employee recruitment and retention. Learn more.
5. Take advantage of global expansion. Despite geopolitical complexities, international business opportunities are too significant to ignore—and the ease of technology and travel make them more accessible than ever for companies. Evaluate global markets and supply chains carefully to determine how to best tap into new markets. Learn more.
For more information on the Business Leaders Outlook, view the midsize and small business reports.