How Business Leaders Can Prepare for a Possible Recession this Year
(BPT) - By John Simmons, Head of Middle Market Banking & Specialized Industries, JPMorgan Chase Commercial Banking & Ben Walter, CEO, Chase Business Banking
No matter their size, location or industry, businesses across the country have been hit by inflation in the last year, forcing leaders to use a variety of creative strategies to combat rising costs.
In the JPMorgan Chase 2023 Business Leaders Outlook survey, we uncovered just how widespread inflation’s impact has been for business owners nationwide and how it and other pressures have contributed to a challenging business outlook. Unsurprisingly, the vast majority of small (94%) and midsize (91%) businesses are experiencing pricing pressures that are affecting their bottom line, while the majority of small (61%) and midsize (65%) business leaders anticipate a recession some time in 2023.
The good news is that despite these expectations, most midsize (66%) and small business (72%) leaders remain upbeat about their own company’s performance, and are focused on growth, hiring plans and other elements within their control.
As we talk with business leaders about the challenges ahead, there are three main approaches they should consider this year in their preparations for the next economic cycle:
1. Consider NonTraditional Strategies to Combat Inflation
Among small businesses, more than half have said honest and transparent communication with customers is a top tactic for coping with inflation. Because consumers still demonstrate a willingness to shop local, honesty and transparency can help strike the right tone to balance price increases with customer loyalty.
2. Invest in Prospective and Current Employees
Employee retention and development — always important priorities for business owners — are emerging as even more important in the current economic environment. In fact, more than half (55%) of small business leaders cited retaining top employees as a critical factor for business survival, especially because they operate with less slack from the start.
Likewise, nearly half (43%) of midsize businesses plan to invest in talent development by offering upskilling and training opportunities that increase productivity, improve the quality of work and enhance problem-solving abilities. These programs are hugely important for small and midsize businesses looking to improve retention, limit turnover, boost morale and attract new talent.
3. Optimize Working Capital
Business leaders are optimizing working capital to finance inventory and accounts receivable through supply chain finance, which helps them move to extended payment terms with suppliers including the option to get paid earlier in their working capital cycle, and dynamic discounting, which enables owners to receive discounted prices in exchange for paying vendors early. They are also investing heavily in inventory management, reworking current debt and securing working capital financing to maintain and even grow their balance sheets.
To learn more about how JPMorgan Chase is helping business leaders build for the future, view the full Business Leaders Outlook survey results for small and midsize businesses.