Small Businesses Remain Optimistic Despite Fear of Recession
Small business owners are preparing for the possibility of a recession. Making contingency plans is stressful when the list of daily tasks to complete keeps growing. Entrepreneurs face many economic challenges that have persisted for several years and are likely to only improve for a while. Confidence remains low—only 34 percent of owners think the national economy is improving. With so many ups and downs, there is uncertainty regarding the impact government measures have on critical issues that significantly increase operating costs.
Three issues of primary concern are rampant inflation, labor shortages, and supply chain disruptions. These factors have forced entrepreneurs to increase prices and rethink their business plans. Although they have little faith in timing an economic turnaround, business owners believe in themselves and their ability to change and adapt to new situations.
Leveraging New and Existing Tools
Although they face many obstacles, the Bank of America 2023 Small Business Owner Report indicates operators feel confident they can achieve their business goals. Retailers have not exhausted the resources in their toolboxes and are using creative tools to stay agile and remain competitive. According to the report, owners took aggressive steps to respond to economic pressures and to address areas requiring improvements.
- 79 percent of businesses raised prices in the past 12 months
- 53 percent added benefits and perks to retain employees
- 49 percent plan to use automation and artificial intelligence (AI) this year
- 34 percent believe the economy will improve in the next 12 months
“While the dual pressure of inflation and supply chain disruptions continue to incumber operations, small business owners remain bullish about their prospects for the year ahead, “said Sharon Miller, President of Small Business and Head of Specialty Banking and Lending at Bank of America. “Small businesses are poised for growth, implementing strategies to retain and attract talent and exploring new tools including artificial intelligence to gain an edge in a highly competitive market.”
Battling Rampant Inflation
Significantly, fifty-six percent of respondents increased revenue in 2022 compared to 2021. Rather than pulling back, 48 percent of owners plan to expand their businesses in 2023—a sizable jump from the 37 percent who planned to do so last spring. Understandably, business owners have many concerns that generate anxiety about developing the most effective strategies to strengthen their organizations.
- 79 percent are concerned about the possibility of a recession
- 68 percent are anxious about commodity prices and the political environment
- Rising interest rates were cited by 67 percent of respondents
- Fifty-seven percent of owners mentioned supply chain problems
Retaining and Hiring Employees
Large and small companies share a common problem—hiring and retaining employees. Being understaffed can negatively affect customer service levels, staff morale, and profitability. While it may require reallocating funds in the budget, organizations are committing to do what is necessary to be competitive with other employers. Thirty-four percent of respondents cited in the report plan to hire more employees in 2023. Fifty-three percent of companies have enhanced existing benefits and compensation packages to motivate current employees to stay and attract qualified prospects.
- 34 percent offer remote/hybrid work
- 27 increased health care benefits
- 34 percent offer cost of living bonuses
- 33 percent increased the amount of vacation time
- 56 percent increased base pay
Although offering more robust perks and benefits comes at a significant cost, seventy-five percent of business owners feel their efforts are appreciated by employees and have improved morale.
Adapting to Digital Tools
To better manage their finances, 80 percent of small business owners are utilizing digital banking, with 55 percent planning to only accept digital payments in the future. Most (90 percent) feel implementing digital resources will make their companies save time, be more efficient, and be better organized. Artificial Intelligence (AI) and automation are becoming more critical to manage business operations and social media.
Sustainable business habits run the gamut from reducing paper usage to recycling obsolete equipment. Establishing an eco-friendly work environment by partnering with sustainable vendors is the point. While they are willing to promote sustainability, implementation challenges exist.
- 49 percent mentioned increased cost
- 29 percent cited difficulty in locating suppliers
- 26 percent had challenges finding high-quality, sustainable products
Understanding small business owners’ collective challenges and sharing their opinions helps other entrepreneurs who may encounter similar situations. The Bank of America Survey was conducted online between March 16 and April 10, 2023. Respondents included 1,145 small business owners across the country with annual revenue between $100,000 and $4,999,999 who employ between two and 99 employees.