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What's top of mind for business leaders today
The economy is humming along, both at home and abroad, deep tax cuts were signed into law late last year, and regulatory reform has taken hold in Washington. That's given leaders of small and midsize businesses plenty of reasons to be optimistic, a view broadly shared by the business leaders who responded to the 2018 Business Leaders Outlook survey by JPMorgan Chase. "We're seeing optimism on all fronts and at all-time highs," says JPMorgan Chase senior economist Jim Glassman.
The survey found that all leaders share a belief that their businesses can grow in the coming year, no matter the size of their operations. Yet the strong economy also presents some challenges, not the least of which is finding talented employees in today's tight labor market. Here's what else the survey reveals is top-of-mind for business executives today:
1. The future is looking bright
Nearly two-thirds of small business leaders are upbeat about the national economy, similar to last year. A full 62 percent expect to increase sales and revenues in the next 12 months, and 59 percent predict a boost in profits.
At midsize companies, this rosy mood is even more pronounced: Among leaders of midsize businesses, 89 percent are optimistic about the US economy, and more than 80 percent expect a boost in revenues in the coming year; three-quarters anticipate higher profits. As a result, more plan to hire full-time workers than did a year earlier.
This outlook is in line with other measures of business optimism. The National Federation of Independent Business (NFIB) Index of Small Business Optimism, which has been measuring sentiment for 45 years, set an all-time record high in 2017, driven by the expectation of more pro-business policies out of Washington. Plus, the NFIB reports that small businesses closed out 2017 with the strongest reports of sales gains since 2006.
2. Growing sales and profits remains job No. 1
Despite this increasing confidence in business conditions, leaders of both small and midsize businesses continue to rank sales and revenue growth as their top challenge. Whether expanding is getting harder or easier varies by business size.
Just half of small business executives—those who lead businesses with revenues of $100,000 to $20 million—say growth is a challenge, a significant jump from last year. While 63 percent of leaders at midsize companies (with revenues of $20 million to $500 million) say the same, that portion has been trending downward for two years in a row.
3. Talented workers are hard to come by
The unemployment rate is at 4.1 percent, the lowest since 2000, and US companies are reporting nearly 6 million open jobs. Not surprisingly, businesses of all sizes are contending with a tight labor market. "As boomers retire in droves, there's a massive shift out of the workforce, and the labor force is growing much more slowly," says Glassman. "This is making it more difficult for businesses to find and hire qualified workers."
Leaders of both small and midsize businesses agree: it's tough to bring in talented workers. One-third of small companies are concerned with the limited number of job candidates with the right skills. At midsize businesses, 45 percent of leaders say they are extremely or very concerned about finding talent, due primarily to a dearth of applicants and missing skills among those they see.
They aren't alone. According to an NFIB survey, nine out of ten small businesses that are filling jobs report few or no qualified applicants.
4. Tax reform should be a boon to business
As many as 91 percent of midsize companies expect to benefit from tax reform, as do 37 percent of small businesses. "The majority expect to benefit from the new tax law to some extent," says Glassman. With that tax savings, 44 percent of midsize businesses plan to pay down debt, 43 percent will invest in capital expenditures, and 33 percent say they will hike wages.
5. Regulations remain a thorn—but less so
With the current regulatory environment, this year business leaders are less likely to report regulations as a threat to business. Still, half of midsize businesses believe the government should focus on reducing regulations, and nearly four in 10 small business leaders say the same.
A survey last year by the National Small Business Association found that more than half of small firms reported that regulations kept them from hiring a new employee or embarking on a new growth strategy. The average owner spends at least $12,000 a year dealing with regulations, and 14 percent of owners say they devote more than 20 hours a month to federal regulations alone.
Another possible reason that regulations are still an impediment: A recent survey by the small business mentoring organization SCORE found that nearly half of small business owners feel that policies favoring large businesses have a negative effect on their potential success.
Ellen Stark is a Chase News contributor.