Small and middle-market businesses are altering their pandemic-era strategies, according to a recent study by Umpqua Bank. The bank’s 2022 Business Barometer survey found that small companies are ready for significant changes in response to inflation and middle-market companies are addressing workforce and cybersecurity issues.
Nearly three-quarters (72%) of middle-market firms reported difficulty finding qualified employees, a 17-point increase over last year. More than 30% are having difficulty retaining employees, up 18 points. In response, leaders plan to be more aggressive with offering remote options, bonuses and increasing benefits. More small businesses also report planning to hire for new skills to build capabilities, increase worker pay and benefits, and allow remote work options.
In 2022, economic optimism has diminished in the face of rising inflation, which ranks as a top concern for both small (73%) and middle-market (37%) businesses. Nearly 46% of small businesses believe the economy will decline further, an almost 20-point increase over 2020 and 2021. However, more than eight in 10 middle-market businesses believe the economy will improve (31%) or stay the same (50%), which is similar to pre-pandemic responses. When asked about revenue growth and profitability, however, most businesses expect levels of increase similar to previous years.
Forty-five percent of middle-market companies reported being a cybersecurity-related fraud target in the past 12 months. Cybersecurity was the top area middle-market businesses are most likely to invest in this year and the second most important in the year ahead next to addressing workforce challenges. For small firms, supply chain issues were top of mind, with 90% reporting price spikes in the cost of goods, 75% experiencing longer delays and 61% needing to source materials differently. Inflation ranks as a top concern for nearly three-quarters of small businesses, which are less able to absorb the rising costs of goods.