According to the U.S. Chamber of Commerce, small businesses have grown to employ just under half of the U.S. workforce and account for more than 43% of U.S. GDP. More importantly, small business owners are becoming increasingly optimistic as American consumers continue to spend, even as inflation continues to tighten the purse strings.
Chase Business Banking CEO Ben Walter speaks with Brad Smith on Yahoo Finance's Wealth! to discuss the bright outlook for growth as small business owners embrace new strategies and technology to run their businesses regardless of the economic situation.
“Most of them [small businesses] Companies are thinking much longer term than that, and that's great. That's what we want to see. We want to see small businesses looking to the future and planning for whatever economic cycle is coming. That's what we're advising our clients to do. We're advising them to prepare for either strong or weak demand,” Walter explains. “We're advising them to prepare for an inflationary or low inflationary environment, and that's going to continue to be the case.”
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This post Luke Carberry Morgan.
Video Transcript
Small and medium-sized enterprises.
They are the backbone of the American economy.
I mean, we all know that many of us got our first jobs at small businesses, which, according to the U.S. Chamber of Commerce, will employ nearly half of the entire U.S. workforce and account for nearly 44% of U.S. GDP by 2023.
So how these entrepreneurs feel about the future is a key indicator of the state of the U.S. economy.
A recent survey conducted by Chase for Small Business, or Chase for Business, found that small business owners are optimistic about future growth.
To talk about this in more detail, I'm joined by Ben Walter Chase, Business, Banking, CEO. Thank you so much for having me, Ben.
What, what are you listening to?
What is the current situation for small business owners?
Good morning, Brad.
Thank you for coming this morning.
Small business owners are telling us what's going on in the economy at large, which is that gas is still going strong.
Therefore, we expect demand to remain robust in the economy.
That's great, and small business owners are leaning into it.
They're investing, they're planning further capital expenditures, they're planning further investments, they're planning further expansion.
Well, that's especially true for our customers.
So we're very excited.
But there is a touch of muted optimism there.
As you heard in our last segment about inflation, unfortunately that continues to be a concern for small businesses.
Well, demand is strong, but we also expect inflation to continue, particularly on the price side and on the wage side.
So these two elements balance each other out.
What are small businesses thinking about the employment situation, the current labor market? They are still struggling to hire at an affordable wage.
Yeah, they have a big demand and they want to hire more people, which is great, because as you said, it accounts for almost half of the jobs in this country.
So if we want to maintain a small, er, robust job market, we need strong demand for labor from small businesses.
The reality is that businesses have demand for their products and services and want to hire, but wage pressures remain.
Well, given rising prices, it's no surprise that workers are demanding higher wages.
We are caught in a classic wage-price spiral.
Well, that means there's increased competition for workers between large companies and other small businesses, and between small businesses and large companies.
The bottom line is that they are desperate to hire talent, and they simply need to do so at a price that fits their business model.
It's really interesting.
We often talk about how public companies are making capital investments in generative AI and other technologies that can help improve productivity and employee productivity.
What are we hearing from SMEs about how they are using technology and whether the latest cutting edge technologies are actually benefiting them?
Well, you're going to move slower than larger companies because they don't have the same capital expenditure budgets.
However, there is an increasing demand from small and medium-sized businesses.
They have been going digital for a long time, just as individuals have been going digital in their personal lives.
That's nothing new.
Well, we try to meet that demand through our banking, we try to meet that demand through our services.
Hmm, but there is a wide range of companies offering digital tools to small and medium-sized businesses, and this is increasingly the case in the AI field as well.
I don't think that will change.
Hmm, they're not going to have their own implementation.
If you look at large enterprises, they have their own large language models, their own machine learning models, but small and medium-sized enterprises don't have that.
But as these technologies become more democratized, there will be strong demand from small and medium-sized businesses to implement these tools into their daily operations. And if you think about where the optimism for the future is coming from, it's coming from small and medium-sized businesses.
You know, we've talked about the different funding elements that are currently supporting small businesses and what they expect over the next probably four to five years, but how many of you are anticipating any significant changes even after the election?
flat.
I don't think most small businesses are planning for the next six months or even three months. Most small businesses are thinking much longer term than that.
That is wonderful.
That’s what we want to see.
We want small businesses to look to the future and plan for whatever economic cycle comes their way.
That's what we advise our clients.
We recommend preparing for both strong and weak demand.
Our advice is to prepare for an inflationary or less inflationary environment.
And when you look at small business, of course, at every moment in the economic cycle there are winners and losers, so that will continue to be the case.
So those who were selling goods did particularly well during the pandemic, and then as we came out of the pandemic, travel and other services bounced back with a bang, but goods took a hit.
Now, as things calm down, we're seeing vertical industries like trucking suffer a little bit as people return to the service industry.
So, over time, those changes will happen, but we want small businesses to make their businesses cycle-ready.
Um, but all the while what we're seeing is near record-breaking business creation.
This shows that there is a lot of enthusiasm about the future prospects of small and medium-sized enterprises.
We're not at the high levels we saw right after the pandemic, but we're hovering just below those levels and well above where we were in 2019. I just wanted to expand on what you just said, which I think is key for a lot of small business owners who are looking at how to make their business cycle-ready.
If there's one key tip they can rely on today that will ultimately put them in a better position to weather the cycle, I think it's scenario planning, regardless of the industry they're in.
So, if you're a small business owner, you're an optimist by nature.
We also understand that starting a small business takes courage and that you have to believe in yourself and your idea more than anyone else.
And I don't mean to take that away from any small business owner.
One of the things I love about my job is interacting with such inspiring, self-motivated people.
Well, but imagine what would happen if that didn't happen.
And then you have to do scenario planning, like what happens if demand goes down 20% or 30% or what happens if you get a big order and it exceeds the cash you have on hand?
Are you ready to do it?
So think about not only what you plan for to happen, what you know will happen, and what you expect to happen, but also what you don't expect to happen.
This is where a great financial partner like Chase can help.
Well, we're here to help you think through, to help you think through those scenarios and think through what contingency plans you should have in place to be able to respond in real time to the situation on the ground.
Ben Walter is the CEO of Chase Business Banking and he's here with us today for the wealthy.
Ben.
Thank you for your time.
Brad, thanks for the invite.
