CEO Advisor Newsletter October 2022
CEOs Concerned about Recession But Remain Optimistic
(According to the Marcum-Hofstra Survey)
- SEPTEMBER 28, 2022 (New York City, NY) – Nine in 10 mid-market CEOs are concerned about the likelihood of a recession, and over a quarter say they have begun laying off employees or plan to do so in the next 12 months. Yet, CEOs say they remain upbeat about their overall business outlook. These are among the findings of the latest CEO survey from Marcum LLP and Hofstra University’s Frank G. Zarb School of Business. The survey was conducted in September, 2022.
- Fifty-four percent of respondents said they are “very concerned” and 39% are “somewhat concerned” that the economy will experience a recession in the coming year. While approximately half of CEOs are taking a wait-and-see approach to staffing, others are employing a mix of strategies to address their needs, with 25.3% saying they have already initiated layoffs or plan to do so in the coming year.
- CEO OUTLOOK
- Despite concerns about the short-term direction of the economy, CEOs are generally upbeat in their outlook for business. The weighted average of CEO optimism on a scale of 1-10 increased to 6.7 from 6.3 in June 2022. More than four out of five (84%) rated their outlook as positive (5 or higher), and more than one in three (34.7%) put themselves in the “very positive” range (8-10). The percentage of CEOs selecting the most optimistic rating of 10, however, decreased to 10.8% from 13.4%.
- “Mid-market CEOs have been continually challenged to think on their feet in the unprecedented environment of the past almost-three years,” said Jeffrey M. Weiner, Marcum’s chairman & chief executive officer. “It speaks to the entrepreneurial spirit of these business leaders that they maintain a generally positive outlook on the near-term future despite indications that we are likely headed for a downturn—and despite a global supply chain that is still recovering and the chronic labor shortage that continues to plague nearly every industry. Look to the middle-market every time for innovation in the face of real challenge and an indicator of where business is headed.”
- Interestingly, sharp falloffs in optimism were seen in both the largest and smallest industry sectors responding to the survey. The percentage of financial services CEOs (21.6%) and real estate CEOs (3.3%) rating their outlook “8” or higher decreased to 33% from 42% and 44% from 86%, respectively.
- Sectors registering notable increases in the 8-10 range included construction (39% vs. 20%), healthcare (33% vs. 17%), and professional services (31% vs. 17%).
- “That mid-market CEOs remain largely optimistic in their business outlook is encouraging, but the intense volatility of the current global economic conditions is incredibly challenging – and you’re seeing that in how CEOs are hedging, both in their outlook and their plans for the next 12 months,” said Janet Lenaghan, dean of the Zarb School of Business. “I expect that we will continue to see these ‘mixed-bag’ type of findings going forward, as CEOs try navigate increasingly unpredictable conditions.”
- INFLATION
- The number of CEOs who indicated their business has been impacted by price inflation increased to 73.2% from 68.5% since this question was last posed in the January survey. However, more companies indicated they are able to absorb rising costs (19.3% vs. 14.0%). There was less willingness or ability to pass increased costs on to customers (32.4% vs. 35.0%), and more companies reported a negative impact on their bottom line (21.6% vs. 19.5%).
- BUSINESS PLANNING INFLUENCES
- “Economic concerns” remained the most-cited influence on business planning (50.6%), although this finding declined markedly from 58.3% in June. Also declining as an influence was “rising material/operational costs,” despite concerns about inflation, with 40.5% of responses, down from 46.5%.
- Reflecting the continued tight labor market, “availability of talent” accelerated as an influence on business planning, cited by 46.1% of respondents, up from 40.9%.
- REMOTE WORKFORCE
- CEOs were also asked about their current policies regarding remote workers. Over three-quarters of respondents (76.2%) continue to provide employees the option of working remotely for at least part of the week. Only 2.0 % of CEOs indicated they plan to discontinue offering a remote work option.
- TECHNOLOGY
- The remote workforce is fueling CEOs’ concerns about cybersecurity and online vulnerability. Slightly more than a fifth of respondents (21.2%) named cybersecurity as their biggest technology challenge. An almost-equivalent percentage (20.8%) said their biggest technology challenge is keeping up with the latest advances, and 17.5% pointed to the costs of keeping up with technology upgrades.
- About the Survey
- The Marcum-Hofstra CEO Survey is a periodic gauge of mid-market CEOs’ outlook and their priorities for the next 12 months. The survey polls the leaders of companies with revenues ranging from $5 million to $1 billion-plus. The latest survey interviewed 269 mid-market CEOs.
- It is conducted as part of the Zarb School of Business MBA curriculum, and developed and analyzed by Hofstra MBA students led by Dr. Andrew Forman, associate professor of international business and marketing, in partnership with Marcum.
- The Marcum-Hofstra CEO survey portrays ongoing concerns regarding inflation and fear of a recession in the coming year. Yet, CEOs remain optimistic that their companies can weather these economic challenges,” Forman said. Similarly, the continuing willingness of CEOs to accommodate employees who prefer to work remotely speaks to the value of flexibility in balancing the goals of the organization with a changing workforce.”
- About the Frank G. Zarb School of Business at Hofstra University
- Hofstra University’s Frank G. Zarb School of Business prepares students to become tomorrow’s global leaders. Located just 25 miles from New York City, Zarb students have access to internships and networking opportunities across every industry.
- About Marcum LLP
- Marcum LLP is a top-ranked national accounting and advisory firm dedicated to helping entrepreneurial, middle-market companies and high net worth individuals achieve their goals. Marcum’s industry-focused practices offer deep insight and specialized services to privately held and publicly registered companies, and nonprofit and social sector organizations.
- CEO Advisor, Inc. advises CEOs, presidents and business owners on all aspects of growth and strategy to grow their businesses to the next level, as well as, provide growth capital and mergers and acquisitions advisory services to small and mid-market companies. Q4, 2022 and 2023 may be a challenging business environment and having additional professional advice and hands-on advisory services to accelerate growth will drive both profits and value in your business. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by mobile phone at (714) 697-3370, by email at MHartsell@CEOAdvisor.com, or visit us at www.CEOAdvisor.com for more information.
Plan Now to Grow and Maximize Profits in 2023
- CEOs perform annual planning to grow their business and increase sales and profits, as well as, the value of their business. There are several methods for implementing a growth strategy. Common growth strategies in business include Market Expansion, Product Expansion, Diversification and Acquisition.
- 1. Market Expansion Growth Strategy
- A Market Expansion growth strategy involves selling current products and services in new markets either in new industries or new geographic markets - or both. There are several reasons why companies consider a Market Expansion strategy. First, the competition may be such that there is little room for growth within the current market. If a business does not find new markets for its products, it cannot grow or increase sales or profits - in fact, profits will decline over time. A business may also use a Market Expansion strategy if it finds new uses for its product and services.
- 2. Product Expansion Growth Strategy
- A business may also expand its product line or add new features to increase its sales and profits. When companies employ a Product Expansion strategy they continue selling within the existing market. A Product Expansion growth strategy often works well when technology starts to change. A business may also be forced to add new products as older ones become obsolete.
- 3. Diversification Growth Strategy
- Growth strategies in business also include Diversification, where a company will sell new products to new markets. This type of strategy can be risky and companies will need to plan carefully when using a Diversification growth strategy. Market research is essential because a company will need to determine if customers in the new market will potentially like, need and purchase the new products.
- 4. Acquisition Growth Strategy
- The above strategies focus on organic growth, and most CEOs and business owners focus solely on this strategy. Growth strategies in business can also include Mergers and Acquisitions. With Acquisitions, a company purchases another company, or purchases the assets of a company without taking on the liabilities to expand and grow. A business may also use this type of strategy to expand its product line and enter new markets, as well as, acquire needed talent and deeper management or needed intellectual property.
- An Acquisition growth strategy can also be risky, but not as risky as a Diversification strategy. One reason is that the products and market are already established in an operating company with an Acquisition strategy. A company must know exactly what it wants to achieve when using an Acquisition strategy, mainly because of the investment required to implement it.
- CEO Advisor, Inc. specializes in advising on all aspects of growth for small and mid-size businesses. Our mission is to grow your business to the next level. Contact Mark Hartsell, MBA, President at MHartsell@CEOAdvisor.com, call (949) 629-2520, by mobile phone at (714) 697-3370 or visit www.CEOAdvisor.com for more information.