Small and midsize business (SMB) CEO confidence declined more than 36% in the second quarter of 2022 when compared to the year prior, per the latest CEO Confidence Index from Vistage, a CEO coaching and peer advisory organization.

Vistage's CEO Confidence Index, which has measured SMB leaders' sentiment regarding a variety of economic and business factors each quarter since 2003, dropped to 69 in Q2, down from 84.3 in Q1 2022 and 108.8 in Q2 2021, but still above the pandemic shutdown in Q2 2020 (65.5) and the Index's all-time-low during the Great Recession in Q4 2008 (48.7).

The marked drop in confidence is accompanied by a sharp increase in concern about current and future economic conditions: 64% anticipate worsening economic conditions in the year ahead and 68% believe that the national economy has already worsened.

"The only thing that remains certain for small business CEOs in the year ahead is more uncertainty," said Joe Galvin, Vistage's chief research officer. "With concerns of potential recession or stagflation on the horizon, we anticipate CEOs' confidence will continue to diminish in the months ahead. However, we do see a bright light in the form of hiring; while it has slowed from the white hot, post-pandemic surge, an overwhelming majority are either still looking to hire or keep headcount the same, regardless of widespread pessimism about economic conditions."

Highlights:

Bottoming levels of optimism, amid declines in revenue and profit

• Just 8% of SMB CEOs believe the overall economic conditions in the U.S. will improve in the next year; only 14% feel economic conditions have improved over the last year
• 52% expect increased revenues in the year ahead (down from 68% in Q1 2022 and 74% in Q4 2021)
• 32% anticipate higher profits in the year ahead, which equals the all-time low first recorded at the height of the Great Recession at the close of 2008.
• Meanwhile, 76% plan to increase prices for their product/service in the next year

Hiring plans have softened, but talent shortages persist

• 52% of SMB CEOs plan to increase their total number of employees in the next 12 months (down from 65% one quarter ago and 76% two quarters ago); 40% say their headcount will remain the same
• 65% report hiring challenges are impacting their ability to operate at full capacity
• For those having trouble hiring: 80% have already boosted wages, 63% have refined their recruitment strategies, 62% have offered flexible hours/schedules, 62% are allowing remote work options, 40% have created apprentice and internship programs

Steep decreases in planned investments, as inflation persists

38% of SMB CEOs plan to increase their investments in plants and equipment in the next 12 months (down from 45% last quarter and 52% two quarters ago).

When asked about which effects of inflation are impacting their business:

• 89% said increased wages and compensation
• 82% cited increased prices from vendors
• 63% experienced higher energy prices
• 61% reported higher costs for raw materials

Remote work remains a challenge for leaders

50% of SMB CEOs report their current workforce is hybrid; 7% say it's all-remote

• Over half of those who allow remote or hybrid work believe collaboration (60%), culture (55%) and communication (52%) have been negatively impacted by remote work
• Those who allow remote or hybrid work say remote work has had no impact on customer satisfaction (78%), accountability (53%), or productivity (53%)

‍