Va. CEOs expect increased sales despite shortages
In Q1 survey, 70% expect sales to increase in next six months
About 70% of CEOs expect sales to increase in the next six months, despite supply chain and labor shortages, according to the first quarter CEO Economic Outlook survey conducted by the University of Richmond’s Robins School of Business and the Virginia Council of CEOs (VACEOs).
Ninety percent of CEOs reported a labor shortage impacting their business, and 75% reported at least a minor impact from supply chain shortages.
Andrea C. Johnson, CEO of van der Linde Recycling & Container Rentals LLC in Fluvanna County, said that the company has faced several supply chain challenges. The time needed to obtain parts for maintenance and repair of trucks and equipment has increased. Additionally, the company faces higher costs on basic safety equipment for employees.
But “probably the biggest impact we’ve had right now, because I run a fleet and equipment, is fuel,” she said. “Our fuel costs have more than doubled over this time last year … and we’re having to add that to the customer cost.”
Richmond-based Livewire LLC CEO Henry Clifford said he and his staff now call securing supplies “the battle of next week.”
Livewire offers technology integration to homes and businesses, so it directly confronted chip shortages. “At this point it’s now a daily and weekly activity where our logistics folks have just gotten used to life during wartime, essentially, and almost normalized the supply chain shortages,” he said, adding that some lead times for obtaining gear run a year out.
Despite facing strong headwinds like a looming recession and the war in Ukraine, entrepreneurs remain optimistic, said VACEOs Executive Director Scot McRoberts. A higher percentage of respondents (70%) expected sales growth in the next six months than in the survey conducted at the end of the fourth quarter of 2021 (60%).
“These are small and midsize companies’ CEOs,” he said. “These aren’t corporate CEOs, and I think they’re more nimble than larger companies, so they’ve adjusted well to the challenges of the pandemic.”
Of the 70% of CEOs who expect sales to increase, 61% said they expected sales to be “higher,” and 9% expect sales to be “significantly higher.” Twenty-one percent expect no change.
For Clifford, increased pricing due to inflation contributes to that expectation, but service categories have also come back amid the transition out of the second phase of the COVID-19 pandemic.
In terms of employment, 67% of CEOs expect to increase their employment over the next six months, while 29% expect it to remain flat, and 4% expect staffing levels to fall.
Livewire has about 30 employees and expects to hire another five or so in the next six months, Clifford said.
Johnson’s answer has changed since she completed the survey in April, she said. The company has increased wages to retain its employees and won’t be seeking to hire more in the next few months.
Relative to pre-COVID times, 46% of CEOs said a higher percentage of their employees would be working remotely, and 39% said the number had not changed.
McRoberts said part of that continued increase might be because employees are demanding flexible or hybrid arrangements.
Except for roles that require in-person work, such as installation jobs, “we’re very flexible,” Clifford said, “and we trust our folks to decide what’s best for them as far as where they want to work or how they want to work, so we’re very results-oriented.”
The majority (57%) of CEOs said they expected capital spending to remain flat, while 31% expect an increase in capital spending.
“One [reason for that] is adjusting to the new virtual work environment that’s demanded by employees,” McRoberts said. “Even though they may be adding employees and growing the business, their demand for seats in the office is not growing with it.
“The other thing I think is just caution against the headwinds,” he said. “Going into a potential recession, cash is king.”
Johnson’s company is approaching the end of a two-year project that she estimated cost about $500,000 total. Currently, the company primarily serves the construction and demolition sectors. To support diversification into recycling mattresses, carpet pads and film (like the plastic wrap around pallets), van der Linde is building a new facility to house the necessary equipment. The investment should serve the company well, since petroleum prices are higher than when the company started on the project two years ago.
Rich Boulger, associate dean of the University of Richmond Robins School of Business, administered the survey from April 5 to April 14. The majority of respondents were in the services and construction industries. The average company represented had about $11 million in revenue for the past 12-month period and 53 employees.
The Robins School adapted the survey from one from the Business Roundtable, a Washington, D.C.-based lobbyist association of CEOs of U.S. companies, and has administered it since 2010.