News stories today are consumed with commentary on the spiraling inflation, labor shortages, and signals of a potential recession. The last two years may not has been the best for everyone, and 2022 shows itself to be no different. We hope this article could provide you with quality information to help you position your business correctly for any impending economic downturns (if any).
First things first, what’s a recession?
In short, a recession is a decline in economic output for two consecutive quarters. in the US, the Nation Bureau of Economic Research (NBER) is the organization responsible for recording the start and end dates of recessions. If a 2022 recession becomes a reality, you would surely hear it on TV, across social media, and even on the radio (you forgot the aux?).
Now, let’s begin…
First, we’ll start with the downsides:
1. Decline in Revenue / Sales from Existing Clients
This is typically the most common impact for most businesses, but the effect may not be evenly distributed. Depending on the service you offer and to whom, this effect can be minimal or larger than anticipated. The impact on the residential side of your business depends on the income and savings of your client base as well as the criticality of your services to your clients. For example, an individual that hires home cleaning service every two weeks is most likely to continue if they have the savings / income to do so, even despite a temporary loss of job. The impact on the commercial side of your business is much more difficult to calibrate and would ultimately depend on the nature of your clients’ businesses. For example, hospitality clients may scale back bookings as a result of a reduction in cash flows in their own business. Retail, office spaces, malls, etc., unless closed, is likely to continue booking at the same rate. High priced services like consulting would be affected based on the impact on their client base.
2. Difficulty Gaining New Clients
This is true as a result of the declining incomes for businesses and individuals as furloughs ensue and business activity slows down. There’s no further explanation needed. The number of potential clients in the market would be reduced due to the adverse economic circumstances.
3. Limited Access to Business Loans
Banks would not be as liberal with loan approvals as they were in the months prior. Loan approval rates are most likely to decrease as collateral requirements increase. In prior recessions, interest rates may have trended lower to make borrowing cheaper for those that are approved, however, this will not be the case in a 2022 recession as the federal reserve is currently increasing interest rates to combat the high inflation.
A recession is not all doom and gloom. There are positives:
1. Finding Workers is Likely to Be Easier & Faster
If you are one of the businesses lucky enough to see limited impact or even benefit in the recession, you should also take the opportunity to be better staffed. Furloughs in heavily impacted industries would lead to a larger supply of labor in the market. This is especially true for industries without high barriers to employment i.e., no certifications, licenses, or technical knowledge required for employment.
2. Opportunity to Expand Your Market/Services or Improve the Way You Do Business
It is no lie, that some of the greatest businesses were created during challenging times, both at the macroeconomic level and even the personal level. There are industries that thrive during a recession. Some of which are bankruptcy attorneys, maintenance services, bars and grocery stores, and even snack retailers (just to name a few based on data from prior recessions). If you are not in one of these segments, you can find clients in these segments. Ultimately, the goal is to ensure that you find a way to weather the storm, if any, and leave the recession with new perspectives and an improved willingness to succeed.
We hope this was helpful. If you are not yet a member, sign up for free to take advantage of our free ATS software and affordable background check services to improve your hiring processes today. We have also compiled a free hiring check list with list of step by step actions and documents needed to ensure you hire compliantly with state and federal laws.