| Alliance Virtual Offices

Will a recession hit in the near future?
What does a recession mean for your new business?
What does a recession mean for your established business?
“What does a recession mean for me?” and taking advantage of the tools you’re provided

Q: How would a recession affect the market? What does a recession mean for me and my business?
A: During a recession, the market takes a hit. Unemployment rates rise, people’s savings evaporate, and money doesn’t go as far as it previously did. For your business, this time of economic uncertainty can be a great time to focus on growth, dial in your product offerings, and solidify your teams.

In times of economic crisis, the public may be asking, “What does a recession mean for me?”

This uncertainty is contagious, especially when inflation concerns are everywhere you look.

Economic confidence is quickly eroding. In May, Gallup’s Economic Confidence Index fell an additional 6 points, from -39 to -45.

Several economists are warning of an impending recession; other economists are claiming that a recession is already here.

The fact of the matter likely lies somewhere between these two assertions, but regardless of how you interpret our current situation, economic trouble is ahead.

So, what can you do? What does a recession mean for the average person? What does a recession mean for the economy in general?

In this article, we’ll be answering questions like these and many more.

First, we’ll take a look at whether or not a recession will hit in the near future.

Then, we’ll ask what a recession means for your new business, and what a recession means for your established business. Finally, we’ll take a look at how to take advantage of the tools you have at your disposal.

So, if you’ve ever asked, “what does a global recession mean for me?” – then you’re in the right place.

Keep reading for plenty of actionable tips on surviving times of economic fear!

Will a recession hit in the near future?
What does a recession mean for your new business?
What does a recession mean for your established business?
“What does a recession mean for me?” and taking advantage of the tools you’re provided

Will a recession hit in the near future?

While asking “What does a recession mean for me?” is a great place to start when preparing for economic turmoil, you’ll need to do a bit more to get truly prepared.

There is a high probability that a recession will hit in the near future. In addition, several indicators are pointing to further declines in the market.

Let’s take a closer look at some of these indicators:

Inflation is high
Economists are worried
Fluctuations are normal in the market

Inflation is high

Across all sectors, inflation is high.

People are spending more on the basic things they need to survive, from housing to groceries to gas.

This leaves them with less purchasing power than they would normally have and inevitably slows economic activity as a whole.

Economists are worried

Numerous economists and industry leaders are confident that a recession will hit soon.

Firms like Ned Davis are issuing stark warnings, and several major news sources are sounding the alarms.

Not only does this point to the likelihood of a recession, but it can also influence economic activity and further increases the probability of a recession.

When everyone is preparing for a recession, they’re typically saving money if they’re able, buying less, and overall contributing less to the GDP.

Sure, recessions would still happen if no one saved money, but often the public’s financial sentiment has a demonstrably negative effect on the economy.

Fluctuations are normal in the Market

Contrary to popular belief, the market can’t just go up forever.

Conversely, the more data we have, the better we can predict upcoming recessions. That said, there will always be slight variations in the length and exact date they occur.

Even in the rare instance that economists are wrong, and we aren’t on the precipice of an economic recession, they’re a standard part of any healthy market.

Therefore, it’s important to ask healthy questions like “what does a recession mean for the economy?” Doing so gives you a better insight into how a recession can impact your business, regardless of the current economy.

However, understanding whether a recession is coming and understanding how to keep your new business running during a recession are two very different things.

Below, we’ll answer questions like “What does a recession mean for inflation?” and other pertinent questions about the ramifications of an economic recession.

What does a recession mean for me and my new business?

If you’re already thinking about questions like “what does a recession mean for me?” then it’s a good idea to figure out what moves your company will take to stay operational — especially if your business is just getting off the ground.

The U.S. market may have experienced its first positive quarter this year, but the improvement was negligible, and economists are still worried about how the following months will look.

For new businesses, this is the time to prepare and iron out any extraneous details in your operations.

Below, we’ve put together a list of some of the biggest challenges that your new business will face during an economic recession.

Less capital
Harder to raise
Expensive loans
Uncertain consumer demand

Less capital

Often, business owners will point to a lack of capital as the reason for their company’s collapse.

Established businesses might have the war chests to weather recessions, but new small businesses usually haven’t had the time to save a meaningful amount of cash.

Thanks to digital tools like virtual offices and other shared workspaces, modern digital businesses don’t have the same fiduciary burden that traditional businesses might’ve had in previous recessions.

Regardless, having access to spare capital is important for every business, and an economic recession only accentuates this need.

Harder to raise

Finding investors can be much more difficult in a recession.

Investment firms have an edge, but downturns in the market will impact their portfolios, meaning that investors have fewer resources.

Because investors deal with the same emotions as the rest of us, many of them are feeling generally pessimistic and unwilling to take a chance during these downturns, making it difficult to acquire venture capital.

Expensive loans

To make matters worse, business lines are expected to be much more costly.

The Federal Reserve just approved another 0.75% interest rate hike in an effort to try to slow demand and cool the economy, meaning Americans are experiencing the highest rates seen since 2008.

This cooling period is unwelcomed, but needed.

The previous bull market — a period of continued economic growth — ended with the pandemic but lasted an unprecedented 11 years.

The interest rate refers to the rate you’ll pay when you borrow money, be it for cars, credit cards, or any other industry that includes finance. Therefore, when The Fed raises the interest rate, business loans become inherently more expensive.

Uncertain consumer demand

One of the most noticeable aspects of an economic recession is reduced consumer demand.

Loans are more expensive, money doesn’t go as far, and everyone is fearful, so it only makes sense that consumer demand is lower during a recession.

Some great ways to combat uncertain demand are making use of your current inventory, cutting out inefficient steps in your business’s operations, and honing in on your target audience.

The solution?

Stay small, capitalize on e-commerce, and outmaneuver your competitors.

If you can keep operating costs low, you can keep prices low while still reaching your target market.

From there, you can position yourself as a cheap alternative to existing products or services, winning the customers that leave your competitors. This allows you to grow through the recession and build a solid infrastructure that will serve you on the other side of the recession.

What does a recession mean for me and my established business?

The impact a recession will have on an established business is a bit different than the effect it’ll have on a brand-new one.

Outside of economist predictions and rising inflation rates, other signals are looming.

New small businesses are typically just worried about surviving the downturn, but established businesses have to juggle maintaining their market share, ample competition, expensive overhead, and several other factors.

So you’re still wondering, “What does a recession mean for me and my established business?”

Read on to learn more about:

Fluctuating prices
Increase in cost of supplies
Supply chain issues
Limited budget

Fluctuating price

As an established business, a recession often forces you to raise prices.

Across the board, prices are all over the place.

For instance, while many may be wondering what a recession means for the housing market, the answer is nuanced.

Established businesses are more likely to be in a position where price fluctuations have a more severe effect, especially when suppliers are involved.

Increase in the cost of supplies

Similarly, the cost of supplies themselves often increases during a recession.

Often, established businesses will have longstanding relationships and by extension, consistent pricing for raw materials.

However, a recession can cause your average profit margin to grow tighter, meaning business leaders will need to think of creative ways to make up for the losses.

Supply chain issues

As we learned during the pandemic, supply chain problems can have an astronomical effect on the price of consumer goods.

Just look at the recent rise in beef prices. Increased demand raised the cost of meat during the pandemic, and continued supply chain problems with vaccines and fertilizer further exacerbated the price.

Fortunately, there are several methods available for established entrepreneurs to use to solidify their supply chains.

Be it establishing better relationships with suppliers, more precise gauging of customer demand, or focusing more energy on digital operations, there are many ways to rectify supply chain problems.

At the will of your budget

Companies with the biggest reserves and widest audience are in the best position for any recession.

If you don’t have the capital to make it through, you’re in a position where raising money is more difficult and getting loans is more expensive.

This leads to many businesses being defined by their budget during times of economic struggle.

If you don’t have the funds to capitalize on the opportunities that the market presents, then you’re stuck on the sidelines, hoping for better market sentiment.

Fortunately, there are several ways to rectify the aforementioned issues, including:

Raising prices
Reducing marketing budget
Cutting unnecessary spending

Raising prices

During an economic recession, many businesses will begin raising their prices.

With supply chain problems, ubiquitous inflation fears, and continued negative market sentiment, businesses begin scrambling to secure profits anywhere they’re able.

During a recession, this will only result in more losses.

Your customers don’t have the funds to accommodate price increases because everyone is in a similar boat. Raising prices is a short-term solution to what might be a fairly long-term problem.

Sure, you can explain a price hike when you’re changing materials or using a more sustainable source, but when you’re changing prices as the public is losing money, most consumers will just go without.

If these customers stop buying, they’ll search for lower-cost alternatives.

A slight rise in prices is explainable, and to a certain point, expected. The issue arises when you begin using your customers to make up for inefficiencies within your operations.

Reducing marketing budget

Other businesses will attempt to reduce their marketing budget.

The idea of removing extraneous costs is good, but eliminating marketing initiatives is still short-sighted.

Consumers have a shorter memory than ever before. If you’re harder to find online and potential customers aren’t regularly interacting with your content, it’ll be more difficult to bring those customers back in when the market turns around.

When consumer spending power drops, businesses need to find a way to replace the customers that no longer make purchases. If you cut marketing budgets, you won’t be able to do that.

Cutting unnecessary spending

Rather than removing a valuable way to connect with consumers or alienating them, the solution is to cut unnecessary spending so that you can maintain your marketing budget and keep your prices competitive.

As it stands, the best way to do this is to shift to virtual operations.

This doesn’t mean that you need to forget about your business’s physical location — it simply means that focusing on digital operations is a safer and more effective way of doing business during an economic recession.

Digital businesses are more likely to see quicker turnaround times, cost-efficient overhead, and incredible margins. Plus, there are countless tools that business owners have at their disposal.

These tools and the flexible nature of digital business give entrepreneurs an outstanding way to get through any economic recession.

Taking Advantage of the Tools Provided

An incoming recession is likely.

If you’re a new business, your focus should be on connecting with consumers who leave your competition because of their diminished purchasing power — and winning them over.

With e-commerce projections showing continued growth, new businesses have the unique opportunity to use an economic recession as a time for positioning and increasing brand loyalty.

Outside of using the time for better positioning, the number one goal for any brand-new business operating through a recession should be to keep surviving.

If you’re an established business, you should switch to virtual operations to keep prices low and connect with new customers.

Virtual operations give business owners a chance to explore countless digital tools and automation services that make running a business a breeze.

Consider a virtual office from Alliance Virtual Offices. These offices are a cost-efficient alternative to their traditional counterparts.

Historically, a standard commercial lease is going to last a minimum of three years. Additionally, business owners are responsible for keeping their office building stocked, utilities paid, and employees provided for.

With a virtual office, business owners have plan packages that start at a minimum of six months and access to private meeting rooms means whenever you need it.

To round out our offices, each location uses a professional and well-known business address that you can use to add legitimacy to all of your operations. Don’t settle for virtual addresses that aren’t backed by space or use a simple P.O. box — a high-quality virtual office is worth it.

Outside of a virtual office, Alliance Virtual Offices has other digital tools that can help any business weather an economic recession.

Our Live Receptionist presents an effective way to reduce labor costs and simplify your daily interactions.

Although you’ll want to be cutting out as many unnecessary positions as possible during a recession, answering the phone yourself is a recipe for disaster, especially if you’re hoping to focus on your business’s core operations.

You risk upsetting customers because of inattention and making business mistakes by trying to be your own receptionist.

Why not avoid the situation altogether?

Using our Live Receptionist service, you have friendly and professional receptionists ensuring that all of your phone calls are personally answered and screened. This gives you the time you need to focus on scaling your operations.

In addition to the receptionists, Alliance Virtual Offices also provides virtual phone numbers to help integrate your business and retain privacy.

Trying to juggle your personal life with your business’s operations is a nightmare waiting to happen, and there’s no practical way to create a healthy work-life balance when you’re always carrying total access to your business in your pocket.

With a virtual phone number, you can cultivate a healthy work-life balance and leave your work phone at home.

Unlimited extensions mean that you have an easy and streamlined way to onboard new team members, and the cloud-based technology of the phone numbers allows you to take calls from anywhere you’re working.

These solutions are a cost-effective way to make it through lengthy periods of economic downturn. They are so useful that you’ll likely continue using them when the market turns around.

Understanding the question, “What does a recession mean for me?” is key to understanding that recessions are a normal part of market cycles. Through careful planning and preparation, your business can make it through anything.

In addition to the aforementioned digital tools, Alliance Virtual Offices provides meeting rooms and coworking spaces that gives business owners a place to host meetings with potential investors, clients, and new team members — while simultaneously also giving team members a place to get work done.

Whatever your business needs, Alliance Virtual Offices is ready to provide a solution.

Further reading

Alliance Virtual Offices provides several digital tools for established entrepreneurs, possible business owners, and everyone else that’s in between.

If you’re searching for a better way to scale your business, tools to help you manage your workload, or a better way to connect with your employees, we’ve got you covered.

What Does a Recession Mean for Me and My Business?