10 Ways Businesses Can Adapt to the Current State of the U.S. Economy

I want to talk to you today about something that is on everyone's mind these days: the possibility of a recession this 2022. 

The current state of the U.S. economy is a worldwide matter that has investors, entrepreneurs, and industry experts on high alert. Entrepreneurs usually keep an eye out for economic forecasts as this affects their strategy in sustaining and growing their business.

Recessions typically involve businesses producing less revenue, workers losing jobs, and commodity prices rising, requiring people and businesses to make certain preparations when one is forecasted.

In the last few months, you've probably heard a lot of talk about stagflation—the combination of stagnant economic growth and rising inflation. These conditions can lead to an economic crisis that can have devastating effects on businesses and individuals alike. It's been said that stagflation is the worst kind of economic crisis, because it makes it impossible for business owners to plan for the future. The current stagflation has also caused businesses, investors, and individuals to decrease their spending and find ways to preserve their cash.

There's no way around it: we're living in an age where it's harder than ever before for small businesses to get by without taking some risks—and sometimes those risks don't pay off as expected. However, if you're prepared with enough resources at hand (and maybe even some good old fashioned luck), there's no reason why your business can't weather this storm just as well as anyone else's!

There's no doubt that the economy is changing, and it's affecting everyone in the business world. This is something we can't ignore, and it's important we understand how this will affect our businesses. 

In this blog, we'll explore together what makes a company resilient during an economic downturn and strategies you can use in your business to survive and thrive during these times and in light of a potential recession.

The Great Recession

In order to better understand how the economy is changing, we need to look to recent history, and draw parallels between what’s happening now, and what has happened in the last major recession.

It’s been nearly 10 years since the Great Recession happened, and there’s no doubt that we might actually be facing a similar situation in severity because of the Pandemic crisis. 

The Great Recession occurred from December 2007 to June 2009 and was triggered by a lot of economic indicators and caused many homeowners to default on their mortgages. The housing bubble burst because people bought houses they couldn't afford—and then lost them when they couldn't pay their mortgages anymore. Many worry we may have another housing bubble.

GDP declined by 4.3% from its peak in December 2007 until it bottomed out six months later in June 2009. The unemployment rate increased from 4% to 10%.

After this recession ended, the unemployment rate fell back down to 4.1% and GDP grew steadily at a rate of 2-3% per year until 2017 when it began slowing down again in 2020 due to uncertainty surrounding trade wars and tariffs with countries around the globe.

The Current State of the U.S. Economy

The current state of the U.S. economy is indicative of an incoming recession. This means that economic indicators are signaling an economic downturn that may be more devastating than what we are typically expecting.

Have you noticed your groceries are steadily increasing in price? That's a sign that inflation is happening. Or how about all of the employee reductions you’re seeing in the market, or maybe you’re experiencing it with your business? There is talk that labor supply will go down and commodity prices will keep rising. Consumer spending in the U.S. has been slowing down over the past year, with everything from housing to furniture sales losing momentum. 

It’s also important to know that the Federal Reserve is projecting low inflation levels and wants to continue increasing interest rates throughout 2022. This could be bad news for economic growth, especially for U.S. business owners. Rising interest rates will also make borrowing more expensive, potentially stifling consumer spending, new home owners, and private business investments. 

Market Predictions in Fruition

In January of this year, the global economic outlook reported that less growth and more inflation were expected. This was due to the lingering effects of the covid-19 pandemic still affecting multiple facets of the economy.

In April of this year, the World Economic Outlook released an update reporting worsening conditions for the future. The IMF contributes an update on the negative effects that the war on Ukraine has on local prices and supplies.

Global growth is now forecasted at 3.6%, lower than January’s 4.4%, and 2021’s 5.9%. Worker shortage continues and job openings in the US are already at an all-time high.

This excess demand for labor results in more spending as companies increase wages or move to areas where workers are in abundance.

Is a Recession Coming?

That's what we're all wondering. Wall Street firms argue over whether or not we're headed for a recession, analyzing various economic indicators that typically signal a recession.

Fed rates continue to increase, possibly in hopes of helping banks recover from the pandemic, but it could also put additional pressure on consumers and businesses.

GDP has already experienced -1.4% growth in the first quarter of 2022, alerting experts for what could possibly come after. While the pandemic allowed more savings for a lot of Americans, continued spending may halt, due to price inflation.

Here’s a graph showing the relationship between 3 economic growth indicators. Note how the pattern looks before The Great Recession between 2007 and 2009.

What You Can Do

The economy is never stagnant—it's always changing, as are the laws and regulations that govern it. And right now, there are some big changes coming down the pipeline that could affect your business in a number of ways.

It's not enough to just keep doing what you've always done. You have to stay on top of the changes and adapt your business strategy accordingly—and quickly.

Here are some strategies you can follow that will help you stay afloat while we wait for the storm to pass:

1. Restrategize Cash Flow

One of the most important management techniques I use to keep my business running is to restrategize my cash flow. Make sure that your business isn't spending money on unnecessary expenses and that any unnecessary expenses have been cut out. This will allow your company to survive longer during periods of economic downturns.

2. Focus on Operational Efficiency

Find solutions that decrease the use of your resources, especially capital, without lowering productivity. Consider a digital transformation strategy to help your teams work faster, or switch to cheaper service providers for your tech stack.

You can also identify bottlenecks in operations and business processes to decrease the time and labor spent on certain business functions.

3. Outsource

I always recommend outsourcing, especially during times of economic downturn. It can provide you with access to the global talent tool, help you avoid the consequences of the Great Resignation, and help your business conserve on costs. Depending on where you outsource to, you can save upward of $60,000 a year per person you hire.

Outsourcing tasks to offshore virtual assistants from cheaper labor markets can help you fill in labor shortages or the high price of labor you experience locally. You can hire virtual assistants to pick up projects during the recession, or even retain them after you’ve experienced the cost-effectiveness of outsourcing.

4. Keep Marketing

You should continue to market your business even when there’s a recession. With social media marketing, email marketing, and other forms of digital marketing, you should maintain efforts to be on top of your audience’s mind. 

Luckily, digital forms of marketing take less financial investment and usually yield higher ROI than traditional forms of marketing.

Money’s tight for everyone during a recession, but as long as you showcase your brand’s values and benefits in an appropriate manner, your marketing efforts shouldn’t go to waste.

Your mission here is to align your brand’s values and benefits with what your target market truly needs in a time of economic downturn.

5. Switch to Digital Work

Automation and delegation are two practices that can help increase productivity in your business during a recession. That’s what I am currently focusing on with my business, Virtudesk.

Leveraging technology and digital work can help you and your team collaborate more, even remotely. This is also practiced by organizations that collaborate digitally and work in remote or hybrid environments. What we use in our company is an automation app like Zapier. Video conferencing with clients and team members also helps save time and money as opposed to attending personal appointments.

6. Nurture Relationships

Prioritize relationships in your sphere of influence during challenging times. You have relationships with your creditors, vendors, customers, staff, and other stakeholders. 

 An economic downturn affects everyone, not just your business. Your being there for others can result in them providing the same support to you and your business in so many ways.

 Acquiring business through your existing relationships is part of a client retention strategy that shows higher returns than finding new customers.

 Similarly, having a cooperative relationship within your sphere of influence can be a fundamental part of your recession survival strategy.

 Favorable interest rates and longer payment terms can come out of well-kept business relationships, alleviating some of the financial struggles that come from unpleasant economic situations.

How the Current State of the Economy is Affecting the Real Estate Market

You've probably noticed that the real estate market has been a little different recently.

The most notable way is that there are fewer people buying homes and more people renting apartments than there were in previous years. This means that there are fewer opportunities for real estate agents to sell their services. Basically, housing prices have outpaced income growth. That’s a historic 34.4% increase in the past two years that experts now predict to slow down, albeit not anytime soon.

Increasing fed rates, however, threaten investors and homeowners with an increase in mortgage rates. The increasing mortgage rates are also making it harder for people to become first-time homeowners, pushing off the age of young buyers. This could eventually lead to a recession in the real estate market where inventories are high and buyer confidence is decreased.

But, what does this mean for you? Well, first let me say that it's not all doom and gloom. There are still ways to make money with your business and there are still people who need you. 

Coping Within the Real Estate Market

Market experts continue to identify signs of another housing bubble. High demand, paired with low inventory has already caused significant overpricing of properties in the past 24 months.

The current state of the U.S. economy now warns the real estate market of two factors: a bubble and an incoming recession. Realtors, agents, brokers, and teams may eventually find themselves with more open listings, fewer appointments, and even clients calling about selling ASAP.

According to industry experts, here are a few actions you can start doing to help your business avoid the struggle with whatever comes out of the current volatility in the nation’s economy.

7. Optimize Your CRM

Optimize your CRM so you can keep track of the people in your contact list. Segregate them well so you know exactly how to keep in touch with them during an economic crisis.

In my experience, it is important to make sure that you take a very human approach to keeping your contacts engaged. This way, they’ll be more understanding and helpful in keeping your business alive.

8. Work Your Referral Network

It costs more to find new clients than it does to work a referral network. Nurture your relationships with your previous clients so you can have a reliable referral network. Contrary to first-time buyers, investors in your circles may be interested in benefiting from rising prices and rent during stagflation.

9. Push Pocket Listings

Talk to your sellers and people in your network and see how well this can work for you. When a recession comes and you have a lot of pocket listings, pushing them more can become your business’s secret to survival.

10. Consider New Market Opportunities

Look into changing locations to where the pandemic era has led people to. You can also look into selling properties you wouldn’t normally sell. One approach to this is teaming up with another realtor or joining a team, which can provide you with the help you may need during an economic crisis.

In a Shifting Market

In an economy as volatile as today’s, it’s important to secure options to keep your business and finances safe in case of an economic downturn becoming a recession or even stagflation.

Recognizing frequent movements in the pandemic era, business owner Robert Garcia has already made the move of hiring prospecting virtual assistants for his business. This cost-effective move has helped his business become more productive and successful, as well as prepared for shifts within the real estate market.

Hiring offshore virtual assistants is a strategy that has helped businesses in various industries during economic downturns or financially challenging times.

The current state of the U.S. economy puts businesses, investors, and consumers on high alert about the future. What we can all do right now is prepare for the worst by making adjustments and looking at cost-efficient solutions.

After all, I've seen some companies doing well, and others are still struggling. Do you feel like the current economic state is having a positive or negative effect on your business? Let me know in the comment section down below! 

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