In case you hadn’t heard, there’s a recession looming.
At least that’s what experts have been predicting for a year or more. And yet in Los Angeles, a supermajority of small-business owners feel that their enterprises are equipped to handle any downturn that may arrive in the coming months.
“Many of those small-business owners feel more confident about the local economy and revenue expectations despite interest rates, supply chain issues and other headwinds,” said Angela Antonio, a senior vice president at Bank of America and its small-business regional executive for the Greater Los Angeles area. “They continue to grow their businesses and feel confident.”
That confidence may be borne of several factors — robust savings or access to funding, operations that are streamlined with help from technology and a lot of time to prepare. Some owners feel battle-hardened from the Covid-19 pandemic. Others see their trades as being relatively safe during hard times.
“It would appear that security, active-shooter training, investigative services and site assessments are essentially recession-proof,” observed Jeff Zisner, president and chief executive of Studio City-based Aegis Security and Investigations. “With reduced operations or vacant properties, businesses and property owners need to make sure they are protected.”
Nationwide, 76% of small-business owners are confident their companies are equipped to survive a recession, according to new study by Bank of America. Meanwhile, 48% of small-business owners plan to expand their operation within the next year — not a large amount, but an 11% improvement from the previous year and not the reaction one might expect with a recession presumably coming.
Narrowed down to Los Angeles, the confidence is more apparent — 82% of small-business owners say they’re equipped for a recession. And 64% of business owners here plan to expand in the year ahead.
Additionally, 55% report working additional hours themselves to cover labor shortages; 66% said they have upped benefits to help attract and retain employees; 49% plan to hire more employees; and a whopping 90% say they have digitally optimized their operation within the last year, such as adopting cashless payment options or banking online.
“I think part of it is the flexibility of our L.A. entrepreneurs that are adjusting their business plans as needed,” Antonio said. “They’re offering increased benefits to retain their workers. They’re digitally optimizing their businesses. They’re pivoting based off of what they’re seeing from their clients and their behaviors and trends. I would say our L.A. business owners are nimble.”
Zisner is among those business owners. The company has invested heavily in technology and training for it, he said, which allows for a certain level of automation and remote working for his nearly 400 employees. And he said he is among those improving pay and benefits commensurate with demand.
“As fewer jobs and qualified candidates are available, the cost of skilled security professionals goes up,” he said. “By investing in our people through training, above-standard wages, and promotions opportunities, Aegis has been able to maintain and grow, even during challenging times.”
Area business owners are also forward-
thinking in terms of sustainability, even with the sometimes-expensive upfront costs with that. Bank of America’s study indicates that 84% of L.A.’s small businesses have adopted sustainable practices — such as reducing paper use, altering habits, purchasing sustainable materials and using electric vehicles — in spite of contending with the costs and variable quality of materials. Digital tools play a role here as well, on top of streamlining work.
“With increasing demand, part of our success has been being in the right place at the right time,” Zisner said. “Our competition tends to be smaller mom and pop operators who don’t have the infrastructure to manage complex security teams or larger security conglomerates who tend to lose out on the personal touch. For the most part, if one of our clients calls, we answer the phone with someone capable of making decisions 24/7.”
Whatever the coming months may bring, it won’t be anything like the early months of the Covid-19 pandemic.
That assurance — and prior experience — likely factors into the relative confidence of businesspeople right now.
“The pandemic really forced businesses to become more efficient, so I think a lot of them are going into a potential recession being pretty nimble,” said Brandon Parsons, a practitioner of economics at the Pepperdine University Graziadio Business School. “In many cases, they’re potentially coming into the recession in a better place.”
Aegis was among those companies dealing with a lot. At the start of the pandemic, around 100 security professionals lost their jobs because their work sites — schools, restaurants, bars, clubs, retail stores and hotels — either heavily reduced operations or were closed altogether. This represented nearly half of the firm’s employees at the time.
“That job loss was, however, short-lived,” Zisner noted, “as nearly everyone was offered reassignment to hospitals, critical manufacturing and asset-protection details.”
In preparing for a recession, Parsons said it’s important for business owners to align their expectation with demand. Although consumer purchasing power remains relatively high, inflation and concerns of a downturn are starting to affect that, he said, so a smart enterprise will adjust and offer similar products at a more economical level than their premium counterparts. To give an example, Parsons posited that consumers may opt for a generic dish soap as opposed to flashy and performance-marketed brands.
For enterprises that have longer-term relationships with their clients, it also helps to be proactive in contacting those clients and seeing what they can do to help out their wallets while still providing services.
“Keeping your current customers happy is really important,” he said. “Just going the extra mile for your existing customers can go a long way in retaining your current revenue stream during a recession.”
And while they’re being proactive, businesses also stand to benefit from making sure they stand out to potential new customers.
“There’s a tendency for firms to dial down marketing during recessionary pressures,” Parsons said. “That can be a mistake, especially given the need for firms to really differentiate their products relative to competitors when customers are more price-sensitive.”