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Is your business prepared for the looming recession?
The recent downturn in the stock market amidst Coronavirus fears should cause businesses to start questioning their resilience against the inevitable recession. And since the global economy is so heavily dependent on China's manufacturing operations, the Coronavirus could be the trigger of this global recession.
While shifting to a more secure manufacturing solution may prevent such future stock market tumult, what can businesses and individuals do to increase their chances of survival during this upcoming economic storm?
Tapping into the freelancer workforce may be the life raft that saves everyone.
Why businesses fail during a recession
During a recession, a vicious self defeating cycle significantly slows down economic activity. Unemployment rates rise in subjection to Okun's Law which results in decreased consumer spending.This in turn decreases business demand which feeds the increasing unemployment rates.
Business's fold during a recession, not because their products and services are too expensive but rather because their overheads are too high, resulting in lean profits margins that crack under the weight of an economic downturn.
The conventional model of doing business is surprisingly expensive. Let's take a look at the numbers.
If each office staff member requires between 150 and 175 square feet of space, this comes to a monthly office rental cost range of $12,000 - $40,250.
The inefficiencies of commuting to work has a significantly negative impact on the greatest assets of a business, the employees. This, in turn, degrades both the quality and quantity of business output.
These congestions are forecast to only intensify over time:
This sluggish process causes employees to arrive to work tired and not in the most productive frame of mind.
Costs of hiring employees
The process of hiring a new employee costs around $4000 , add on top of that a yearly salary commitment + overtime costs + benefits.
The conventional process of hiring employees is also grossly inefficient. It takes an average of 30 days to fill a position, and if your business has a low retention rate this causes gaping talent cracks that could force you to decline important business requests that are so precious during a recession.
Flawed business strategies during a recession
When business demand decreases, the routine course of action is to reduce the workforce down to just the skeleton staff, to help meet these relentless overhead costs.
But solely laying off staff without a follow up plan is not a solution to surviving the recession just like throwing cargo off a sinking ship won't prevent your ship from sinking, it just slightly delays the inevitable.
The key to surviving this recession is to adopt an innovation solution that will encourage continued business activity at a lower cost while keeping unemployment rates under control.
How can a business survive the recession?
Tapping into the global talent economy is the key to increasing profit margins and cutting down all of the aforementioned costs.
Freelancers can be hired on a project by project basis so there is no pressure to keep them on board all year. There's also no need to pay them any benefits.
The time to hire a freelancer is also significantly shorter. A talented freelancer can usually be sourced within a day (compared to 30 - 40 days using conventional methods). Technical recruiters can now assist with this process by sourcing the most talented freelancers for any given task, further cutting down processing time.
To establish a recession safety net, businesses should start integrating a the remote workforce into their current operations so that they then have the option of scaling this arm of this business if the pressures of the recession demands it.
This transition doesn't need to be an abrupt strip down and overhaul of your labor force, ease into this innovative staffing model by posting a small project to begin with. Perhaps your business needs a graphic created for an article or you need a landing page created for a sales campaign.
Then as you get accustomed with the process start posting more complex jobs that will benefit your operations, like getting a mobile app developed or hiring a programmer to modify your code base.
There are over 1300 categories of freelancer jobs so you shouldn't have any issues filling any talent gaps in your business.
How can individuals survive the recession?
There's also hope for individuals that fall victim to the downsizing effects of the recession. As mentioned earlier, the conventional hiring process is immensely inefficient, and this process will only become more delayed as everyone follows this trajectory during a recession.
By signing up as a freelancer, you can instantly make your skills available for hire to the growing number of businesses that will be tapping into this platform.
This isn't a band aid solution, the remote workforce is booming as more organizations are adapting to this more efficient method of doing business.
In 2019 Freelancers contributed almost $1 trillion dollars to the U.S economy , that's almost 5% of U.S. GDP. These astronomical stats prove that the freelancing model has the capability of significantly supporting GDP production if more businesses and individuals lean into it
The recession is likely to accelerate this growth as businesses will be reluctant to return to convention staffing methods after experiencing the immense efficiencies of this model.
To prepare for this shift, individuals should sign up to a freelancing platform and start completing side projects to build up their portfolio. Your evident experience on the platform will greatly increase your chances of employment as a freelancer during an economic downturn.
Working as a freelancer during a recession does not mean you'll be enduring a pay cut, in fact, most freelancers end up making more money than they did working full time.
As a full time employee you are relying on a single stream of income, which with a single corporate decision, could completely disappear overnight.
As a freelancer, you have the peace of mind of working with multiple employers across multiple projects. This does not place a financial burden on employers since they are hiring on a project by project basis and the income of freelancers is supported by this strength in numbers.
The Coronavirus outbreak has caused businesses globally to trial a work from home experiment that is highlighting the incredible benefits of this remote working model. The coming recession will finally tip the global workforce scale in favour of this innovative staffing model, dramatically shifting the working landscape as we know it.
And since the remote working model also combats climate change , it isn't just the key to surviving the recession, it's the pathway to a more efficient and sustainable future for everyone.