The next economic recession is on its way. That seems to be the consensus opinion among professional and retail investors according to a recentBloomberg Markets Live weekly survey. And that speculation is increasingly being echoed bytop financial analysts andfinancial media.
Numerous factors—pandemic spending-induced inflation, a tight labor market, the war raging in Europe and thesubsequentenergy price shocks—are contributing to a gloomy outlook for U.S. and global economies in the near term. These current and unprecedented headwinds are expected to culminate in a global economic slowdown sometime between late 2022 and 2024.
It should be noted that predictions about the health of the global economy are always mere guesses. No one knows for sure when, or even if, a recession will materialize in global or U.S. markets. But smart money prepares for every scenario.
What does a recession mean for the public safety sector and businesses that support the missions of the public safety leaders? What can you do to ensure that your company navigates the recession in good health? How can you position your business to survive and maybe even thrive in deteriorating economic conditions?
Answering these questions is easier if you know what to expect.
The Next Economic Downturn: What to Expect In Public Safety
Historically, essential services like public safety fare better in an economic downturn than commercial sectors. Why? Because their operating budgets are less responsive to shocks.
In good times—or, more aptly, in times of good economic fortune—private businesses tend to have more cash on hand and feel empowered to take on a bit more risk. They’ll invest in a new product line, hire more employees or pursue that big acquisition to bolster their capabilities.
However, these decisions are evaluated differently when the economic hammer drops. In downturns, many companies look to shed costly or unjustified expenses. They have to start “trimming the fat.” And that can mean shelving plans for new products and expansions into new markets, or even shedding payroll.
The reality for emergency services is quite different. Most public safety departments never have to deal with the “problem” of extra funding. Public safety leaders are more concerned with stretching their existing budgets to cover departmental needs. Those budgets tend to be lean already. There isn’t much fat to trim to begin with.
That doesn’t guarantee that budgets won’t change throughout a prolonged downturn. However, public safety will still be expected to do their jobs just as effectively. So, how will public safety leaders adjust to these pressures?
Just because there isn’t much to cut doesn’t mean there won’t be budget cuts at all. However, there is an advantage that public safety leaders enjoy over their commercial counterparts in these scenarios. Their budget cuts come more slowly.
Public safety budgets are funded by government spending. That offers reassurance and a level of stability for public safety leaders facing an uncertain economic outlook. While their private sector counterparts have to start trimming the fat almost immediately, public safety leaders at least typically get the benefit of a set budget for the remainder of the fiscal period.
Of course, while the cuts do happen more slowly at the start of a recession, public safety budgets are also slower to recover once boom times return.
When budget cuts threaten funding, public safety leaders, like other government employees, get creative. One way they get more bang for their budgetary buck is by pooling resources and sharing costs across different departments, service disciplines and localities.
Let’s say a regional director of an EMS agency in one county needs to adopt current GIS (geographic information systems) software but doesn’t have the funding to cover the cost of the entire project. She can work with neighboring counties and regional boards (or a regional authority) with the same need to share funding responsibilities or to establish a multijurisdictional procurement that will benefit all.
Another option to keep in mind are federal and state grants. During tight times, companies can make sure their customers are taking advantage of available grants that help local agencies procure equipment and services. Even if the grant doesn’t cover the entire cost or the funding is temporary, those extra dollars can be enough to get a reluctant buyer over the hump.
Budget Priorities Will Shift
The current economic environment is already causing some funding headaches for public safety leaders. Many departments today are having difficulty finding enough candidates to fill available positions. This shortage of labor is a major hurdle placing additional pressures on departmental budgets.
The public safety sector has always lagged private industry in compensation. Today’s high inflation environment is further eroding the purchasing power of public safety salaries. Predictably, recruiting efforts suffer.
As a result, public safety workers’ unions are expected to advocate for higher salaries for their members. If these efforts are successful, more of the budget is going to be allocated to payroll. This, inevitably, will leave less of the pie for procurement of equipment and technology.
That means providers will need to get more creative and selective in how they pitch and present their offerings.
What Should You Know About Your Public Safety Customers Today?
Knowing what to expect generally during an economic downturn will help you navigate your opportunities in public safety better. But if you’re hoping to take advantage of those opportunities and make meaningful connections with new customers, you’ll need to dig in and learn more about them individually.
How They’re Funded
Understanding which of your prospective customers are positioned to withstand rough financial times is crucial. Ideally, you’d like to know which departments are more likely to keep or grow their budgets. You naturally want to go after prospects who can afford your products and services.
Some public safety agency budgets are more sensitive to economic slowdowns than others. That sensitivity is dependent on the way public safety departments and agencies are funded. Many are funded through local taxes—property taxes, sales taxes or other consumer taxes. Others get their funding through surcharges and fees.
In the current inflationary environment, the cost of goods and commodities is going up. And tax revenue is going right up with those prices. So in theory, tax-funded public safety departments should be fairly resistant to inflationary pressures. That story changes, of course, in a recession when the economy (and tax revenue) shrinks.
How the Labor Shortage Affects Your Customers
You want to be selective in choosing your prospects. Just as important, you want to make sure you’re in tune with the changing needs of your customers. Understanding how major challenges, like the current labor shortages, impact public safety should help you tailor your product offerings.
A lack of available candidates is a major source of stress for public safety leaders. Not long ago, police academies used to enjoy considerable recruiting success, regularly turning candidates away due to a lack of seats. Today, many struggle to meet their recruiting quotas to replace retiring officers. Similarly, 911 agencies across the country are having trouble replacing Baby Boomer retirees and filling telecommunicator seats is a greater challenge than ever before.
The issues we described earlier—low salaries, eroding purchasing value due to inflation—may not abate any time soon. Figuring out how to do more with less manpower may just be the new normal. And that gap between available labor and the need to do more is exactly where your product or service could come in to help.
Pay attention to the specific ways in which the labor shortage is affecting your current customers. Pivoting to adjust to those needs may just be the key to navigating the predicted economic downturn.
4 Ways Public Safety Can Stay Ahead During the Economic Slowdown
Success in business is often the result of recognizing and taking advantage of opportunities when they present themselves. And a shakeup in the economic status quo can set the stage for new winners and losers. With a recession expected in the near future, now is the time to think about how to best position your company in a more competitive economic environment.
1. Get Lean and Mean
Recessions can actually be good for the health of the economy. Markets are rarely perfect. They always hide inefficiencies. These are exposed during harder economic times. In a downturn, it’s important to identify your weak points and get rid of waste. The trick is to not wait; make those hard choices fast.
2. Push Newer Technology Offerings
If your customers are expected to do more with less, perhaps you can be the one to deliver the “more.” Automation has been a disruptor in the labor market for quite some time. Being risk averse by nature, public safety leaders aren’t typically early adopters of trends. That labor shortage and the increasing costs of labor, however, may provide just the motivation public safety leaders need to embrace automation.
3. Get Creative with Your Product Offering
You’ll need to offer new solutions for your customer’s emerging needs. In a downturn, they’re less likely to make large equipment expenditures. Public safety leaders will be looking to minimize and share costs. They’ll delay buying a new fire truck, for example. But a subscription-based software service will probably fit their investment model better—especially if they can split the cost with a sister agency.
That buffer year we mentioned above should afford public safety agencies a chance to assess their new set of needs. It should also give you time to update and diversify your product offerings. Your goal should be to create a new set of must-have products.
4. Keep Investing in Marketing
In the private sector, the marketing budget is one of the first things on the chopping block when the economic outlook turns sour. But research has longproven that companies that keep oninvesting in marketing during economic downturns come out of recessions healthier than competitors who take the opposite approach. Don’t get nervous and start slashing your marketing budgets reflexively.
You do want to get lean. But you don’t want to cut to the bone. Remember, marketing is an investment in future success. And you shouldn’t sacrifice the future for the present.
Preparing for the Recession in Public Safety
An economic downturn affects governments, taxing authorities and public safety agencies differently than consumer or commercial sectors. Annualized budgets insulate public safety leaders and give them lead time to adjust to new operating realities.
Still, eventually agencies will contend with smaller budgets for your products and services. To win their business, you’ll need to innovate and position your products and services to compete on price, value and need.
If you could use help in developing the best strategy to reach public safety,we’d love to start a conversation.