Mike Andes (founder of Augusta Lawn Care) presents a May 2022 commentary on the macroeconomic outlook and how an emerging downturn creates a hiring opportunity for small businesses. He argues large firms over-hired during 2020–2021 and are now laying off workers (Amazon, Netflix, Carvana cited), which will produce a 6–8 week window in summer 2022 (June–August) when small businesses can hire; however, he warns the same recessionary forces (falling stock prices, higher mortgage rates, falling home values, rising inflation) will damage demand and strain small businesses that can't retain efficient recurring revenue or pay competitively.
Questions this video answers
Mike Andes, founder of Augusta Lawn Care (operating over 90 locations).
May 16, 2022 (video metadata/date given in source).
A 6–8 week window in June, July, or August 2022.
He states the average household net worth is 140% greater than in 2019.
Unemployment is stated as under 4%.
Chapters
Hey, folks, Mike Andes here. And today I'm going to talk about the macroeconomic picture, where our economy is at, and how it's going to affect you and your small business. If you don't know who I am, I'm Mike Andes. I'm the founder of Augusta Lawn Care. We have over 90 locations around North America. But today I want to talk about what's happened in the stock market. What's happening? The real estate market, why is that happening? And more importantly, the opportunity that's coming up for small businesses now. Last couple weeks been brutal for small businesses. If you look at the jobs report that just came out, it basically said that small businesses are losing employees right now and big businesses are just hiring like crazy. But that was for last month, and this is what I wanna talk about today. I really think there's gonna be a really big opportunity to be able to hire employees coming up here this summer. And let me explain why I said the same thing back in January at Landscape Summit. I said, hey, look, we're gonna come up for a bit of a reprieve from this whole labor market issue. So let me kind of explain what happened. So this is, you know, 2020, right at the very beginning of the year, or, sorry, 2022. And at the beginning of the year, we had Omicron, right? Omicron. Buyers came out, and a lot of people kind of went back down into lockdown in a lot of markets. And so what happened is we had a whole bunch of layoffs. Layoffs were really high. And so all of a sudden we had this opportunity in, like, February and March to be able to hire is a really good opportunity to hire people, because all of a sudden we can actually find employees. And that was caused from a month or two prior, having that whole bunch of layoffs from Omnicron. And I believe this is my prediction that what we're gonna see in a couple months is another softening. It's not gonna be easy to hire people, but it's gonna be a softening in the labor market to where you can actually hire employees. And. And they're gonna actually show up to interviews, they're going to actually want a job. They're going to actually want to work and show up to work. And the reason for that, in my opinion, is the fact that right now, if you look at a lot of the large Fortune 500 companies that are giving their reports, they are forecasting a slowdown and they're forecasting a weakening of demand, and they're laying off a ton of Employees. Amazon just laid off tens of thousands of employees. And they literally admitted to over hiring because of the anticipated demand that they were having in 2020, 2021. And all of a sudden they're like, oh, we don't need all these hundreds of thousands of people that we hired. And so they're just laying them off. Netflix laid off hundreds of thousands of people. Lots of these large massive companies are laying people off. And we're going to see, I truly believe in the months of June, July or August, somewhere in that period of time, we're going to have another like six to eight week window to be able to hire employees. So, so what should you be doing right now? Because right now, if you're watching this at the very beginning middle of May 2022, it's extremely hard to hire employees. A lot of people don't show up to interviews. You just can't find anyone wants to work. It seems especially if you're in home improvement labor type work, it's very difficult to find employees. And again, the reason I talked with our franchisees last week about this, the reason for this is because the average person, the average household in the United States, their net worth is 140% greater now than than it was in 2019. So before the pandemic. The reason for that is cause all the stimulus people got free rent, they didn't have to pay for their student loans, a whole bunch of stuff that went into that. But at the end of the day, if an employee feels like they're 140% richer, 140% wealthier, they're not going to feel the need to have to work hard or go get a job. They're not going to feel that burning desire they got to go get employed. They don't feel like they need to. Well, that's going to go away because. And 140%. Well, if their net worth prior to the pandemic was $3,000 literally that means it needs to go up to what, $8,000 in order to be able for them to have 140% increase in their net worth. Because the average renter has a net worth under $10,000. The average homeowner over $100,000. And so if we look at the average entry level employee, it's probably renting, probably probably getting started entry level. They feel rich right now, rich comparatively to 2019. And so it's been struggle, it's been very, very difficult to hire employees. Unemployment is extremely low. Right now it's under 4%. Well, that's going to change in my opinion. These massive companies that have overhired and are now laying off that are seeing a weakening of demand that their stock price in the past two to three months has been cut in half or more. The Nasdaq is in bear market. The S&P 500 is right next to it. The Dow has been trimmed massively in the past couple months. These companies, they trade on on their stock price and they make hiring decisions based upon their stock price. And when that's hurt and it has been massively cut at these massive companies, they're going to start cutting employees. And those employees can be picked up by small business owners. Now net net be horrible for small business owners. A weakening of demand is going to hit small business owners like never before. It's going to be absolutely cataclysmic. But for the owners, the business owners and the companies that can hold on to their employees, that can make sure that they are efficient enough to weather this storm of a recession that we're going to go into. And whether or not the news or politicians want to admit it, we're probably in a recession right now. With the fact that the rates have now been increased, mortgage rates literally have doubled in the past few months. And so we're see a weakening in the house market later in this year. We're going that's going to happen. What we've seen in the stock market over the past two to three months is going to happen in the real estate market. That's going to affect every single small business owner, every single person that does home improvement. When your clients start to see the value of their property go down 20, 30%, that's going to change their mind about whether or not they're going to do project based work or use that extra home equity line of credit on a massive project on their property. It's going to affect all of us. But the companies that will win are the ones that are going to be able to keep recurring revenue throughout those months. It's going to be the employers are able to hire these employees that are currently going to be laid off from these massive corporations have been hogging all, all of the labor. And you can tell in the job report, I'm not making up that they're hogging the employees. Look at the job report. 400 plus thousand jobs added last year to companies that had more than 1,000 employees. While at the same time small businesses with less than 100,000, sorry, less than 20 employees had a negative print of less of almost 100,000 employees lost jobs last month. So what's going to happen? In my opinion, we're going to see a shift. We're going to see the ability for us to be able to hire people to. Because for most small businesses that have 5, 10, 15 employees, the biggest limiting factor to our growth right now is finding labor. It is finding employees that want to work. And I truly believe that as we go into recessionary time, with inflation going up, not only is it going to pinch the working class, unfortunately, in their net worth, and they're going to feel that need to go get a job. We're also seeing right now these massive job layoffs from big companies. A Carvana just laid off thousands of employees the other day. Well, they weren't just a year ago because their stock was 90% higher than it is today. Sorry, not 990%. It was almost 10x higher than it is today. So 1000% greater. So these companies that have been inflated, their stock price, they're getting whacked right now. They're laying off a lot of people. We're gonna have an opportunity to hire employees, but at that same time, we're gonna have a weaker economy as we head into the summer and in the fall. And it's going to be crazy times. So it's the same story. Systems treating employees well and making sure you have a good culture and making sure you can pay a competitive wage using pay for performance. These are all things that are going to allow you to weather the storm and get on the other side and take market share from your competition. And you'll get on the other side of this while 80% of the market goes out of business. You'll pick up their employees and their customers for pennies under the dollar. I hope that was helpful. Check out mikeandies.com for more information and we'll see you tomorrow.
