It’s a natural curve—as threats of recession increase, company spending tends to decrease.
And then, as company spending decreases, those companies’ venders get cut and receive less revenue, thus decreasing their spending.
This is Economics 101. It’s a scary pattern, and the reason many fear the year ahead.
Many companies are reviewing the budget they set in place for the year. Some are even reconsidering some spend they originally allotted for. However, one customer is less likely to decrease its budget in response to recession.
That customer is the federal government.
Unlike commercial companies, the federal government has three unique characteristics that make it one of the best customers you can have during a recession. The federal government has to continue operations, maintains a significant budget, and always pays its bills.
1. The Federal Government Has to Continue Operations
Unlike most organizations, the federal government doesn’t get the option to slow operations simply because of a recession. And, more specific to our field, particularly not the Department of Defense (DoD) This is because the US economic environment does not slow the national security concerns of the nation.
For example, a few things that probably won’t pause just because the US is in a recession are:
- concern over China
- conflict between Russia and Ukraine
- basically, any other national security concerns or operations you can think of.
Most companies respond to a recession by finding areas in the budget to trim. However the DoD doesn’t have that option. If it starts to cut, the country’s overall national security is on the line. That makes the security of this budget nonnegotiable.
So, your service or product may be at major risk of being cut from the budget of your commercial customer. However, you are not facing the same level of vulnerability when working with the federal government.
2. The Federal Government Maintains a Significant Budget
Congress has recently reached a bipartisan, bicameral agreement to pass the National Defense Authorization Act (NDAA) for the 62nd consecutive year. In this agreement, a total of $857.9 billion was allotted for national defense, with $816.7 billion authorized specifically for the DoD.
According to the summary, this year’s agreement focuses on “the most vital national security priorities for the United States, including strategic competition with China and Russia; disruptive technologies like hypersonic weapons, artificial intelligence, 5G, and quantum computing; modernizing our ships, aircraft, and vehicles; and improving the lives of our service members and their families.”
While most companies are facing a decrease in revenue this year, and therefore a decrease in spend, the DoD is increasing its spending, as national security remains an unmoving priority.
3. The Federal Government Always Pays Its Bills
In a time of financial uncertainty, companies’ credit becomes a focal point as there is little wiggle room in budgets for invoices to go unpaid.
One of the top reasons for going into business with the federal government during these economic shifts is not having to worry about not getting paid—and one less concern amongst all of the other stresses of a recession is always a good thing.
The federal government always pays its bills.
These transactions may take significantly more time to process than you are used to in the commercial sector, but they do get paid. The government never defaults on its bills. And that’s the type of peace of mind that is rare and valuable during any time of economic uncertainty.
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It’s a scary time to operate a business, there’s no doubt about that. The hope is always that a recession will not occur. However, with the threat of one looming, it’s important to have a plan of action ready to ensure your company can survive it.
For many, that plan could be to drive up your federal revenue channels for steadier customer and cash flows.
For more information about why and how to pursue federal funding during threats of a recession: Read Here
