Can Recent Layoffs in the Technology Sector Provide a Boost to Small Businesses?
As Amazon, Google, Microsoft, and other top-tier technology companies continue to report layoffs, the number of experienced job seekers looking for their next opportunity is rising. The tech industry’s response to the current economic climate has been to reduce their workforce, allowing small and medium-sized businesses, who have had a hard time finding qualified employees, to take advantage of the now accessible talent. Business owners surveyed for BizBuySell’s quarterly Insight Report face a tough labor market, with over 50% describing it as challenging to hire and keep employees. In fact, 48% of business owners report that business is not running at full staff because of difficulty hiring due to a lack of applicants. Business owners may consider tapping into this qualified and experienced talent pool to help grow and scale their business. And for business owners looking to sell their business, there are many talented individuals now open to the possibility of entrepreneurship, either by creating a start-up or buying an existing business.
Why are Technology Companies Laying Off Employees?
Despite the low national unemployment rate of 3.6%, news of tech layoffs at renowned firms continue to dominate the headlines. As consumer behavior shifted online due to the pandemic, the tech industry worked quickly to hire additional personnel to meet the needs of its customers in 2021. Many technology firms find themselves over-staffed as consumers and businesses respond to the current economic headwinds. Additionally, technology companies are often valued by a ratio of their price to earnings, and this ratio is sensitive to any changes in interest rates. As the Federal Reserve looks to tame rising inflation with increased rate hikes, technology companies are seeing decreased business valuations amid the higher cost of financing. As a result, many in the sector are turning to layoffs to cut costs. The ripple effect of high interest rates caused a financial strain on consumers, big businesses, and particularly the technology companies that relied on low-interest rate debt financing.
Adding Tech Talent to Small and Mid-Size Businesses
Small and mid-size businesses that have found hiring difficult over the last few years may want to consider recently laid-off employees from the tech sector. Tech talent not only brings valuable experience and well-developed skill sets, they can also tolerate a bit of risk and bring a start-up mentality. Candidates from this sector are often open to creative financial compensation structures and willing to work for equity, in addition to cash salaries. Smaller companies have a lot to offer this talent pool. Small and mid-size businesses can provide opportunities for leadership, high visibility, increased responsibility, and the chance to play a more significant role in the company’s future.
In an increasingly digital world, industries outside the technology sector need employees with digital skills. Business owners are investing in their brands by increasing cyber-security, IT infrastructure, and multi-channel product offerings. With the influx of technology-based jobs shifting to many industries in the service sectors, such as health care, engineering, medical billing, and more, having a strong and professional team of employees is increasingly important. An engaged and talented workforce is key to all businesses, but even more so for the service sector, which is known for weathering economic downturns. An experienced and knowledgeable team can boost the value of a service business, so hiring individuals with a technological background is important for continued growth.
Will Layoffs Lead to a Surge in Business Acquisitions?
Demonstrating economic growth during a downturn in the economy often leads to successful companies and brands and many start-up behemoths started during challenging financial markets. The Great Recession of 2008 saw Airbnb, Square, Uber and many others get their start. Many recently laid-off tech employees may find that this is the time to explore entrepreneurship. While some may choose to start their own business, others may look to buy an existing business. The advantages of buying an already established business are becoming more appealing, with venture capital firms keeping a close eye on deals and reducing lending. With no need to worry about start-up costs, product launches, or customer acquisition, entrepreneurs get a company that is already bringing in money, has an established brand, and a successful business plan, allowing them to hit the ground running.
As the tight labor market for small businesses continues to be top of mind for business owners, the recent rounds of layoffs from the technology sector may offer some relief. Business owners can benefit from this experienced and well-qualified talent pool to help them grow and scale their business.