Economic uncertainty isn’t just a headline right now—it’s a reality that small business owners are feeling across the country. Inflation is still high, capital is harder to come by, and consumer confidence is wavering. Whether you’re a lean startup or a growing local or small business, the ripple effects of a shaky economy hit close to home—and fast.
One of the biggest questions we’re hearing from clients right now is: "How do I keep offering competitive benefits when I also need to cut costs?"
It’s a valid question, especially when benefits are often the second-highest expense on the books—right behind payroll. At the same time, benefits are one of the most important investments you make in your team. They’re not just about compliance or compensation—they’re about caring for your people and building a foundation for growth. You have to balance both.
What Happens to Small Businesses and Startups During Economic Downturns?
When the economy tightens, larger or mature companies usually have cash reserves or credit lines to fall back on. Small businesses and startups don’t always have that luxury. In past downturns—like the dot-com bust, the Great Recession, or even early 2020—we’ve seen many small businesses and startups forced to make tough, fast decisions to address budget and cash runway shortfalls. Often, employee benefits are the first thing on the chopping block.
Here’s why:
- Cash flow becomes unpredictable. A couple of late invoices or a drop in demand can impact your ability to cover fixed costs.
- Hiring slows or freezes. That makes retaining your current employees even more critical—your team is your runway.
- Group insurance premiums continue to rise. Even during downturns, insurers raise rates, and renewal season doesn’t wait for your budget to stabilize.
- Time gets tight. With so much to manage, benefits become one more complex problem to solve—one that often gets delayed or deprioritized.
JD, Tyler, and I have been through this before at Zane Benefits and PeopleKeep. And while every economic cycle is different, we’ve learned that small businesses and startups with flexible, thoughtful benefits strategies come out stronger on the other side.
What’s Different About This Moment?
Right now, the market isn’t in full recession—but it feels uncertain enough that business leaders are starting to act like it is.
At LegUp Health, we think this creates a unique opportunity—not just to cut costs, but to reimagine what a sustainable benefits strategy looks like for your team.
That might mean:
- Switching from traditional group insurance to a defined contribution model using individual plans
- Exploring level-funded or partially self-funded group plans that offer greater control
- Implementing Health Reimbursement Arrangements (HRAs) or boosting Health Savings Account (HSA) contributions
- Offering fixed health insurance or benefit stipends instead of increasing payroll costs
- Combining multiple strategies for a more personalized and cost-effective hybrid solution
And most importantly—it means working with someone who can help you evaluate these options without a bias.
Why We’re Different at LegUp Health
Most brokers focus on selling one thing: group health insurance or individual health insurance… or snake oil. It’s what they know, and it’s how they get paid. But at LegUp Health, we’re different.
We’re a small business too. We understand the balancing act you face—every dollar matters, every hire is crucial, and every benefit has to justify its investment.
That’s why we’re completely agnostic to the type of health benefit you offer. Whether it’s group, individual, or something in between, our goal is to help you find the smartest path forward based on your specific needs, team, and budget.
We’ll even help your employees navigate the details—signing up, comparing plans, understanding subsidies, and making the most of their benefits year-round. That’s part of our promise: real support, not just paperwork.
Our Advice for Small Business and Startup Leaders Right Now
If you're a startup or small business leader thinking about your benefits strategy, here’s what we’d recommend:
- Don’t wait for renewal season to start planning. Proactive planning gives you more options and better leverage—especially if you're considering a change from group to individual or hybrid.
- Re-evaluate whether your current model still fits. Your business isn’t the same as it was two years ago. Neither are your employees. It might be time to rethink what’s working and what’s not.
- Think beyond insurance premiums. Sometimes it’s not about switching plans—it’s about introducing savings tools like HSAs, or cost-sharing strategies like HRAs.
- Communicate clearly with your team. Economic stress can create fear. Let your employees know you’re thinking ahead and doing everything you can to take care of them.
- Lean on experts. This is what we do all day, every day. We’ll help you make sense of your options, run cost comparisons, and support your team—without pressure or bias.
Let’s Make a Plan Together
We know that no two businesses are alike. Some of our clients are bootstrapped startups with five employees. Others are family-owned shops with 30+ team members. And some are high-growth ventures with 100+ employees, and counting. What they have in common is this: all businesses need to attract and retain talent within limited payroll and benefits budgets.
LegUp Health offers free consultations for Utah and Texas-based businesses. We’re happy to review your current benefits strategy, explore new approaches, or just talk through your goals. Whether you’re looking to cut costs, increase flexibility, or just get peace of mind—we’re here.
