The Effects of the Recession on Small Businesses
The recession of 2008 has all but officially arrived. Can your small business survive?
Some are in Denial
I’m still finding economists and everyday people who say, “A mild recession isn’t something to be worried about” or “Don’t panic” or “Nobody around here has lost their job yet.” In spite of this Pollyanna attitude the recession wolf is howling and closing in for the kill.
All indicators show that the economy is at least on the edge of recession, if it hasn’t already passe over that line. The continuing credit crunch crisis is hitting most lending institutions hard. Businesses can’t get loans to expand and are finding themselves cutting back. Many companies are reporting huge loses and Wall Street has been dropping like a rock. The fact is that economic growth has virtually disappeared and that, my friends, is a sure sign of a recession.
The bottom line is that you have to be prepared for the downturn. Sticking your head in the sand won’t help you at all. Be realistic and face this trouble head on.
Recession Effects
When the full force of the recession sets in, what will it mean for your small business?
Essentially it means people spending less because the cost of fuel and other living expenses will remain high. Disposable personal income drops dramatically during a recession. People will be spending money just to survive, not to entertain themselves or buy new stuff.
Expect a slowdown of at least 20% of your current business volume although a 40-50% reduction is more likely unless you’re in an essential niche. Are you prepared to take a 50% cut in your profits? What steps have you taken to shield yourself from this certainty? If you haven’t prepared your business to survive, you will find yourself in trouble within the next 6 months. Prepare now by lowering your operating costs, cutting back on non-essentials, including employees, and find and secure your most profitable niches.