Is the United States in a recession? A recession is formally defined “as two consecutive quarters of decline in real GDP (gross domestic product).” Thus, from a formal perspective, the answer is NO. However, without a doubt, we are in a recession. We have been for about a year. And, as I have consistently shared with my students and clients, by the time you read the “R word” in the newspapers, we are well into the downturn. If I am correct in my assertion, what is going on? Simply, the world is changing faster than our ability to communicate the change through language. Without language, we cannot explain reality. For example, when the automobile was first introduced it was described in terms of known language, that is, the horseless carriage. However, today no one explains that their ride is a 2008 Ford Horseless carriage (Okay, they might say mustang, but you get the point).
We are well into the effects of a concept called the bi-modal distribution trend. I first started teaching about this concept in my futurism work in 1991, just five years into the information age. We are now at the mid-point of the era and the bi-modal distribution trend is re-shaping the world. So what is the bi-modal distribution trend? The phrase refers to the shift away from the traditional bell-shaped curve and to a reality characterized by extremes. Extreme wealth and extreme poverty. International conglomerates and neighborhood boutiques, Starbucks and coffee carts. The evidence of the trend is everywhere except in our language.
Thus, we can be reporting record mortgage delinquencies and foreclosures but no recession. We note low unemployment but gloss over under-employment. We read that 50 U.S. billionaires don’t qualify for Forbes wealthiest list and that 750,000 U.S.citizens are homeless. While the Dow flirts with 13,000, 42 million Americans greet each day without basic health care coverage. And on it goes.
As such, while a significant number of businesses in numerous industries ranging from entertainment to transportation and retail may report flat or declining revenues, the economy, as a whole, may not be recessionary.
I believe that small business, as a category, is a leading economic indicator. Small businesses live closer to the customer, and closer to the edge. In the past year I have witnessed the highest number reporting flat or slightly declining revenues since the late 1980s. Nothing catastrophic, but decidedly down. A number of factors have combined to put the brakes on growth.
The informed small business owner knows that a recession is just one of the four business phases and the best time to achieve market share gains. But before you can successfully navigate a recession, you need to know when one is present. If no one has told you before, let me be the first. We are in a recession, have been for a year, and will be for about 15 more months. So, if you are not already doing so, it is time to operate your venture in recession mode. This means:
1) hold on to cash;
2) don’t borrow unless unavoidable;
3) wait on capital investments;
4) postpone hiring;
5) lower your prices; and,
6) increase your marketing.
During a recession customers trade loyalty for price. A recession, therefore, represents the best opportunity for growth. Later, when the economy improves, you will realize greater profits from the larger customer base. You business will prosper, even if you don’t read it in the newspaper.
Be joyous! Let now be beautiful. Blessings, Thomas
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