No matter how well or how poorly things are going for their businesses, smart owners are aware that conditions will change. Business activity in the U.S. has never followed a steady straight-line pattern. Instead it moves in upward and downward spurts, called expansions and contractions (or recessions). This pattern is known as the business cycle. And when these movements are particularly strong or dramatic, people call it a “boom-and-bust” cycle.
The exact timing of recessions is impossible to predict. But the symptoms are easily recognizable: Sales, revenue, and profit growth all decline. Credit dries up. Unemployment increases. As news spreads of layoffs at large corporations, your employees are likely to become anxious and productivity could fall off. It’s up to you to implement strategies that will keep your business stable in challenging times. The specific strategies you choose will vary depending on the industry you’re in, the financial condition of your company, and your long-term values and goals.
As a business owner, you have to be prepared for both good times and bad. Recessions are a fact of life, and you need to account for them in your business plans and strategies. The first step is to understand the business cycle and know how companies in different industries may respond in unique ways to economic stresses.
The biggest risk is that the reduced business activity during a recession could force you to shut your doors – permanently. To avoid that worst-case scenario you need to take a rigorous look at your cash flow. Debt is another major concern, particularly as many business owners rely on personal assets to finance their businesses.