What is a Recession? And What Does it Mean for Small Business Owners?
We, unfortunately, have had to have our central HVAC unit at our house repaired this week. I started chatting with the repairman, the owner of the business, about business in general and what I do. I just can’t help myself! As I often hear from business owners, he expressed that he is great at what he does, but significantly less confident about the actual running of the business. (I agree; he is great at what he does!) This chat brings us to the word “recession,” which is flying around everywhere in the last few days. It can sound a bit scary, right? At its heart, it's a sign that the economy is slowing down for a while.
The generally accepted definition of “recession,” is that the US is not making as much stuff or doing as many services as it was before for at least six months in a row, or “two quarters of declining GDP.” But it's not just about that one number. Experts also look at things like whether people are losing jobs, if they have less money coming in after inflation, and if businesses are selling less. They are evaluating a lot of economic data to determine if things are really slowing down. The folks at the National Bureau of Economic Research (NBER) are the ones who officially say, "Yep, we're in a recession," and they look at how deep, widespread, and long-lasting the decline is. Spoiler alert: No, we are not in a recession. Yet. The people who study such things, however, have increased the probability of recession this year to 40% likely.
Now, what does this mean for us as business owners? A recession can surely throw some curveballs our way. People might tighten their belts and not spend as much, which can directly hit our sales. It can get tougher to keep our profits healthy, and suddenly cash flow becomes even more critical. We might have to be extra careful with our spending and maybe even face some tough choices to keep things running smoothly. Plus, getting loans or investments might become more difficult.
With all the economic chatter lately, it's definitely something on our minds. While we can't predict the future, being aware of what a recession is and what it might mean for our businesses is just plain smart. Knowing what we're up against gives us the power to plan ahead and take action. We can start thinking now about how to focus on what we do best, managing our money wisely, continuing to connect with our customers, and maybe even find new opportunities in a changing market. I’ll be digging in and doing some research for all of us, myself included! Stay tuned. While the future is always uncertain, it is understandable that it may feel exceptionally uncertain right now. We can combat fear with preparation and quiet confidence, making sure to cultivate our individual and collective genius, no matter what the economy throws our way!
