Economic Booms And Busts: Characteristic Of Today Economies

One thing is certain in life; economic booms and busts are unavoidable. But what is not as certain is how people are dealing with the downturns and the tough financial crisis.

The impact of a recession on small businesses is similar to large businesses. Without major cash reserves and large capital assets as collateral, however, and with more difficulty securing additional financing in trying economic times, smaller businesses may have a harder time surviving a recession. Bankruptcies among smaller businesses may therefore occur at a higher rate than among larger firms.

The bankruptcy or closure of a small business can create difficulties not only for the small business owners, but also for employees and community equally.

In the wake of such bankruptcies or dissolutions, the entrepreneurial spirit is taking a hit, discouraged, at least for a while, to launch or invest in business. It is also discouraging banks, and other lenders from making loans for startups and other investments until the economy turns around. Many business owners are focusing on the factors that they are actually unable to alter or regulate. Approximately 80% of the managers approached during a report we conducted in 2018 said that their profits were either deteriorating or, in the best-case scenario, were stagnant. Furthermore, almost 100% reported that they are cutting costs and reducing staff numbers. Operating within a tight budget is prudent, to say the least. That said however, rushing to cut expenses in line with revenues is just one strategy for getting through difficult times. This is what many companies in Lebanon did and not much else, me included. The results from such a strategy proved counteractive – a loss of additional business, weakening customer service and subsequently the development of the business itself.

Clearly, this approach is not the miracle we needed to move forward. Instead, by refining our business or its operational methods, we can definitely find ways to cut costs that do not damage the business, but adds value to our customers and also keeps the employees actively engaged. Although it may not be easy or even possible to grow revenues in these times, the main way to survive the downfall is by looking past what is outside our sphere of control (sphere of influence) and instead focus on what is truly in our control. While panic can be a real stimulus, it only works if it pushes you to take the steps that actually assist (as opposed to damage) the situation and your business. Recessions come and go and some are more severe and lengthier than others. But history confirms that downturns habitually finish, and when they do, an economic upturn follows.

Think Positive, because from small things great beginnings come. Use this as a pull-out quote: "When the years are great, everyone is a champion. When the years are hard, only great leaders step forward"