Is Yours A Recession or A Depression?

 It has been said that when the economy takes a nosedive, what is a “recession” for the Big Guys is a “depression” for the Small Guys.  Whether this is true or not, the current state of the economy is certainly depressing for entrepreneurs.

I’ve heard owners all over the country bemoaning rising costs, as they watch sales shrink. According to the NFIB (National Federation of Independent Businesses), optimism about the economy is at a 28 year low among small business.  The index of small business optimism fell 2.2. points in May to 89.3, the lowest reading since 1980 when the index plunged as a recession hit.  Plus, the number of owners citing inflation as their number one business problem is up 3 points to 17 percent, the highest reading since 1982. 

But the good news is that it doesn’t seem to be affecting business spending and hiring… at least yet!  Although over the next three months, only 2 percent of the owners surveyed by NFIB plan to create new jobs, down 3 points from expectations in April.

http://www.reuters.com/article/hotStocksNews/idUSN1028170220080610

So how to you survive in a slow economy? We have all done it—some of us more than once.  My worst war story of business survival was when interest rates rose to 22 percent. Actually, I didn’t survive in that venture.  I had invested in a personal service business (Phone-a-Helper) targeted to people with high levels of discretionary income.  I watched the market evaporate at the same time that interest rates soared, completely eroding the low profit margins of that type of business.

I had no option but to bail. It was basic math.  With a 22 percent interest rate on my loan and a 10 percent profit margin on my services, I was in trouble.  Each day, the economy put me deeper in the hole.  So I dug into personal savings and paid off the business loan.  I took the hit. We all have.  It hurt.  It hurt badly.  But pouring more money into the rat hole didn’t make sense.  And watching a prolonged death would not have been any better.

So that is my story. But what is your story? 

I want to know them. So do other readers!

Please comment, so others can learn from your strategies.

(My upcoming blogs will deal with tips on how to survive in a bad economy.)

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