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December 10, 2008

An Economic Hibernation Nation

An Economic Hibernation Nation

Summary

As an internet and real estate entrepreneur, my business prospects are always in flux. So it's still unclear how the current crisis will aff

As an internet and real estate entrepreneur, my business prospects are always in flux. So it's still unclear how the current crisis will affect my businesses in the coming months, let alone years. My priorities have shifted toward less risk and less reward, hoping to simply maintain some stability until good opportunities present themselves, as they always do whether the overall business climate is good or bad.

On the optimistic side, I agree with those who see this as a time of potential opportunity for flexible, clever businesses that will rise to the challenges by cost cutting and consolidation and then move into niches that have been occupied by less efficient entities that will not withstand the pressures of the coming recession.

However, the only certainty in the current business environment is an unprecedented level of economic uncertainty. Most businesses reading this post are from the USA, which continues to be viewed as one of the stablest and "safest" of the economic harbors. That is an advantage to some extent, but I think in many sectors we've begun to see a major shakeout.

Profitable businesses will see far less profit and be forced to cut costs. Struggling businesses will die in much greater proportion than usual, and unemployment will rise to levels not seen since the Great Depression. Unfortunately, bad news and forecasts seem to beget more of the same and that is not a virtuous cycle, but it is also important to be realistic. In my view, this is a time to batten down the business hatches, ride through the storm, and then be prepared to act quickly when the sun starts shining again.

Specifically, I think the best course of action is to consolidate business efforts as much as possible by looking for redundancies and other unnecessary expenses and laying off slacker employees. In general spend less while continuing to look for opportunities.

This approach will not help the overall economy which may be best served by a spending stimulus, but that massive spending should begin with massive corporate and government entities and interventions rather than small businesses.

We've been fortunate to live in a time of relatively great prosperity and there are some good reasons to think we can regain some measure of that level of success. Howeve,r it is likely to take at least several more lean years before we recover and the forces of globalization suggest to me that we'll have to work harder and smarter than in the past just to keep up. Best of luck ... to us all.
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