NO Business Will Escape This Downturn

Every business will be affected by this economic meltdown, there is no escaping. Those who think they will escape the downturn are fooling themselves. The root causes are universal and will affect every business. It’s called the “domino theory”.

I spoke with my insurance agent and she reported revenues down over 30%. Why? It makes little sense as people are not yet taking their cars off the road. She responded, “They are not buying new cars so the insurance premiums are less and people are reducing their coverage to lower their bills. It amounts to an overall 30% decline.” She also added the fact that the default rate for nonpayment is up. Her hours were cut as were those of her staff.

A produce delivery business I represent, and had assumed would be relatively immune to the downturn, is likewise experiencing a deep reduction in revenues. People are not eating out as much the small business owner reports, thus consumption at restaurants is down, reducing his revenues by 30-40%. He is making fewer and smaller deliveries.

We need not even discuss the auto industry, the housing market and the trades and businesses that are supported by these markets. Can you even imagine the depth and width of this tremor?

The financial markets are clearly losing tens of thousands of jobs nationally, with New York City experiencing a 20% decline in its revenue flow as a direct result of the reduction in the financial market. The unemployment statistics are sobering – 596,000 new filings last month alone. Even Microsoft is laying off 5000 people.

It’s the ripple effect that will undo us all. Fewer people are working, there are more foreclosures and less purchasing power. It affects every business. The reason gas prices have declined so much is a direct result of less demand for fuel. Factories, trucks and yes, cars, are all using less fuel. Can you imagine the amount of reduced demand required to reduce gas prices this much? It must be a huge decline.

Of course, this is also a global issue so imports and exports are declining as well, adding additional momentum to the slow down.

I hear some small business owners believing the bottom is near, that they are surviving, that they are OK and that they expect to persevere throughout the recession with modest adjustments. These small business owners are kidding themselves. The bottom has not been reached and it will be a long slide until it is. We are in for a five-year disaster at least. Everyone will be affected, everyone’s business will be reduced.

Plan, adjust and prepare. Failure to do this will be at your own peril. There is no escape. Downsize and do your preemptive workouts. Market effectively so you can not only survive, but also maintain profitability. Failure to adjust will end in a slow death… or maybe a rapid one. Act now. Call me if you need help.