LESSONS LEARNED FROM 30 YEARS IN BUSINESS
3 Decades, 3 Recessions and 3 Ways Small Business can Climb Out of the Current Recession
MicroBilt has been around for 30 years. In that time we've seen a lot of changes. Throughout this year we'll be looking back at the last 30 years and bringing you lessons learned from the past. Given the state of the economy, it seems only fitting that we look back at some of the recessions MicroBilt has lived through.
In this issue we'll look at the big recessions of the last 30 years, how we got out of them and what lessons you can put to use from the past. Ultimately how to respond to the recession and keep your business thriving is up to you. But you can always take a page from the past to learn how to deal with adversity today.
In the last 30 years Americans have been buying bigger and bigger houses at higher and higher prices. Eventually it all led to a bubble, which burst and has affected us all. But you, {see} reader, will lead the recovery. After all, Small Businesses represent 99.7% of all U.S. businesses and employ 57.4 Million. When you succeed, the country succeeds.
Recession 1 (1980-1981)
Response:
Government increases spending and cuts taxes
What you can learn from this:
Most small business owners and managers would say that cutting your costs is crucial during a down economy. No doubt, this is true. However, the government's increased spending response to the 1980-1981 recession could be adapted to running a business. It's never a great idea to increase how much you spend without justifying it, but taking advantage of low recession prices for things like advertising space can pay off.
The second part of the government's response was to cut taxes. The business version of tax relief, cutting prices, can help you to boost sales (after all, everybody likes a deal), but tread carefully. Slashing prices and increasing your marketing spending may help you keep your business busy, but busy isn't always profitable. If you're going to use these tactics, be careful not to dig yourself a deeper hole with price cuts and more spending.
Recession 2 (1990)
Response:
Government increases unemployment benefits and the Fed cuts interest rates
What you can learn from this:
The government can increase unemployment benefits to help people who are struggling. You may not be able to do this with your small business, but you can work with customers who are having trouble paying their bills through your collections. Working with customers to come up with a payment plan shows compassion during a recession, but, more importantly, it can seriously increase your chances of recouping your money.
The second part of the 1990 response, cutting interest rates, can be applied by any business that extends credit. The trick is not to cut into your overall profitability. One way businesses do this is by offering introductory interest rates to bring customers in. Adjusting your collections and how you extend credit can help you weather the economic storm.
Recession 3 (2001)
Response:
Government cuts taxes and the Fed cuts interest rates while offering discounted lending
What you can learn from this:
The response to the 2001 recession was a bit of a hybrid of the 80's and 90's recession responses with a twist. The twist was the discounted lending. The small business equivalent of discounted lending would be offering permanently low interest rates to your customers rather than just an introductory low rate. Combined with price cuts and low introductory interest rates you can attract customers, but they must be combined properly. After all, a discounted price, a low-introductory rate followed by a low interest rate might make customers happy but may not bring in enough money to your business.
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