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Small Business and the Recession Part 1: Myths by tuggljosh

[NOTE: This post is part of a series that tuggl will be posting once or twice a week to help small business owners not just survive the recession, but capitalize on it. Much of our research has led us to believe that this can be the case with nearly every small business, and we hope it helps you!]

It’s easy to get the impression that an economic recession inevitably leads small business owners to hemorrhage jobs and cash in an almost hopeless attempt to stay afloat. Small business owners are (mostly) buying this grim scenario, as more than half expect to invest less in development this year than they ever have. But does this approach make sense? Are small businesses doomed to bottom out in unison with the greater economy?

We think that’s malarkey. Our research reveals some surprising facts and arguments that lead us to believe that small businesses can actually create a net benefit from a macroeconomic recession. How do you grow your business against the odds, creating revenue that flies in the face of expert predictions? We’ll post our six tips in the weeks to come. We’re going to start by analyzing some of the major concerns coming from small business owners, giving all of you guys a little Tuggl pep talk to keep you optimistic!

The Myths

We’re not taking the recession lightly, and neither should you. But if the picture being painted is overwhelmingly gloomy, perhaps it’s time to look for a second opinion. The truth is seldom as lopsided as it seems through the lens of the media.

Take, for instance, the credit crunch. It may sound like a breakfast cereal spawned by a joint venture of General Mills and American Express, but it is one of the biggest problems facing the economy. The credit crunch was tabbed as the primary reason small businesses would not survive this recession. Banks are increasing lending rates and raising loan qualifications, and the result is supposed to be that small businesses can’t get the loans they need to support their businesses.

Are we crazy, or does this sound like a business that is already going to fail?

Small businesses should not be affected by lending rates, because they are mostly cash enterprises. It’s one of the advantages they hold over large entities, which are more susceptible to changes in lending policies because investors expect them to hold debt in order to maximize returns on the interest rates. Small enterprises, meanwhile, shouldn’t be holding or utilizing such loans unless they are necessary to expand or make large inventory purchases.

Another thing we have a hard time buying is so-called “survival mode.” It seems to advocate that when confronted with problems, you should become a turtle, retreating into your shell by firing employees, trimming benefits, cutting “unnecessary” marketing costs, and selling assets. Cash turnover should always be a concern in a small business. You can make smart decisions about how you are spending your money when orders decline (like putting off a big capital expenditure), but you should not recklessly begin cutting budgets that can help you to capitalize on the recession (we’ll give you tips as to how in later posts).

Your business is always in survival mode. If you weren’t, you wouldn’t survive, would you? In the good times, you work to expand your business. What’s different about a recession? It provides you with different opportunities – that’s all. The businesses that fail in a recession probably weren’t the ones that were experiencing exponential growth during economic boom times. Business success more than anything else, is about one thing: Effort. That doesn’t change depending on the conditions of the greater economy. If you are truly interested in your business surviving a recession – truly passionate about what you do – you will apply yourself in order to make it happen.

The point is that you don’t need to merely survive a recession. Instead, you should focus on trying to increase your business through creative means. Next week, we’ll post some tips here to help you make this happen. In the meantime, feel free to continue this discussion with your recessionary myths in the comments section below or on Twitter @tuggl!

Best,

Josh Clauss, Communications Guy

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