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August 19, 2008

The dreaded R-word. If there is another piece of lexicon that sends bigger shivers up and down the spines of financial pundits and consumers alike, it would have to be Depression. We’ll save that for another equally uplifting entry.
So what is a recession, in business terms, at least? It refers to a period of economic downturn and is defined by Barron’s Dictionary of Finance and Investment Terms as:
“ ..Defined by many economists as at least two consecutive quarters of decline in a country’s Gross Domestic Product”.
In other words, if the market value of goods and services produced in the US decreases for two straight quarters, we can safely, albeit unhappily, declare ourselves to be in a recession.
It would appear though, that the definition of a recession has taken on a subjective quality; trawling the business and political news in the past few months has shown a startlingly wide array of arguments as to whether or not we are in a recession.
It seems we can’t even agree on bad news.
What can you do to protect your business from the downturn? Not a lot, quite frankly. There are fairly significant forces at play here. There are a few things you can do to either ride out or take advantage of the situation.
1. Revisit your strategic plan or business plan. Remember that document? What contingencies did you put into place to anticipate and mitigate a reduction in sales? If you didn’t prepare contingency plans, it’s never too late to do so.
2. Cut back. Take steps to trim any excess. The emphasis should be on running lean and running efficiently.
3. Prepare your employees or partners. If you anticipate being impacted by the downturn, you should have conversations with your employees. Discuss how both you and they would be affected. Will there be cuts involved? What steps can you take together? Some businesses welcome voluntary pay or hour cuts. Remember, the more your employees feel they have a stake in your business, the more likely they are to step up.
4. Shop for deals. Take advantage of reduced prices and a willingness of suppliers to negotiate. A reduction in profit margins is better than no profits at all. Caveat Emptor
5. Barter.
6. Put on your game face. Look yourself in the mirror, square your shoulders and say: “I signed up for this – in good times and in bad. Let’s make the most of this.” This isn’t the first case of economic downturn and it certainly wouldn’t be the last.