After the Dow soared over 300 points yesterday, it was hard not to feel optimistic. Yet American and British authorities have both warned that the bad times aren't necessarily past.
Federal Reserve Chairman Ben Bernanke came closer than ever to discussing a recession, according to Henry Blodget, and acknowledged that America's GDP might contract before the first half of 2008 is over. For small businesses, this could mean shy consumers, rising supply prices, and still harder-to-get loans.
The same sorts of problems are a threat in the UK, too. The Confederation of British Industry "is revising its growth rate to 1.8% this year, and 1.7% in 2009," according to the Small Business Blog from Microsoft. "This is gloomier than the chancellor's recent forecast of between 1.75% and 2.25% growth in 2008. The recent figures on the growing cost of living seem to be behind this latest downgrade."
Nonessential services simply can't compete with mortgage payments and groceries, of course, but this makes it all the more important for businesses to stand out within their fields. Also, a focus on non-local customers could help, since not every county, state, or country will be affected equally.
On the bright side, the Dow is down only 5 points at the moment, and the Nasdaq is up by about the same amount.
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Comments
Recession Ahead?
Doug,
There has been a lot of conjecture in Australia in regards to the impact of the American sub prime mortgage market and what impact that will have on the local market.
Australian companies are relatively unexposed to the credit crunch yet our stock market indexes are all down predominantly due to a lack of confidence in the market as a whole as opposed to genuine economic forces.
We are also facing realtively high inflation and major interest rate rises (a measure by the reserve bank to buffer against inflationary pressure)pushed by the resources boom in Western Australia which is having a major impact on the purchasing power of Australian households and many small businesses particular businesses which are highly geared.
There is talk of a recession in America and many fears that Australia will follow suit especially as some of the plunges on the stockmarket have been compared to the stock market crash in th 80s. Some people are even talking about another depression (although I think that is paranoia bred from uncertainty)
All this leads to very little disposable income at the lower end of the market where small businesses generally find their niche.
So what is the solution to selling in this type of market? We suggest offering customer propositions which talk about return on investment (ROI) and products like VoIP which offer massive reductions in office administration costs.
In economic climates akin to what we are facing many businesses place purchasing freezes or limitations on their staff so it might be worth talking to the CFO about the ROI of your proposition rather than the purchasing or administration person you normally deal with.
My company Logical IT provides a wide range of computer and mobile office equipment to the Australian market and we supply over 20,000 IT related products and services via our website - www.logicalit.com.au
Logical IT can also assist with financing of IT procurement and offers a variety of leasing and hire-purchase options to assist our clients with reducing the upfront cost of IT expenditure and allowing our valued customer to purchase in the most tax effective manner.
On a positive note they say that the stock market as a whole works in the opposite way to gravity - what goes down must go up! Eventually...
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