Economic Fluctuations

By: Santi Chacon

Denver, Colorado

Business Coach

An economic fluctuation is a sequence of economic activity typically characterized by recession, fiscal recovery, growth, and fiscal decline.

We know a recession is coming again once you get back on your feet financially. The only question is When?  If you managed to keep a cash-flow positive business during this recession I applaud your efforts but what happens next time under another instance of economic strain? What will you do or avoid doing altogether? You have the chance to reconsider cash reserves, infrastructure, and investments with the aim of reducing risk.

You can prepare by diversifying your offerings, creating more cash reserves, focusing on core competencies, thinking lean, expanding, and building new partnerships that will help to sustain you or assist you in a quicker financial recovery. If you are just attempting to get through the current tremors of economic disaster without regrouping and planning you are gambling on your financial future.

Cliff Notes On Business Cycles

• During economic contractions businesses experience declines in sales and profits.
• Recessions do not come at regular intervals.
• Some recessions are close together (called a double dipped recession). An economy can go many years without a bust (or the bottom of a business cycle).
• The longest period in U.S. history without a recession was the economic expansion from 1991 to 2001. Because business cycles are economy-wide phenomena, they show up in many sources of macroeconomic data http://www.bea.gov.
• When economic conditions deteriorate, much of the decline is attributable to reductions in spending on new factories (capital spending), housing, and inventories.

Consider the inferences of the cliff notes. What are the implications on your industry and business? As a professional have your fingers on the pulse of economic indicators, industry, and your own business.

Musical Chairs

You do not want to be the only one standing when the music stops and your seat of industry is taken. Do not be fooled by your current level of comfort; what you think is secure isn't. The next recession may hit you harder and if you don't decide to play a different game you will be standing alone without anyone to blame but yourself.

Last Word About Business Cycles

The only predictable element about a business cycle is that it experience fluctuation again. Recessions by definition are short-term. The good news is that you will only have to weather the storm for a couple of years.