I get asked by customers and other entrepreneurs quite frequently these days: when do I think the economy is going to turn around? Of course, like everybody else, I don't have any idea. What I do think is remarkable is how quickly things turned bad. In one month, things went from looking slightly down to everybody slamming on their brakes. In the explanation of this phenomenon might lie some of the answers we are all looking for.
Even in the aftermath of September 11th, consumer demand and global markets did not drop as sharply as they did in late September and on into October. Surely the shock of 767's flying into skyscrapers was more terrifying to the average person than the failing of Lehman Brothers, an insitution whose business most Americans could not accurately describe? This makes me think that everybody was feeling over-extended and over-borrowed, and was just looking for an excuse to be afraid. In other words, we were already afraid, but keeping it inside, and as the house of cards started to wobble everybody started blowing. Carrying large balances on credit cards, buying houses we couldn't actually afford, having to spend $100 to fill up our tanks--it all just got too overbearing. Suddenly, being reasonable and responsible felt better than trying to be cool and keep up with the Joneses.
But this national psycho-reversal, assuming it happened, still doesn't explain the supposed complete suspension of consumer demand. Perhaps it was the reporting of the initial "smoke" of the financial crisis by the 24 x 7 media (yes, especially the bloggers) that actually fanned the flames into an inferno? For those of us who haven't lost our jobs, what has actually changed about our purchasing power? Gas is 50% cheaper than it was two months ago. Everything is on sale at the shopping malls. It hasn't been this cheap from an inflation-adjusted perspective to buy a house in over a decade. Your dollar even goes further overseas. So, if your income is still the same, your purchasing power has almost doubled!
The answer is, I believe, that we live in more of a fear-based economy than ever. When people are afraid of what lies ahead, they examine every behavior, every purchase, every career decision. They also stop taking risks with their money and their jobs.
So, if you're like me, you're wondering what this all means for the future of entrepreneurs and small business owners. First, consumers are definitely cautious, and buying their necessities plus a few low-priced forms of entertainment (good for movie theaters, Walmart and Hooters, not so good for luxury resorts and high end restaurants). Second, there are fewer businesses taking risks or spending "into the wind." Which means, there is an opportunity.
If you can find a way to tailor your products and services to meet the needs of the cautious consumer, it has never been cheaper to advertise your services and build your products. Employees are just looking for a steady paycheck and good benefits. Customers want great value, and even better service. Media outlets of all kinds are dying for your advertising dollars, no matter how small.
The businesses who will survive this downturn are the ones with real customer bases, great value, and high quality products and services. The businesses who thrive at the end of this downturn are the ones who will find opportunity and hope where everybody else sees downturn and dispair.
As my grandpa used to say, when you're swimming upstream all you have to do is open your mouth if you want to catch the fish.
--jsk
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