And the blog goes on...
for Small Business owners, It often Pays to Listen to The Message of the Markets
Many small business owners only look at the economy through their own prism. That's normal and we all tend to do it.
However, it can be very advantageous to assess the economic outlook from the viewpoint of others to help you gain valuable perspective from people with "boots on the ground" so to speak.
why? because a broader perspective can help you make better decisions for you and your business.
So, whose view of the economy should matter to you? In our opinion, it's always best to look to your client base.
Spend time talking to them as they can provide valuable insight as to how your business will fare in the current economy.
If your business is B2C, your clients will be able to give you a gauge as to how they think their family will fare in the coming months which can give you insight into whether or not their spending habits will need to change in the short or long term.
If your business is b2b, information on the health of your clients' businesses, whether their clients are taking longer to pay, if sales have slowed down, if inventory is harder to obtain, will give you valuable information on how this will affect your own business.
the stock market is another thing you'll want to keep your eye on. The US stock market is commonly referred to a forward-looking indicator and often foreshadows good times as well as turbulent times in the US economy, as much as a year ahead of time.
After a very strong bull market environment (expanding & upward) in the US for over a decade, the stock market recently had major indigestion caused by the Federal Reserve tightening interest rates and the war in Ukraine, among other things.
Additionally, the shape of the yield curve, which is the relationship between interest rates and Time (maturities), as measured by US treasury securities, is considered a harbinger of future economic growth in the US, or a lack thereof.
Today, The yield curve looks like this:
what we want to see here is a normal yield curve, where the longer you go out in time, the higher the interest rate is. This would be a sign of continued economic growth, with no recession on the horizon.
Conversely, if the 2-year US treasury yield were to go higher than the 10 or 30 year treasury yield, that would mean the yield curve is inverting, meaning a US recession or at least a serious slowdown could be on the horizon.
This is something a business owner would want to know and plan for.
These are a few signs to keep an eye on, keeping in mind that no one sign is the holy grail. However, when taken together, the goal is to give you an objective set of criteria to help you evaluate whether to have your offensive or defensive game plan in place.
Lately, in the us stock market, the Nasdaq has declined ~20% and the S&P 500 more than 12%. at the same time, the US treasury market has come under serious upward pressure on yields, although not to the point of inverting as of yet.
If a bull market equals a flashing green light with all systems GO, and a bear market equals a flashing red light with danger in the air, then times like this have to at least mean a flashing yellow light if one is paying attention.
The Takeaway
in our opinion, now is not the time to be complacent.
In fact, we think it's a natural time for caution. Here's a quote by the late great Jim morrison, who we think said it best, when he said "...Keep your eyes on the road and your hands upon the wheel...".
remember that chance favors the prepared mind and that the time to prepare for any economic winter is always before it arrives.
Do you have enough monthly pay working capital at your disposal?
because capital dries up when the economy is weakened and that's when your business needs it the most.
or, Are you struggling to stay on top of merchant cash advance payments?
because the more stress there is in the economy, the harder it can be to keep up and that's where debt restructuring can help.
what can we do to help?