How Small Businesses Can Prevent a Double-Dip Recession

What is the likelihood of a double-dip recession?  According to Lord Abbett, senior economist and market strategist with Milton Ezrati, the scenario is unlikely:

“It seems these days that half the headlines in the financial media fear a double-dip recession, as do half the conversations on Wall Street. There certainly are risks, not least in Europe’s financial difficulties. But still, there are reasons to question such widespread concerns. History, after all, offers only one true double-dip experience, and that grew out of a policy error. More, the actual data on the economy fly in the face of such an outlook.” (source, http://blogs.wsj.com/economics/2010/07/19/guest-contribution-double-dip-seven-reasons-why-not/ )

But is he right?  I would argue unemployment is one of the major bi-products of a recession.  Here are some interesting facts regarding employment:

1. “Unemployment, as measured by Gallup, was 9.2% in June — down from 9.4% in May and 10.8% in January. At the same time, the percentage of those working part time who want full-time work also declined, to 9.1% in June from 9.7% in May. The net result is that June’s underemployment rate is the lowest of the year to date.” (source,www.gallup.com/poll/141092/gallup-finds-underemployment-june-2010-low.aspx )
2. “18.3% of the U.S. workforce is underemployed as of June 2010” (source,www.gallup.com/poll/141092/gallup-finds-underemployment-june-2010-low.aspx )
3. “Anyone who works four hours a week for minimum wage is classified as employed”(source,www.helium.com/items/1881907-the-real-unemployment-rate)
4. “Anyone who is not registered with the state as actively seeking work is not classified as unemployed” (source,www.helium.com/items/1881907-the-real-unemployment-rate)
5. “Businesses with fewer than 20 employees account for 25% of all jobs but generated 40% of job growth in the last recovery”                          (source,www.usatoday.com/money/economy/2009-11-09-jobless09_ST_N.htm)

If small business hiring is the solution, how can these companies hire without access to credit?  Here are a couple ideas:

Partnering

Financial partners come in many forms (private investor/lender, guarantor, etc.) Our clients have used friends, family, vendors, government, and even competitors to help secure financing. Make sure you consult with your trusted advisors before entering a financial partnering arrangement. I have seen businesses inadvertently given away due to cleverly drafted legal documents!

Acquisition

Buying a business? Without cash? It may seem crazy at first, but think about it. If you are hurting, what are the chances that some of your competition is hurting as well? The trick is to identify situations where 1+1=3. For example, we have structured deals where our client paid nothing out of pocket, folded the competitor into their operation, and all of the equity stakeholders made more money—including the sellers. In this circumstance, a good portion of the income benefit came from the elimination of redundant overhead (e.g., now they only needed one phone system, one computer network, etc.) The end result was a much more viable, bankable company. (source, “Profitpreneurship”).

Want more?  See Ren’s new book, “Profitpreneurship”, which is available on Amazon.com.  “Profitpreneurship” hit #1 on Amazon’s Bestsellers in Business Plans category on May 11, 2010!  If you would like to purchase a copy of Profitpreneurship, please follow the following link: http://amzn.to/cCCXTJ

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