November 25, 2014

The R Word and Economic Woes — The World Will Go On

Don't worry about the R Word -- recession.  The world will go on.I have been discussing The R word for months now.  The R word meaning “recession.” 

In November, I wrote in my main blog that “by April-May of 2008, we are going to be in a downward spiral. We may not be in a full blown recession, but close.”

I attributed my prediction on three main issues affecting the U.S.:

1. Extremely high energy prices

2. The Housing Bubble

3. Crazily high consumer debt

In December, in a column I wrote here on The Top Franchise Trends For 2008, I started out by saying “The year 2008 will be ‘Frantastic’ for the franchise industry, which is an industry that typically does well when little things such as our economy, slow down.”

My friends did their usual, “Joel, quit being a Negative Nancy (OK. A Negative Nolan  — male version). I said that I wasn’t being a Negative Nolan. I was being a realist. I watch the markets. I read about global events. I read a lot of blogs. I meet with future small business owners who are afraid of losing money in a small business / franchise start-up.

My business is a contrarian one. When the economy slows down, and people are downsized from their corporate jobs, I start getting busy. (I started getting busy in December!)  No offense to the economists with Phd’s next to their names.  

When I start getting more inquiries about franchising, I know the economy is slowing. 

That’s not economic smarts.  That’s street smarts.

So, interest in owning one’s business increases dramatically as the economy slows down, and the job market dries up. That is a fact. I saw it in 2001-2002, first hand.

One of the questions asked of me by prospective new franchise owners that I meet with is:

“With the economy getting lousy, and people being laid off, and downsized, is this really a good time to get into my own business?” My answer is yes. Yes.  And … Yes.  Guess what? Do consumers still need to buy products and services?  Of course they do.

Naturally, the next question is, “Don’t consumers scale back on luxuries, and non-essential stuff”?  The answer is the reason for this column, folks.

Two weeks ago I had an upper middle class couple in my office, for a franchise consultation. Mr. Smith had been downsized from his middle management position at a large local corporation, back in October. He was still not having luck with his job search, and thought it best to explore some non-traditional career options. Mrs. Smith was pretty much on board with his idea.

One of the opportunities I presented to the Smiths was a residential cleaning franchise concept.  They both felt that there was a real need for this type of service, and that they use one themselves currently. Mrs. Smith told me how important the service was to her, because it allowed her time to do some really important things with her limited time. Mrs. Smith went on to say: “There is no way I will give this cleaning service up. It is too important to me.” Mr. Smith didn’t look too excited about her proclamation, especially since he didn’t have any income coming in. But, being a smart man, he did not challenge her on it.

So, the answer to the couple’s question from above is no. Once a great and meaningful service is provided to a consumer, it is really hard for that consumer to give that great and meaningful service up. Yes, consumers will tighten their belts, and back off from some extravagant spending.  But when it comes to time saving products and services such as house cleaning, you will be hard pressed to find folks willing to give it up. Really.

It’s hard to deny that we’re in (or going in to) an economic downturn.  During this economic downturn, the world won’t stop spinning, consumers won’t stop spending, and people will still go into businesses of their own.

Everything will be OK.  Really.

* * * * *

Joel Libava on 2008 franchise trends About the Author: Joel Libava is President and Life Changer of Franchise Selection Specialists. He blogs at The Franchise King Blog.

13 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

13 Reactions

  1. Great article, I couldn’t agree more. It is very hard for people to give up things that they count on as time savers and little luxuries. Women don’t need manicures but not too many will give up their pampering sessions. I’m just hoping things will turn around by the end of the year.

  2. We move toward what we think about, think about recession and guess what happens sooner or later, recession. Think about prosperity and you will move in that direction. I actions follow our thoughts.

    For years a real estate bubble has been predicted to burst, well here it is. Is it painful for some absolutely. What will we learn? Kind of like the dot com crash just a different industry.

  3. Joel, I want to thank you for writing this, and Anita, thank you as well for posting it. I’m NOT an economist; I’m a copywriter. But four years ago when I voluntarily left my corporate job after seeing the axe swing one too many times, I just had the *feeling* that I was doing the right thing. Now, it seems that year after year I’m seeing more folks joining the Free Enterprise brigade as they get squeezed out of their companies.

    I wanted to jump on this then and I do even more so now. Every time I read the grim headlines I think, hmm. Large corporations may have cut a major chunk of their workforce, but they still need to get the work done. Who’s going to do it? I’m here and I’m ready, and I’m sure many others like me are also prepared. And then you have those who left those companies who, as you say, are launching franchises and small businesses of their own. Yes! They, too, need support. I’m glad to be out here and ready for the shift.

    Also, I’m happy to hear you’re prospering as a result of the change. Thanks again for writing this. You really hit it the mark.

    Dina Giolitto

  4. Steve, could this be called “Law Of Attraction”? Because I do agree that what we think about long enough whether it be positive or negative does happen.

    Agree with Mrs. Smith. I am not about too give up any of those services that make my life a litte easier, may cut back, but not give up. This to shall pass.

    Great article Joel!

  5. Oops – typo: “hit the mark.”

    Dina Giolitto

  6. Thank you Dina, EJ Mayln, and Amanda!
    Steve, in most cases, “our head trips determine where our feet trip”. {I think I will copyright that!}.
    Anyway, with the negative momentum of all the things I brought up, energy prices, housing/mortgage issues, and the amount of debt we, as consumers have been accumulating, reality does catch up. It has.
    Joel Libava

  7. It is all relative. It makes sense that new business owners will be “born” from an economic downturn. It is survival of the fittest! If you cannot work for someone than work for yourself.

    I believe that everyone has a little entrepreneur in them – recession periods usually pulls it out of the true survivors. Fortunately, there are enough consumers in the world to patronize new businesses, even through the tough times. These are the times that developing a near recession proof business can keep your wallets lined with cash.

    SB

  8. I sort of agree and disagree at the same time. It is, indeed, hard to give up the quality service. On the other hand, if that prevents me to put enough food on the table – I’ll do it without blinking.

  9. Joel,

    I got great fuel for my soul after reading your post.The franchise business is the way to go. Keep up the good work and please stay “contrarian”!

    Best Premises,

    Martin Lindeskog – American in Spirit.
    Gothenburg, Sweden.

  10. We are interested to create a franchise concept of our meeting place for entrepreneurs and business minded individuals. For a background, check out our site: http://www.bluechipcafe.se (Please click on “Engelska” for an English summary version of the site.)

    What should be the first step if you want to start a new type of franchise chain?

    All the Best,

    Martin Lindeskog
    Blue Chip Café, Business Center & Community
    “Biz & Buzz in a Cup.”

  11. Thanx a lot, Martin!
    Your concept looks interesting and DIFFERENT.
    You have already made your 1st step. You have something DIFFERENT.
    Talk with Craig about it. If he could help The Disney Corporation with their 1st retail stores, then he can help you!
    Joel Libava

  12. Joel,

    Thanks for your comment. Yes, we are different, but the different pieces (café, business center, community with a club membership) are not unique. The ingredients mixed together will result in a different way of doing business. You will find the “third place” (after your home and office). We have a story to tell, that you could trace back to the historical coffee-houses with for example the founding of Lloyd’s in London. Businessmen from a specific industry (ship builders, commodity traders, insurance agents, etc) went to a designated place (Edward Lloyd’s café in 1688) and exchanged information.

    I look forward to get in touch with Craig.

    Martin Lindeskog

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