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.

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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.

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.