It’s been all over the media, has been the chosen topic for many a conversation, it’s official; WE ARE NOW IN A RECESSION. So how do tell the facts from the fiction? And most importantly what will it actually mean for your business?

Lets first look at the definition, which is:

Wikipedia

“In macroeconomics, a recession is generally associated with a decline in a country’s real gross domestic product (GDP), or negative real economic growth. According to one widespread definition, a recession occurs when real growth is negative for two or more successive quarters of a year.”

It should be pointed out however that there are differing definitions, the US for instance defines a recession as:

“a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”

Ok, so there might not be one defintive answer but a general interpetation would be a overall decline in growth which in turn results in negative effects such as those listed.

Now lets look at what the ESRI actually reported?

(From the ESRI website)
“We expect GNP to fall by 0.4 percent in real terms in 2008. This implies that Ireland will experience its first recession since 1983
We now expect consumption to grow by just 1 percent in 2008. This is a dramatic slowdown from the last three years when consumption growth has averaged over 6 percent.”

Consumption by the way is the total personal consumption expenditure, or the purchase of currently produced goods and services out of income, out of savings (net worth), or from borrowed funds. It refers to that part of disposable income (income after taxes paid and payments received) that does not go to saving.

In general terms this is likely to mean:

There will declining sales to go around but the same number of businesses competing for their share. In other words, competition will get stiffer.

The average consumer will have less money to spend and will be more cautious where and on what he or she spends it.

Financial Institutions will be pickier when it comes to providing credit, as the risk will be increased.

In more specific terms this may mean:

Certain costs of doing business are likely to continue to increase such as diesel, energy and interest rates. Companies who are heavily dependent on these such as the haulage industry are facing and will continue to face industry specific difficulties.

However others costs of doing business are likely to drop because suppliers will be operating in a more competitive market and will endeavour to cut prices to continue to attract and hold on to customers.

Consumers are less lightly to spend on luxury type goods and companies operating in this space will also face specific challenges. We have already seen things such as car sales suffer and this is now likely to continue.

Hiring choice will increase and recruitment costs will come down as a result of increased levels of unemployment within the workforce.

So what measures can business take now to prepare for the uncertain times ahead?

• Evaluate and manage costs, ensure that your business is getting value for money from suppliers and service providers. Remember there are likely to be better deals to be had now that competition will be greater. This doesn’t mean going for a cheaper option but rather investigating if there is a better value for money option available.

• Ensure that your product remains attractive. The easy thing to do is to cut prices but that won’t necessarily mean that it’s the right thing to do because it’s also a likely approach of competitors. The best way to ensure continued sales is to endeavour to make your product stand out from the crowd. So rather than just cutting prices really focus on making your product and your customer’s experience unique.

• Invest in your people. Make sure that your employees have the relevant training and skills because in this new more completive environment they will be both your first line of defence and attack. The more able and skilful they are, the better they will able to meet the challenges ahead. Your managers will have to manage problems and people, the marketing team will have to come up with new and more clever ways of getting your message to prospects and the sales team will have ensure that the deals keep on rolling.

The thing about bad news is that it travels faster and yeah the skies of our Irish economy are looking like there is a thunderstorm on the horizon. But be thankful that’s its you running your business and not some politician.

Having come into direct contact with many Irish business owners over the years, Its my strong belief that entrepreneurial flare will continue to ensure that Irish companies will not only survive but continue to exceed expectations. Remember it was you guys and gals that created the Celtic tiger to begin with and its you that will ultimately lead us back to where we belong.

There will of course be some casualties and certain companies face industry specific problems but as a proud Irish business owner, I call on the business community to give two fingers to the doom and gloom merchants, don’t batten down the hatches and remember the best form of defence will always be ATTACK.

Posted by Niall

Tags: business development, business growth, business planning, Business training Ireland, irish recession

This entry was posted on Friday, June 27th, 2008 at 8:35 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.