Is It a Good or Bad Economy? Please Don’t Ask!

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Is it a good or bad economy? Business ownership

Peter Lynch, a well-known investor, once said that for an investor 15 minutes a year spent on macro economic issues was a waste of 10 minutes time. I would go a step further and say that those 10 minutes can have a detrimental effect because of the way it can affect your attitude.
For the business owner, with few exceptions, it is a waste of time or negative use of time to worry about the economy. Yet I still hear business owners asking questions and making comments about the economy. They are usually in the form of “I don’t think I will move forward in X because of the economy” or using the economy as a scapegoat for why their business isn’t doing as well as they would like.
So why do people obsess over the state of the economy? Because the talking heads on TV and the body less voices on the radio constantly talk about it. Yet if you listen to them for a while you will either let your emotions ride the roller coaster of their prognostications or you will realize that they really don’t know what they are talking about. They are paid to talk, not to understand, and so they talk. Since people are much more inclined to accept and willing to listen to negative information they oblige them. It is important to realize that even in the best of times our economy lays off 59,000 people a month which means that there are 59,000 hard luck stories out there every month in even the best of times.
How should a business owner view the economy?
For the business owner any focus on the national economy is a worthless and detrimental use of brain cells. Unless you are Wal-Mart such a general view of the economy tells you nothing about your target market and their buying habits. The only way economic news is of any value is if you can accurately narrow it down to your marketplace, industry or Geographic area. Even then, the information is usually worthless.
How should a business owner deal with the economy and the constant stream of economic information?
  1. Do your best to ignore it. This starts with not listening to the talking heads, fear mongering blogs, scare social media posters and others like them. We live in a time of information overload and just as your Inbox is overwhelming because of the amount of mail that you get in, you can be overwhelmed by the amount of information that you receive on a daily basis. And just like your inbox you need a Spam filter that limits that amount of information that you receive. I have yet to see anything truly helpful on the news section of the TV. So consider going counter cultural and not watching it. The same goes for radio.
  2. Develop a historical perspective. Listening to economic news in the vacuum of today or this year blows it out of perspective. You need to develop a longer time horizon with which to view economic information. A minimum of 3 decades is a good start but longer is better. Consider this, (beware, I am going to be generalizing about the national economy) in the eighties the economy was rolling along at a very good pace, in the nineties it became an obscenely good pace, then in the 2000’s it reverted back to a good pace and people started complaining about how terrible the economy is. My response is that if you can’t make it in this economy then your business is flawed and you have no business being in business.
  3. Develop a global perspective. I was recently talking to a man who had run five businesses in Brazil and was now moving to West Michigan to start a business. Over the course of our conversation he asked me if I thought the economy in the area would be a problem because everyone that he had talked to told him that he shouldn’t start a business because the economy sucked. I told him that there really wasn’t much to worry about. I gave him some economic information for the area, including that the unemployment rate (a very general overview of the state of the economy) was between 5 and 6 percent. He started laughing and told me that in Brazil it was around 25 percent unemployment and he had successfully run 5 different businesses in that economic environment. You need to realize that this business environment is the envy of the world. This means that it is also good for your competitors as well. So you may have difficulty getting business because of the plethora of competitors but I can guarantee you that it is not because of the economy.
  4. Listen to your marketplace. If you want to know what is going on in your marketplace listen to your client base. Now a word of caution is in order here. Be careful listening to what they say because they are also affected by the talking heads.  So don’t just listen to what they say, but listen to what they do. Case in point. I was talking to a potential client in Oklahoma and after I quoted him my price he began to tell me how the economy in Oklahoma wasn’t very good and how they were a relatively poor state and, therefore, he didn’t think he could afford my fees. But only 20 minutes before he had been bragging about how he had just purchased his second plane for his business to fly his employees around the state, and that he had just broken ground on building himself a new home. The problem wasn’t the state of the economy, the problem was either that I hadn’t shown him the value of my services or that he was a Knucklehead.
Remember these things the next time you hear anyone talking about the economy and please remember not to use the economy as a scapegoat.
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