THE DOUBLE DIP
AN ENTREPRENEUR’S FRIEND OR FOE?
Renee Horne – London 24 August 2011
It’s a topsy turvy time for the global economy; both the United States and Europe have tried to revive their unpredictable economic statistics. But there are fears that there is not that much bag of tricks that can resuscitate the US and Europe staggering along with flat line growth. Pundits argue that the recent news on GDP shows that the double dip has arrived due to an expansion of 1.3% and consumer spending of 0.1% in the second quarter. Indeed there seems to be a sense of nervousness from bankers, governments and companies about the future. In the world of business, entrepreneurs are scared about whether the double dip is upon us and if so what steps should be taken to ensure they stay afloat? But then again there are some sassy entrepreneurs who see the double dip as an opportunity to make a profit…. …..Read more.
Double Dip Depression
At one stage the Economist predicted the Great Depression would begin in December 2007 and then put us out of our misery by July 2009. But now the US and Europe have seen a wave of global economic uncertainty. In the US, a Gallup poll which was released in April showed that 29% of those questioned thought the economy was in a “depression” and 26 percent said that the original recession had persisted into 2011. However the most convincing that the recession has never ended or is in a double dip is that companies are not hiring. Unemployment statistics are high, the US has seen about fourteen million people out of work, a third of those have been searching for employment for more than a year. In the UK, the unemployment rate increased to 7.9%, from 7.7% in the first quarter. All this uneasiness in the labour market adds up to many arguing that could there be a double dip in waiting or has it arrived? So what does this mean for entrepreneurs? Due to the ups and downs in the market most small businesses are questioning exactly where is the global economy heading? In the US, for five consecutive months, the Small-Business Optimism Index fell, dropping 0.9 points in July, a larger decline than in each of the previous three months and bringing the Index down to 89.9. This is below the average Index reading of 90.2 for the last two-year period. To simplify, there isn’t a lot of optimism from entrepreneurs, with fear that bad times are ahead. The index also showed that there was more pessimism for future real sales. So, overall, 68% of small business owners surveyed argued that the economy stresses them out, while 38% said their greatest concern was the prolonged recession or double dip, with 32% stated high unemployment. But this is not the only worry; entrepreneurs could be facing double dip depression as bank lending rate data seems to suggest a prolonged recession for small businesses. Significantly, there is a sharp increase in prime rates in the US with experts arguing that it’s likely to be between 3 to 8 base point increases by the end of 2011.
Double Dip Survival
Despite all the entrepreneurial double dip “depression”, there is good news for small entrepreneurs. If you have not taken on debt, this will not make you vulnerable to any interest rate increases. According to experts, in the US almost 60% of small business owners have not pursued credit in the last 6 months. Over a third of these small businesses worry about default or bankruptcy, while half argue that there isn't enough demand for their products or services to warrant taking on a new loan. Indeed for start-up entrepreneurs, double dip survival is crucial. The pundits would argue that in these times of uncertainty, bootstrapping would lead to a successful business. That is start your business without external help or capital, set aside a small amount of your savings to start up your business, however from the onset be cautious about all money spent. Ultimately start off small and slowly. This may seem ironic, but perhaps slow, steady growth is preferable to fast, explosive growth. By slow, an entrepreneur may need to understaff that is at the start of the companies life cycle the entrepreneur must be the “do all person”, that is the chief salesperson, chief marketing officer, chief fulfillment officer, chief financial officer and yes if need be the person in charge of cleaning those bathrooms every day. So to survive the double dipper the start-up entrepreneur must disregard their own vanity and do even the worse jobs to keep those costs done. There will be more tough times ahead, so proceed cautiously and intelligently. Some businesses that fail are in a declining market such a book stores, music stores, printing businesses that are dealing with changes in technology, consumer demand, and competition from huge companies with more buying power and advertising. And for businesses that have survived these troubled times barely hanging on a thread, the answer is to go back to basics by taking good care of your customers as you may lose them to strong competitors. If you shrewd enough, there is a flipside to this, while the economic instability continues your competitors are likely to fail, presenting you with an opportunity to attract new customers. So a downside for one business is an upside for another.
Double Dip Opportunism !
Then again there are those entrepreneurs that can turn even the scare of the double dipper into something that can make a profit. Savvy entrepreneurs have seized the opportunity by creating brands of cultural context. For example, CafePress.com, where people can upload self-designed products that are printed by CafePress and sold to other consumers, people are buying beer jugs, mouse pads and even T- shirts emblazoned with images of US President Obama and Vice President Biden looking like upside-down ice cream cones decked in dunce caps above the words "Double Dip Recession." And if one is into YouTube, there are roughly seven thousand posts, such as one featuring sexy, hip-hop song Double Dip by Problem, with another featuring a scene from an old Seinfeld episode when the phobic George Costanza character played by Jason Alexander gets caught at a party when he double dips a chip. Some companies are more fortunate, in just two years in the US, Wholly Double Dip, made by Wholly Guacamole has become a highly profitable dip. And there is also advise aplenty (sometimes at a cost of course) of how to survive the double dip. Some pundits would advise buying gold or yielding stocks or take a look at the top agricultural commodities as food products are bound to soar. Ultimately the double dip could mean an opportunity to dip into a delectable ice cream or dreadful sour cream it’s all up to the innovation of an entrepreneur…. Have your say….