Wednesday, March 9, 2011

Forgetting Business Cycles

I remember when the recession of 1981 ended. A year later, my town emerged from the recession. (Two years after that, my family had climbed out of the recession. Some families never did.) Even now, we hear on the news that the recession in the U.S. has ended, but 16 percent of Americans still cannot find employment.

This is one reason that following business cycles to time your business creation is a dumb idea. Unless your business involves selling stocks and bonds to institutional investors, you shouldn't make decisions based on cyclical timing. By the time we reach unemployment rates below 5 percent again, the next recession might be on its way.

Start now, selling things people want and can buy now. When they have more money, they'll probably buy more. Your business will be viable at any part of the cycle.

A business that forms at the top of the curve, in contrast, may not be needed at the trough. Don't be that business.

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