I have noticed that the headlines lately have a generally negative tone about the economy, but not overwhelmingly so.  The data is mixed and frankly a bit confusing to me as it lacks concensus about the direction in which the economy is heading, or even the timing of our demise, survival, or recovery (depending on the view of the forecaster).  This presents a dilema for most business owners: should they hold steady, expand or contract to match future demand?  Chaos theory and the complexity of the economy further cloud the issue, making a clear decision unlikely.

If you operate a coin laundry, tighter consumer credit may be good for you as fewer of your customers will be able to purchase a washer and dryer (and thus no longer need your services).  However, the resulting lower sales at appliance stores may cause them to reduce prices which in turn may boost sales and hurt your business.  Higher gasoline prices may eat into a household's disposable income and make a washer purchase impossible and help your sales.  On the other hand, if those gasoline prices rise high enough it may become cost effective for the household to purchase the washer instead of driving to the coin laundry.  Which way are the economic winds going to blow and what can you do to help your business?

If you accept that you can't control what happens in the economy at the macro level, and that any changes will affect specific businesses differently (as in the washer sales versus coin laundry example), then the best position may be to remain as flexible as possible and able to respond with agility to take advantage of any opportunities that present themselves.  First, let's look at some of the issues... here are headlines in the news today (11/27/07):

• Harley-Davidson Plants Close for a Week - 5,400 Harley-Davidson workers are out of work for at least a week as Harley closes multiple plants due to a drop in sales... the first time this has happened in company history. WJFW TV (www.wjfw.com)
• Citibank Receives Emergency Cash Injection - Unable to raise capital in the U.S., Citibank has borrowed $7.5 Billion from the government of Abu Dhabi at 11%, with Abu Dhabi receiving 4.9% in convertible stock, making Abu Dhabi Citbank's largest single stockholder.  Wall Street Journal, 11/27/07; Page A3.
•  Layoffs Possible as Citibank Eyes Cost Cuts - Despite recent capital infusions, Citibank which already has laid off over five percent of its workforce this year may be forced to institute "massive layoffs" to position the business in line with economic realities. (www.chicagotribune.com)
• Online Shopping During Black Friday Shoots Up 10 Percent - Nielson Online reported that Internet traffic to major retailers grew 10 percent over the previous year, with consumer electronics jumping 235 percent at the high end and books, music, and video growing one percent at the low end. Jacksonville Business Journal (www.bizjournals.com/jacksonville)
• Cyber Monday Sales Expected To Generate $700MM - According to the Federal Trade Commission, a recent Forester study reports that online holiday spending is expected to grow to $33 Billion in 2007, up from $27 Billion in 2006. The Frederick News-Post (www.fredericknewspost.com)
• In Cleveland, 6,000 Apply For 300 Wal-Mart Jobs - Cleveland's first Wal-Mart is about to open and with it is coming 300 jobs in a metro area that is struggling economically.  6,000 people applied, or 20 applicants for every job.  USA Today (www.usatoday.com)
• Consumer Confidence Drops Near 2-Year Low - Index falls for the fourth month in a row and hovers around a two-year low. (www.cnnmoney.com)
•  U.S. Housing Starts Rebound - Housing starts rebounded three percent in October after falling sharply in the prior month.  Economists have warned, however, that the housing market is likely to remain depressed well into 2008 in part because of the glut of unsold houses flooding the market. AFP (http://afp.google.com)
• House Prices Retreat In A Third of U.S. Cities - House prices fell in one-third of U.S. cities last quarter as stricter lending standards caused a 14 percent decline in sales nationwide. Houston Chronicle (www.chron.com)
• Oil Prices Tumble As Market Mulls Possible OPEC Output Hike - World oil prices slumped Tuesday on increasing speculation that OPEC may decide to hike crude output. AFP (http://afp.google.com)
• Debt Puts U.S. Companies Under Will of China - China holds a large portion of the debt of the U.S. government in the form of treasury bills and bonds, is the sole supplier of products to many U.S. companies, and in many cases dictates to those companies what and how it will supply them.  Albany Times Union (www.timesunion.com)
• Don't Look Now: Here Comes The Recession - Even with a boost from holiday spending, the U.S. economy looks shaky.  How bad could it get? (www.cnnmoney.com)

 Given the uncertainty in the economy, businesses that are agile enough to respond rapidly to changing conditions will have more opportunities to maximize their profit.  To become agile, businesses should:

• Retain a cash reserve to carry themselves through short periods of "adjustment" in the economy.  Alternatively, have a line of credit available (but unused) for emergencies and opportunities.
• Consider arrangements for additional resources that can be rapidly expanded or terminated as needed,  For example: 1) Rent or use short-term leases on equipment rather than purchasing; 2) Consider outsourcing work rather than hiring additional staff; 3) Pay overtime to existing employees as needed, rather than hiring additional ones.
• Review financial reports on a monthly basis, looking for trends in cost and net income, then adjust operations as necessary.
• Continuously review customer needs via comments, surveys, and by tracking inquiries.  Adjust the product or service as needed to meet those needs.  As an example, many used car dealers have changed the mix of vehicles they sell to favor those with better gas mileage as fuel prices have risen, in response to customer demand .
• Focus on customer service... Make sure that you retain your existing customers and can both attract AND RETAIN new ones.
• Keep up on industry trends for your business (read trade journals and industry websites) as well as with trends in general (read general news, business news, and sites like www.trendwatching.com).
• Network within your trade association, chamber of commerce, and other similar groups to share ideas on how to respond to changing economic conditions.
• Negotiate with suppliers for faster delivery of smaller orders to avoid carrying excess inventory, and for more favorable payment terms.  Remember, if business is slow your supplier may need you more than you need them, which gives you a stronger negotiating position.
• Listen to your employees as they are your "frontline troops."  Many good business ideas and innovations come from employees rather than from the business owner. 
• Don't be afraid to try something new.  In order to adapt to changing conditions your business may need to make changes as well.
• Keep a positive attitude at all times... it will transfer to your employees and your customers.

I am reminded of two fables that may be applicable to the current business environment.  The first is that of the mighty oak that tried to stand up to a strong storm and finally broke while a nearby sunflower bent with the wind and stood up tall when it was was over and the sun came out again... that implies agility to me.  The second fable is of the blind man in the great depression who was selling pencils.  When asked by an unemployed stockbroker how business was, he replied "as good as last year."  "But don't you know that we are in a recession and people are spending less"  asked the stockbroker?  The blind man thought about it and reduced his hours as well as the number and variety of pencils he had for sale.  The next time the stockbroker passed by and asked, "how are you doing?" the blind man responded, "you were right, there is a recession... my income is down by half!"  That fable implies to me that how you "view the glass", as half-empty or as half-full, can have an impact on business performance.