By anyone’s standards, this has been a challenging year. From the pandemic to widespread fires to economic shutdowns to mass layoffs, thousands of businesses across the nation have gone through their most difficult times ever. Unfortunately, many businesses will not emerge from these trying times. And those that do emerge, may be weaker than before and less able to compete with larger, stronger competitors.
With this rather gloomy background, there is light at the end of the tunnel, and it’s time to start to looking ahead to next year. What will the business economy look like in 2021? Here are some predictions:
2021 will be the year of hope and rebuilding. The Bureau of Economic Analysis (BEA) is anticipating that the 3rd quarter GDP in the U.S. will increase by over 30%. This is a big number, but keep in mind that the 2nd quarter was down 31.4%, so we are effectively back at par – but in this economy, getting back to even is a welcome relief. The fact is, it will take time to feel the wealth again.
Half Full or Half Empty?
While growth is expected to continue, a panel of 52 economists has lowered its forecast for the rate of growth for the last three months of this year and for 2021, according to the National Association for Business Economists. So, while there is expected growth, it is less than originally forecast.
Furthermore, the economists surveyed are divided over when the economy will return to pre-pandemic GDP levels, with roughly a third saying the second half of 2021, a third saying the first half of 2022 and a third believing it will be towards the end 2022. So again, there is good news on the horizon if you look behind the headlines.
Money is Cheap and Available
Here is some more good news: If you’ve made it through 2020 you can likely make it through 2021. And lenders love businesses that can survive tough times (it means they will likely be paid back). Accordingly, the Small Business Association (SBA) is lending money more readily on existing established businesses that have a track record.
Plus, economists expect the Federal Reserve to hold interest rates close to zero through 2021, so money will be cheap. By the way, if you as an owner have personally invested in your business, that will help your application. The SBA loves applications that show the owner has some skin in the game.
Deloitte summarized the economic outlook well when they wrote, “Don’t mistake your rearview mirror for the windshield.” In other words, this has been a very difficult year for many, and we are not yet out of the woods, but there are better days ahead. Note that the economy may indeed get worse before it starts to get better. This is especially likely if we see a spike in Covid-19 infections during the winter months.
In fact, some prognosticators think that we may see an economic boom ahead. Behavioral finance expert Morgan Housel told CNBC that he thinks the U.S. economy may see a recovery in 2021 that is similar to the post-World War II period of aggressive growth.
“Think of the amount of pent-up demand of people who are just so eager to get out of their homes and go on vacation, go back to a restaurant, combined with the incredible amount of government stimulus from both the Federal Reserve and from Congress,” Housel said. “You put those two things together, and if we were to get a vaccine in the coming months, then 2021 could look like something most analogous to the end of World War II.”
Hope is indeed the operative word for 2021. With the election almost behind us and a vaccine on the horizon, it is right to feel optimism.
Business Tips to Help You Survive and Thrive
- Continue to market your business with an aggressive call to action to get customers in the door.
- Offer discounts to generate interest whether you are a B2B or B2C business.
- Don’t stop advertising. In fact, research shows that companies that advertise aggressively during an economic crisis, far outperform their competition both during the downturn and well into the recovery.
- Cash is King. There are likely to be some bumpy roads ahead for the short-term, so make sure you can weather the conditions. Keep as much cash on hand as you can. Try liquidating unused assets and excess inventory.
- Trim unnecessary expenses. This will require discipline, but you can do it.
- Try to strengthen your relationships with customers, vendors and suppliers. If you need help getting through these challenging times, it helps to have friends in all the right places.
- Stay Healthy – you can’t run a business if you are sick, so be smart: wear a mask, social distance, and stay healthy so you can stay in the game.
About the author:
Scott Yahraus is a leading business builder and conflict resolution specialist. With experience in state and federal court receiverships, and provisional director assignments, he specializes in helping companies improve operations, solve partnership disputes, and restore profitability. He brings vast knowledge and experience in the areas of real estate, business management, construction, and retail to help companies avoid or repair complex issues. With an unparalleled track record in successfully navigating businesses to positive outcomes, Scott can help put companies on a pathway to profitability. Learn more at: www.Scott4Business.com