Regardless of how big or small your company is, it is and always will be affected by business cycles. These cycles happen on a small aspect as well as a global economical level. By furthering your understanding of what goes on during them, you can better position your company to adapt.
On the small end of business cycles, there are busy and slow seasons. The most extreme example of this and a key to illustrate the point is a ski resort in Colorado. Their business cycles, or seasons, revolve around the weather with the peak being the holidays from Christmas to just after New Year’s. Obviously, they are so slow that they close from late spring to early fall. Almost every business has a peak season and a slow season so it’s important to identify what those are in your line of service or sales. With this knowledge, you can help plan your advertising budget better as well as labor needs, control hours of business, and anything else needed to adjust to the change.
On the bigger scale are the economic business cycles we face as an economy. In this fashion, the cycles have to do with production and overall economic activity. It’s usually measured by gross domestic product. The term business cycles have actually come under fire since there is no mechanical or predictable pattern that they follow, making them not a true cycle. Many now refer to them as economic fluctuations for this reason but the definitions are the same and they both refer to the same thing. The fluctuation periods are referred to as economic growth when they are in an increasing level of development and economic recession when they are in a contracting level of development.
There are many different theories that play into business cycles and it’s the reason behind most of our macroeconomics classes in college. Since the contraction or recessed effects of the cycle can be painful to their citizens of many developed countries, many governments have moved to make it their responsibility to attempt to mitigate the business cycle as much as possible. There are alternate views, outside of the most widely accepted expanding and contracting, as to the reasons behind economic growth and recession as well. Everything from politics to general creation of inflation all comes into play when dealing with economic concerns on this level. But most importantly, it is important to understand that there is a global cycle of business that can affect your bottom line as well.
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