There have been 14 recessions in the United States dating all the way back to the Great Depression. Fortunately, the US economy has always managed to bounce back. But what impact has that had on those who own their own business? There was a brief recession during the COVID-19 pandemic, which by the way has thus far been documented as the shortest recession America has faced, and fortunately for many business owners they were graced with federal relief funds in the attempt to stay afloat and support those during that time. But unlike this recession, business owners haven’t always received those funds in the past. More often than not it is the small business owners who are left out. They certainly don’t have the financial backbone to lean on in those times. But indeed, both large and small businesses can still be negatively impacted during a recession. If you take a look at the quarterly earnings reports, you will notice a significant drop in profit and sales for all businesses. Whether you are a small businesses or new business owner, most likely you don’t have the adequate resources, such as a hefty number of stocks that you can dip into or sale during this time. Small business owners just don’t have the same resources made available to them as those in larger corporations. This often times has left companies with no other option then to file for Chapter 11 bankruptcy. But throughout history, there have been some common denominators when comparing large and small businesses alike. The tightening of credit conditions has been implemented on both, with small businesses feeling the effects greater and that’s because lenders simply can’t risk the uncertainty of lending money with all the uncertainty of how a smaller business will weather. They realize there’s a greater chance that smaller businesses may not survive. Another obvious impact that business owners have faced is the decline in sales. Consumers are more likely during this time to live frugal, so they aren’t indulging in unnecessary items as often. When you take into account the rise in costs for everyday essentials, that makes it even more financially difficult for people to buy unnecessary items. During a recession, sometimes for several months afterwards, the stock market takes a major hit. It has been common amongst business owners during this time to begin laying off staff. Owners will figure where they are able to cut costs and sometimes find they just aren’t able continue to pay out the current salaries when they aren’t bringing in enough money. Some find the need to cut out advertising and marketing departments briefly. Wage increases tend to be halted during this time too. In more extreme situations employees have faced taking a temporary pay cut. Automotive manufacturers are at the top when determining which industry is impacted the most and show the sharpest decline in profits. Common with other businesses, the need for layoffs is inevitable. In worst case situations an entire automotive manufacturing plant has been forced to close down, leaving hundreds of workers unemployed. There is an upside though, particularly for entrepreneurs, the end of a recession can level out investment capital, resulting in more opportunities for investors to invest in your company!


Article by
Ava Collins
Content Writer and Researcher

Student award winner Ava Collins