Blog for 7-21-08

I don’t know about you but I’m very concerned about the state of the economy. I‘ve learned that as business people one of the worse mistakes that we can make is not to pay attention to the big picture or the economic trends. Make no mistake about it; what happens in the broader economy will impact your business.

For instance, today inflation is higher than at any time since the 1970’s, and the national un-employment rate has risen to 5.5%. New York State and New York City’s un-employment rate usually exceed the national average. The 2009 fiscal budget for New York City had what some are calling draconian cuts to basic services for poor and working class citizens. But the mayor and Office of Management and Budget (OMB) stated that the cuts would have been deeper if not for a surplus from 2006 and 2007 to off-set some of the projected deficit. The Mayor is credited for saying that 2009 cuts will seem like child’s play compared to the next couple of years.

The continuing financial crisis on Wall Street has caused at least two bank failures so far and over 189,000 employees have been laid off. A crisis on Wall Street directly affects New York City; Wall Street is the engine for NYC’s economy. Corporate taxes and personal income taxes from the financial sector are major contributors to the City’s coffers. Experts are suggesting that the lay-offs that we’ve seen so far are only the beginning.

Lay-offs are also forecast for almost all of the government agencies during this year and next as these entities meet mandated 2% budget reductions. Private businesses and corporations may follow suit if business is bad. Do some reading on current economic forecasts. You won’t get a clear picture from watching the 6:00 PM news.

How might this affect child care businesses? First, it is almost impossible to pass on the increased costs in housing, food, utilities and gas to parents by increasing fees; families are already strapped. Try to do some belt tightening to cut down on cost when ever it is possible and safe. Second, some of your parents will probably be laid off. That’s right! Laid off workers may not need or be able to afford child care, thereby shrinking the market for child care services.
What to do? Be proactive in thinking through some scenarios that might meet the needs of parents who have been laid off. Perhaps they won’t need full day or full week child care. You might consider altering your enrollment and attendance policies. Whatever it is, think it through carefully so that you are prepared if that time should come.

The third and final suggestion is, If you are about to embark on some major project that will cost money, like the expansion of your program, do a re-assessment to make sure that it still makes sense in the current environment.