The Shutdown Continues: Your Company and the Shutdown (January 2019)
28 Days Later.
Four weeks after a mysterious, incurable virus spreads throughout the US, a handful of survivors try to find sanctuary. Sorry, wrong story.
28 days later and we are now are entering into the fifth week of the partial government shutdown. Our world may not be inhabited with zombie-like humans but this shutdown is bringing consequences. Even for private companies this is not something to ignore.
This partial shutdown comes as a result of the disagreement over allocating federal funding to support Trump’s promised border wall. Since December 22, 2018, over 800,000 federal workers across the country are either temporarily unemployed, working without receiving a paycheck, or furloughed. The major agencies affected by this partial shutdown include the Departments of Agriculture, Commerce, Homeland Security, Housing and Urban Development, the Interior, Justice, State, Transportation, Treasury, and Environmental Protection Agency. Airports are becoming clogged, national parks are filthy, and the Smithsonian museums and National Zoo are empty.
While you may not be a federal employee or have a working business relationship with a federal agency, the shutdown is impacting the flow of revenue across the country and across industries. Businesses that operate near federal agencies are no longer getting their usual customers. Airline companies are losing a significant chunk of revenue due to fewer bookings. Private business owners who have contracts with government agencies have projects at a standstill. Small business owners expecting to take out federally funded business loans will be forced to dip into their personal savings. Business owners looking to obtain required federal licenses in order to operate their businesses are put on hold (eg. operating distilleries, food and drug approvals).
Personal consumption is and will continue to decrease. Like any other financial situation, buying behaviors change when the money gets tight. People will use more discretion when it comes to buying everyday items or services. So-called “millennials” may need to drop that Avocado and toast to just toast. Mimicking the buying behavior of individual people, companies will cut back or hold off on spending and investing. On a serious note, this is bigger than losing avocado and toast (but still not as big as a zombie apocalypse).
This forecasted change in buying behavior over a prolonged period of time will trickle down financial consequences. According to Bank of America economists, U.S. economic growth decreases 0.1 percentage points every two weeks of a federal government shutdown. An extended shutdown could negatively impact the nation’s overall credit rating.
What to Do
Be aware of what is going on the news and stay up to date. Learn how the government shutdown impacts you personally and your company. Will your license to operate be delayed? Can you now longer rely on key customer(s) to drive in revenue? Will pitching your business idea to investors be more difficult? How does this change your business plan in short and long term?