“Housing is a very pronounced leading indicator of the economy…When the housing market weakens, it usually does so before the economy as a whole turns down. Similarly, housing is almost always the first sector to recover from recession.”

So if you’ve read in the news lately that the housing industry is suffering, start paying attention. Look at your business plan and see what you can do to avoid unnecessary spending, cut costs, and scale back plans for expanding in the months to come. Here are more reasons to be a prudent budgeter during late 2007 and early 2008.

According to the Small Business Administration (SBA), a small business owner has a negligible chance of succeeding in the first five years of conducting a new business because 50% of such businesses will fail during this time frame. In addition, the SBA cites two reasons that a business will fail as stated by Michael Ames in his book, insufficient capital and poor credit arrangements.

You need to have a strong plan that can weather an economic downturn. One way to get personal help is to visit your local small business development office for planning assistance. This center may be operated by the county or city government or a local university.

Be smart with your money. Try to secure and preserve capital reserves for a possible recession. You need to arrange credit that can help to bail you out if things get really rough.

In a section about forecasting, the SBA web site describes strategic thinking (which is necessary for planning how your business will survive a recession): “It is also a tool to help you confront change, plan for and make transitions, and envision new possibilities and opportunities.”

The ability to confront change will test your skill as a small business owner. Don’t become another statistic. Start following the economic indicators in the news. Plan for how you can keep your business afloat. It might also be a good time to hold off on expansion. This economic slump could last a few months more or it could drag on for over a year. No one will be looking out for your business but you. Make the most out of the economic doom that you read in the media. Make smart business decisions to stay in business in 2008.