Business Cycle Definition

Learn more about what a business cycle is.

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business cycle definition

What is a business cycle? A business cycle refers to the natural ups and downs during a certain period of a business’s operations. Typically, this would be one year, but you can look at more extended periods. The business cycle also encompasses the broader market (e.g., real estate or nationwide).

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Every business experiences financial boosts or surges, followed by downturns. Identifying and understanding these phases in a business cycle can help companies prepare. 

What propels the business cycle?

The definition of a business cycle includes the concept that businesses experience slow months and busy months throughout the year. For real estate companies in the northern or midwest states, for example, the late fall and winter months can be slow. After all, it’s hard to sell a house when the yard is covered in snow or it’s overcast. But once spring hits, people have a renewed interest in hunting down a new place to live. Other businesses experience summer slowdowns.

Customers may pick up interest in purchasing goods or services because of a change in season. Or it could be because of a new trend. No matter the reason for the downturn, it’s essential to plan for ways to keep customers engaged. 

How to Help Your Business Thrive During Low Points in the Business Cycle

There’s no magic formula to keeping sales up, but there are some things that you can do to help foster interest in your products or services. They include: 

Keeping the business cycle in mind at all stages of your small business helps you make it through the good times and bad. 

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Summary

A business cycle is the natural highs and lows of a business and the broader market. Companies may do well during part of the year or certain seasons but worse during other times. Smart business owners track the cycle of the market and their business. Following the business cycle helps them understand and prepare for all stages of the company. 

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Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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