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Predicting/Preparing for Economic Transitions 29

tions” and actual “plans” of what business performance and
plans will be like in the near future. The small business
members have a unique position in terms of having their
“ear to the ground” and whose businesses are, in many
ways, more dynamic than larger businesses. They refer to
these index metrics as Small Business Optimism Index
components.

Small Business Optimism Index components comprise:

1. Plans to increase employment
2. Plans to make capital outlays
3. Plans to increase inventories
4. Expect economy to improve
5. Expect real sales higher
6. Current inventory
7. Current job openings
8. Expected credit conditions
9. Now a good time to expand
10. Earnings trends.

They also calculate the total change of these metrics as
well.

As Table 2.2 depicts, they record three dimensions of their
index metrics.

This provides an excellent view as to where the business
cycle is likely to go in the short term and enables businesses
to gauge their markets more effectively.

Plan future economic cycles with
risk probabilities

Every economic cycle has diverse risk probabilities. It is
important to create a baseline of recovery scenarios with an
upside and downside based on risk probabilities. During