How can you create a business that is resistant to recession?
Recessions occur regularly. Despite that, many businesses survive, and a few die.
Let us look at the last downturn that shook the world in the wake of the US financial crisis, in which almost the entire financial sector collapsed. It was a period in which Lehman and Bear Sterns went down. To prevent the total collapse of the financial system, the Federal Reserve handed out massive bailouts to shore up the balance sheets of the leading banks and major auto companies. The effort was to prevent the collapse of the US economy, which was the engine of the world.
The mortgage industry and, with it, the housing market collapsed. Properties were foreclosed in their thousands. There were no buyers left, and despair swept through the country. The purchasing power of the population was collapsing.
How did the companies survive in this period? They did it by:
Shoring up balance sheets.Undertaking a massive across-the-board cost-cutting.Smart companies used the downturn to resort to automating business processes, improving efficiency, and reducing recurrent workforce costs to the minimum.
No company, country, or individual is recession-proof. Those who have managed their businesses well in good times accumulated a war chest and kept debt down to within limits to survive. Stick to fundamentals, and you will be fine.
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