The legendary ball-drop in Times Square at the end of 2018 marked a decade since one of the worst recessions in modern memory. Four miles away, nervous Wall Street-types wondered if it also marked the end of a long cycle of expansion. They were joined by a range of individual and institutional economic forecasters who are still arguing over whether we’ll see the start of another recession in 2019. Or in 2020. Or in 2021.
What Companies Should Do to Prepare for a Recession
Here’s what successful companies did last time around.
May 09, 2019
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Summary.
The question isn’t whether should prepare for a downturn; it’s how to prepare. The companies that emerged in best shape from the last recession lost nearly as much revenue as industry peers at the outset; the outliers were from a few sectors that didn’t experience the downturn as strongly. But by the time the recession had reached its lowest point in 2009, the resilients had increased their EBITDA by 10%, on average, while industry peers had lost nearly 15%. The resilients seem to have accomplished this by reducing operating costs earlier in the recession cycle, and more deeply. By the first quarter of 2008, the resilients had already cut operating costs 1% compared with the year before, even as their sector year-on-year costs were growing by a similar amount. The resilients maintained and expanded their cost lead as the recession moved toward its trough, improving their earnings advantage in seven out of the eight quarters during 2008 and 2009.