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Frequently Asked Questions About Recessions

Is it a recession when the market hits 0% year-over-year growth and then the growth rate starts increasing again?

No, that is a soft landing.

Can my business stay out of recession if my market goes into recession?

Yes. Seeing a recession coming well enough in advance gives you time to position yourself accordingly. This is not always the case, but it is possible.

Are there still opportunities to be had during a recession?

Yes. If you see the recession coming well in advance, you can conserve cash during your growth/slowing growth phases and then make purchases at lower costs during the downturn.

Can either political party negate a coming recession?

No. The overall economy is too large. It cannot be controlled to that degree through the near term, whether through legislation or via executive order.

What are ITR’s top Management Objectives™ if my business is in recession?

Start thinking half a cycle ahead if you are already in Phase D, Recession, and begin preparing for Phase A, Recovery. 

However, if you are in Phase C, Slowing Growth, but expect to move into Phase D, Recession, consider these 5 steps:

  1. Focus on the segments of your business that are the most profitable
  2. Trumpet your competitive advantages and start developing your message for Phase D. Why should people want to buy specifically from you during a downturn, which they are also likely feeling?
  3. Practice cash management for proper allocation and inventory control (if applicable)
  4. Ask yourself what you should be doing and what you should stop doing.
  5. Practice resource management: divert resources toward more profitable parts of the company

Other ITR Economics Phase D Management Objectives include:

  1. Implement cost-cutting measures
  2. Offer alternative products with a lower cost basis
  3. Perform due diligence on acquisitions while valuations are falling
  4. Reduce advertising as consumers become more price conscious
  5. Enter or renegotiate long-term leases
  6. Consider capital equipment needs for the next cycle
  7. Tighten credit policies
  8. Develop programs for advertising, training, and marketing to implement in Phase A
  9. Lead with optimism, remembering that Phase D is temporary

Do all industries go into recession at the same time?

No. The economy is like a train; each industry is a railcar. Understand your industry's position in the train to better understand when it will enter into recession.

What is a working definition of Phase D, Recession?

The 12/12 Rate-of-Change is declining and is below the zero line (negative growth rate). The data trend (12-Month Moving Total/Average, also written as "12MMT" or "12MMA") is below the year-ago level, and the rate of decline is increasing.  

What are the two most common short-term impacts of a recession?

  1. Running short on cash
  2. Work expanding to fill the extra time

See our blog post here to learn how best to combat these two impacts.