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Surge In Firms Going Bust Due To The Economic Downturn

As Businesses Go Bust Due To 2021 Recession A Business Fundamentals Analyst would have a much better perspective. So much of the media hype, financial assumptions, and analysis claims that businesses will make money in the next two years, or that they are already seeing such an improvement. But the reality of Business Fundamentals is something far different. Businesses are going to go under if they fail to change their focus and model, or if they just ignore the problem altogether.

This article will focus on the importance of changing mindset and strategy for business, specifically an economic downturn. Many analysts claim that the recent downturn is having a negative impact on investor confidence, and this effect is being felt by Commercial Real Estate investors. The article will show why Commercial Real Estate investors will most likely go under during a recession.

The first reason as to why Businesses will fail during a recession is that they will be missing opportunities that could have been grabbed during good times. For example, during the last decade banks were building too many homes, and this created an oversupply of unsold homes. Many potential investors missed this opportunity, because they were focusing on the quarterly profits of the real estate company rather than the long term viability of the company. The result, a lot of properties went into foreclosure and too few new businesses were started.

Another reason as to why Businesses will fail during an economic downturn is that they will be trying to do too much with too little. In the last decade, there was too much focus on short term profits and not enough emphasis on building long term value. If an investor only wants to make money today then he or she should focus on how to increase return on equity instead of working on the company’s financial framework. Investors also need to understand that economies shift, and the economy will either slowly improve or get worse before it gets better. Investors need to stay on top of these shifts in order to be able to capture the right opportunities at the right time.

Of course, there is also the fact that during an economic downturn people will start to cut their spending and this will hurt a firm’s profitability. If you happen to be a company that makes and sells fashion accessories, shoes or fashionable clothes, you will definitely be affected by the current economic downturn. Retailers who experience consumer spending cuts are sure to see their profit margins decline and their stock prices drop. When consumers see a company that is experiencing significant problems in sales losing millions of dollars of revenue each day, they are likely to avoid that company and invest in other similar firms. This will ultimately affect the economy in a negative way.

Although it appears that the economic downturn is impacting a lot of Companies, the fact is that only a few are really losing out. Some firms will experience short term problems, but will recover in the near future. Others will be forced to downsize and close their doors for good. Only a few businesses will suffer and those that do will recover from the downturn. If you are a small enterprise that has recently started up or is a budding entrepreneur, you need to know that there are a lot of opportunities in recession and depression.

Woodward & Bernstein