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Business in Recession With Be Proportional
#1
There is an old understanding that the smart business owner will make more money during a recession because the goods iare cheap, hiring is cheap and rental also will be cheap. So when the market recover, all his previously signed contracts will have its condition be the same.

Well, lets have a deeper analysis on the 3 areas that may apply in the past doesn't apply now:

1. Goods is cheaper during recession.

Definitely is true, many retailers want to get rid of their old stocks for cashflow purposes. Some have to get rid of their stock to ensure the survivability of their business while others just want to tighter competition.

A business owner who brought the goods during recession may not be selling it off immediately. To get loans during recession is harder and the interest rate will not be low too. Likely people who are cash rich will stock up using their own cash. Little they forget about the 2 important thing about logistic - they will lose opportunity cost in storing for future usage and most things will depreciate unless you are in the antique trade. Ultimately the dollars and cents will go back to the same.

2. Hiring is cheaper during recession.

Do doubt even business owners will quit their business to be an employee during the bad times. You can sign an employment contract with them and everyone know pay raise is the hardest thing beside morning wood. It is easy to do a pay cut but difficult to increase it back, there will always be thousand and one reasons for bosses to say no.

This is not the same as the past, previously we can just make an employee stay for his loyalty and all the old values. Presently it is different. Once it become the employee's market, you can start seeing resume fly faster around and they can forfeit any relationship that could have been built over the years. Without getting the employees' to work long enough, your cost in training new staff and again opportunity cost will wipe your your so called profit in recession.

3. Rental is cheaper during recession.

Not only rental, even selling price of property will drop significantly too. Banks and mortgagers will let go your property at a price to their advantageous and not yours. You can easily get an office 20% below the normal market price during recession and sign a 3+3 years contract.

In case you always sign the contract without look through it or doesn't understand its meaning, there is an escalation clause to ensure proper market rate being passed to the tenant. You already lost some money for moving your office during recession and your business won't be good during that time. You may still have to lock yourself down for 3 years where the market could turn better or worse after you signed. You never know what will happen but you already make losses.


You can't beat the system, but you can exploit it. Choose the right things to do during recession.
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#2
Good post....
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#3
Thanks for the post......
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#4
Oh... !!!
You mean there are three benefits of Recession....
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#5
Good to know that....
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#6
There will be be equality, equity or proportional, you are just too naive to even believe there is a chance things will go proportional. There will be more internal trading done during recession to fool the system because people feed on chsos.
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