Recession and inflation both cause the depletion of asset value. Smart business leaders prepare themselves for the impending recession by cutting costs, conversing cash, and focusing on those products and services with the highest margins.
The mass layoffs in Meta, Amazon, and others are all cost-cutting measures. According to news reports, Meta’s investment in building futuristic metaverse research products has been drastically pruned. I suspect many of these companies will bear added focus on the highest ROI segments of business, like ads.
Recession will lead to a drop in discretionary spending that will start soon. It will include cutting travel costs, bonuses, and wage hikes will be pruned. Fresh hiring will be cut down drastically. We will soon be seeing a rise in jobless claims.
Individual businesses should take a close look at their business strategy, examine individual components of their balance sheets and prune wherever they can. I do not envisage inflation to hold for too long in 2023. By the second half of next year, economic activity worldwide will have cooled down substantially, demand will drop, and price drop across the board will be seen.
Smart business leaders should use the recession period to become lean and strong. Every effort should be made to improve operational efficiency. Automation and induction of new technology that will help conserve general costs and reduce recurring costs are good measures. Low-cost IT outsourcing companies will see a rise in demand for their low-cost technology implementation services in the second half of 2023.
Companies with good cash reserves will find good bargains by the second half of next year. Enterprises unable to withstand the downturn or inadequately prepared for the impending recession will see overstretched balance sheets; high recurring costs will become available for acquisition. M&A activity will see a rise.
How to prepare my business for the impending recession?
