Company recessions

- Did you know that a recession can hit an individual company? Most people think of recessions in national terms but companies can be in recession too. Those companies are losing money and contracting. Very often there's something fundamentally wrong with a company's business model, leadership or finances. Let's talk about these three recession risks for a company. The leadership, the finances and the business model. Leadership and finances are easy considerations to talk about. When it comes to leadership I'm talking about the ethics and competency of people running a company. Are they crooks or liars or are they honest in their business practices. Can they run a business that instills confidence? Can they get things to work well? That's leadership. As for finances, this is simple enough, is the company's money managed well? Is it profitable? Or is it on its way to profitability? Or is the company losing money? The business model refers to how a company makes money. It might have a bad business model because its costs are too high or because it doesn't sell enough product or maybe it has a product no one wants because something better or cheaper exists or comes along. If a company has a bad business model, poor leadership, and poor finances, it's done for. In fact a company really needs only two of the three of these problems to be at risk of recession or collapse. Poor leadership or a bad business model though may not be enough to bring a company down but if the finances are also in bad shape, party's over. Think about Blockbuster Video. You probably know what happened here, Blockbuster's fall was so steady and complete and devastating that it's become a textbook example of what not to do. Streaming services like Netflix burst on the scene, Blockbuster clung to its old brick and mortar, corner store video rental business model and the results were not pretty. If you were an employee of Blockbuster it didn't matter to you what the DOW Jones was doing, or what the overall economy looked like. For you, if you worked there, it depended completely on that one company. All that mattered was the very targeted recession hitting you. Think about it, somebody was the last person to be laid off from Blockbuster. There was someone there at the end. Don't be that person. There are usually warning signs about a company, that it could fall into recession and it all comes back to the business model, finances and leadership. If a company was very profitable and then starts losing money and then losing even more of it, that company will likely begin to lay off people and it could eventually go out of business. Circuit City is an example of a tech retailer that just didn't have a good business model and that began to hurt its finances too. They eventually folded under pressure from Best Buy and other retailers. Sometimes though the business model may look good but the finances may be a mess or a total lie and poor leadership likely knows it and may even be behind it. This is what happened to Enron. As a company now just as well known for energy trading as for cooking its books. It didn't have sound finances or leadership and it imploded. Boom. So is your company headed for a recession? Are you working somewhere that could be the next Blockbuster or Enron? How would you rate the business model, the leadership, and the finances of your company? Are all three of those in good shape? Because if they aren't you should be on the lookout for more problems ahead and a potential recession coming to your company.