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The Impact of Recessions on Businesses

Technical definition of a recession is two consecutive quarters of negative growth in the gross domestic product (GDP). According to the National Bureau of Economic Research, the hallmark of a recession is a "significant decline in economic activity spread across the economy, lasting more than a few months."

Both definitions are accurate because they indicate the same economic results: a loss of jobs, a decline in real income, a slowdown in industrial production and manufacturing, and a slump in consumer spending.

Both definitions are accurate because they indicate the same economic results: a loss of jobs, a decline in real income, a slowdown in industrial production and manufacturing, and a slump in consumer spending.

Falling Stocks and Slumping Dividends

As declining revenues show up on its quarterly earnings report, the manufacturer's stock price may decline. Dividends may also slump, or disappear entirely. Company shareholders may become upset and may, along with the board of directors, call for the appointment of new company leadership. The manufacturer's advertising agency may be dumped and a new agency hired. The internal advertising and marketing departments may also face a personnel shakeup.

Recession Impacts on Small Businesses

Small, private businesses with annual sales substantially less than the Fortune 1000 perform similarly to large companies during a recession. Without significant cash reserves and large capital assets as collateral, however, and with more difficulty securing additional financing in trying economic times, smaller businesses may have a more challenging time surviving a recession.

Read More: https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp#:~:text=Recessions%20impact%20all%20kinds%20of,likely%20to%20receive%20government%20bailouts