High Profitability is the Best Defense against the Effects of Recession

The most important strategy for surviving a recession is to firmly establish a highly profitable business structure during normal economic conditions. Having high profitability means that you have the resilience to remain profitable even if sales drop due to a recession. I always tell management that they are not truly managing if they cannot post profitability of at least 10 percent. Creating a sound financial structure and maintaining high profitability is the best safeguard against a recession.

Highly profitable companies are also able to accumulate greater cash reserves and weather a long recession with lower profit levels. They can also afford to take advantage of prices that are radically discounted during a recession and invest in equipment by using their extra funds.

Successful business management means doing your utmost to raise profits at all times, not just trying harder to survive during a recession.