Our economy has been moving in a positive direction for around ten years now, ever since it began recovering from the dramatic 2008 recession. Since the economy tends to run in cycles, there’s a not-insignificant chance that we may be headed for another downturn in the near future. What does this mean for doing deals? Is there anything we as investors and business leaders can do to prepare for an economic downturn?
As a matter of fact, a weak economy is an ideal time to do deals. A bear market creates new opportunities for deal-making that aren’t always available during periods of strong growth. A recession exposes hidden weaknesses in business that aren’t apparent during a bull market, and weaker or less prepared companies are often available to purchase at steep discounts. Now, it’s important to remember that nobody can tell you what’s in the tea leaves with any certainty, and trying to time the market can be a risky prospect. I’m not saying that a recession in the near future is a certainty, but there are many statistics and other indicators circulating that could potentially be predictive of clouds on the horizon. Readying yourself and your business now, while the weather is still nice, can help you be more prepared for new opportunities if a storm should roll in whether that is 6 months or 6 years from now.
For this episode of the Fueling Deals podcast, I talk about what key events take place when a good economy starts to turn in the other direction, and I offer strategies for preparing your business interests and investments to survive and even thrive during a recession. The key takeaway from this episode is that it is important to begin thinking about the kinds of opportunities a recession creates before it actually hits, and I hope this episode offers you some insights into how to do so.
Why a Bad Economy is Good for Deals
Here’s the thing, a strong, healthy economy full of growth can “artificially” prop up businesses and make them look healthier than they actually are. The real test of the health of a business comes when the market recedes. To use a metaphor, as the tide rolls out what’s underneath the water is exposed, and many businesses find that they aren’t on the stable foundation they thought they were. This can dramatically devalue weaker businesses, which in turn can create fantastic deal opportunities to purchase these businesses at a steep discount.
It’s said that there is a lot of money to be made in a recession. Ultimately, most of this money comes from deals, which is why some investors begin raising and saving capital during the tail end of a healthy economy so that they enter a recession fully prepared to take advantage of these new opportunities. It’s a viable strategy, although as I’ve said before it can be risky to try to time the market. Regardless, your first step should be to look to your own business and investments and ensure that they’re as healthy and stable as possible before you begin preparing for new opportunities.
Deals are Always Available, No Matter What the Economy Does
Even in a good economy, there are ample opportunities for great deals to be done, so I don’t want you to get the idea that you should wait for the market to begin turning before you look into deals. This episode of the Fueling Deals podcast is about getting you to stop and consider, to really think about the kinds of opportunities that may come open during a recession so that you can fully prepare to take advantage of them.
The fact of the matter is that the start of a recession is a very unstable time with lots of risk and lots of opportunities, and the only thing you can’t do during this turbulent period is trying to do business as usual. Build up your economic strengths so that you can weather the chaos, and then take advantage of other businesses’ weaknesses by doing deals at steep discounts. That’s the secret to making money during a recession and, while it’s easier said than done, careful preparation and planning can open up new opportunities for you to grow your wealth and the success of your business.
For more informative episodes of Fueling Deals that can help you grow your business rapidly and inorganically through deals, please visit www.fuelingdeals.com.