Why Businesses Fail During a Recession?

I always wonder why businesses fail most especially during time of recession, a period when economic of a country decline, it's when some well known business will started fail which I still wondering what normally caused them to failed.

A recession is a period of economic decline, a tough time when businesses struggle to grow and a time when consumer spending decreases. This time of recession a country always undergo several problems of increases in market price, low customers demands and other financial crisis. However many businesses have failed due to lack of some certain things that business owners don't put in order.

I'm not a financial expertise or professional in running a business but I can walk you through with my own past experiences about business. I go into different business a way back and recession was the reasons why my first two business fail. My businesses failed because I don't put some things in order when in the time of recession.

What Makes Businesses to Fail During Recession

• Lack of Cash Flow:
  During a recession, businesses experience lot of down in sales, which affected the business cash flow. Cash flow is an important factor that determines every successful business. It show the flow in and flow out money of a business. However, when there is decreased in cash flow of a business, especially the money coming in, it will be difficult for businesses to pay their bills, purchase inventory for operations or invest in the company's future. Many businesses battle this a lot, and there is no denied that a business without sufficient cash flow, can quickly fall into financial distress and fail.

• High Debt Levels: Debt can be a big problem during a recession, and the reason why many businesses fail is that they enter a recession with high level of debts, and that keep them to continue struggle to generate enough revenue to pay off their debts even when is not the time to be. Honestly high debts levels can make a business have a difficult growth, I said that in my previous post why our business should not always depends on loan as generating revenue for business to stay afloat High Debt level can put strain on the business during recession.

• Poor Management Decisions: The most cause of failure during recession is poor management in making decisions. This can contribute to the failure of a business during a recession. Frankly it happens when businesses find itself involving in poor investment decision on high risk business or failed to adapt with change in consumerism. It can lead to financial losses for such business

• Lack of Innovation: I noticed every recession businesses that failed to adapt to market changing is likely to fail to their competitors. Innovation sell during recession, it help business to stay afloat, so any business that embrace it will be safe when competition arrive. Adapt with new trend is important for businesses to stay relevant

In conclusion; I believe there are many other reasons why businesses fail during a recession, I just mentioned few base on my own experiences. But these are the most important cause of business failure during recession, and only businesses that is proactive in manage those lacks will storm the recession and come stronger.