Business failures in PAST recessions?

[farmmilkmama]

I was talking with someone yesterday who told me "This is just a recession, it will blow over like all the rest of them have."

But this feels different. I guess when you can flip through the daily paper and read about the BIG businesses that are failing, and then drive around town and see shops closing up their doors...is that normal in "just a recession"?

I was researching last night about this subject, as in, what percent of businesses failed in past recessions, and it doesn't look like there's a lot of easily understood information out there. Can someone help me out? Point me in the right direction? In the worst of the past recessions, were so many businesses (especially bigger ones) closing their doors? Thanks in advance.

[tomato204]

I think some, perhaps most businesses that are in trouble now financially were just working with very low margins to start with.
The "just in time" mentality means if your supplier's credit gets funky, you can't get enough parts or whatever to operate next week. Stores don't keep the huge supplies they once did since they think they can get twice a week delivery, thus they don't plan ahead.

[FloridaWyld]

I think some, perhaps most businesses that are in trouble now financially were just working with very low margins to start with.

While I acknowledge that there is some truth to your statement, there is so much more to it.

If you look at the Census records, you start to see a clearer picture:

"About three quarters of all U.S. business firms have no payroll. Most are self-employed persons operating unincorporated businesses, and may or may not be the owner's principal source of income."

These small businesses aren't what I would describe as working on low margins; they're just facing lower volume. When money gets tight, people are more likely to fix that leaky pipe themselves rather than call in a plumber. They'll skip that hair appointment, maybe postpone going to the Doctor. All of this adds up- and now the plumber, hair stylist and doctor are going to find themselves cutting back.

Its a domino effect that doesn't necessarily reflect the business acumen of the company owners, especially if they are fairly new to the market place and had not yet established a solid customer base.

[Wyobuckaroo]

My 2 cents is............

Most any business now will use bankruptcy as an accounting tool to better the bottom line.

Just like deducting the light and phone bills. It is as simple as using the rules governing insolvency to lower an operating cost or tax burden like any other deduction.

There is no adverse stigma today for business bankruptcy. Nor seemingly any financial consequences.

Then again, that's my take on it
Wyo

[Vidman]

If GM had filed bankruptcy before they accepted Government money, they would have remained in control of their Business. Now The Poser who currently occupies the whitehouse controls them.

Bankruptcy before TARP was a good thing, Bankruptcy after TARP will destroy GM.

[Anon001]

Farmmilkmamma,

If you look at the current stats and the stats during the time of Jimmy Carter, it was much worse then than it is now. *Interest rates were through the roof, the national averags for unemployment were at double digit rates. *

Not only that but 50% of mortgage foreclosures (so far) have been in only 3 states. *

So, I don't think this recession is as bad as some in the past. *The thing we havet to be careful of is inflation. When the economy starts to recover, the feds will have to pull their moneys back out of the economy. *If they don't do that soon enough and aren't careful with it, we will go into hyper-inflation. *So, things could get much worse, but I think if it does it will get worse due to inflation not the current recession.

Edited for clarity:
I did not iimply that the Jimmy Carter was or was not at fault. It was not a political statement. I should have referred to the economic hard times during the 70's or something. I only used his name, knowing everyone would be familiar with pinpointing a time in history in that way.