Recessions rearrange the board. Bain analysis of company earnings worldwide finds that winners diverged from losers during the past recession and widened the gap during the subsequent expansion. The number of US companies that substantially increased profits was 47% higher during the last downturn than during stable periods. And 89% more US companies lost profitability in the last downturn vs. stable periods. Preparing before a recession gives companies more options. Specifically, winning companies excelled in four areas: early cost restructuring, plus some combination of balance sheet discipline, aggressive commercial growth plays and proactive M&A.
Tom Holland is a partner in Bain & Company’s Accelerated Transformation business. Jeff Katzin is a partner in Bain’s Performance Improvement practice. They are based, respectively, in San Francisco and New York.