Up and to the right is great – until it isn’t.

31 years of out of home lending and investing have taught Insider this: You never lose money in a recession.  You lose money by the dumb things you do just before the recession.

The US economy has been up and to the right for 8.2 years.  There have been 11 economic expansions since 1945.  The average time between recessions was 6 years.  Since WWII the longest time between recessions was 10 years.  Insider expects a recession in the next couple years.

US Real Gross Domestic Product. Source: St Louis Fed

Lots of 20-somethings have never been in the workforce during a recession.  Those of us who’ve survived two or three recessions get lulled into complacency during the good times.  A smart manager is aware of what out of home revenues did during the last recession:

Next time you consider a major out of home acquisition or take out a large loan ask yourself the following:

  • How will I recognize a change in the economy?
  • Will my company survive if revenue declines 19% the year after my acquisition closes or the day after I borrow more money?
  • What steps would I need to take to stay profitable if revenues start to drop?

A bet-the-farm acquisition at an above market multiple won’t survive the next recession.  A startup company using 80% debt financing to construct a bunch of spec digital signs won’t survive the next recession.

Guess when the Clear Channel buyout closed and Clear Channel Outdoor and iHeart loaded up on debt? July 2008, just in time for the recession.  A word to the wise.


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