When you think of business, you think of spreadsheets, charts, calculations, projections, and other things that are based on facts and numbers. However, there is another piece to the puzzle that is largely based on chance. That piece is a little something called the US economy, and its current state can either make your break your business’ success.
Recessions happen for any number of reasons and often create sudden and significant financial hits for all kinds of businesses. In fact, young entrepreneurs who are just coming of age have experienced one recession or another for most of their lives. While the effects of a recession are far-reaching, certain businesses have thicker skin when the economy starts to tank.
While we can’t guarantee the success of any business, we can direct you in the right direction towards businesses that are likely to hold their own during a recession. Don’t wait for external factors to change in order to start your entrepreneurial journey. Instead, develop a smart and strategic business venture that meets the moment.
In this article, we are going to explore eight businesses that we consider recession-proof.
What Causes a Recession?
According to the National Bureau of Economic Research, a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in the real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales.” So essentially, people lose their jobs, companies make fewer sales, and in general, the economy and the country’s economic output struggles.
While the exact moment a recession will strike is largely unpredictable (although professionals do often recognize warning signs and can tell when a recession is on the precipice), there are a number of factors that all work in conjunction to create the economic hit. These causes are both financial and psychological.
For instance, in the case of the 2008 recession, risky and overinflated loans created a “bubble,” which is an extremely rapid increase of asset value. While the economy seems to be booming, more and more people decide to make riskier decisions, such as buying larger houses that they can’t realistically afford. Eventually, the bubble bursts, people panic and liquidate their assets, causing the economy to tank.
While our current recession is largely due to the disruption of the supply chain due to the lockdown orders in place because of covid-19, experts have been observing warning signs for the past couple of years. Similar to 2008, the economy was seeing overinvestment, exceedingly low-interest rates, and fragile business models. When the pandemic hit, the bubble was already in a prime position to burst.
Even if you were unfamiliar with the causes of both of these recessions, chances are you felt their effects. However, we aren’t here to talk doom and gloom. Let’s move on to discussing the sorts of business ventures that hold their own against economic recessions.
What It Means For a Business To Be Recession Proof
As you can probably guess, a business being “recession-proof” means that it is less likely to suffer a negative financial impact when a recession strikes. The key to this is providing a service that people need, even when funds are running low. For instance, no matter how many percentage points the S&P dropped in a day, people need plumbers to fix their leaky pipes.
Furthermore, recessions often bring lifestyle adjustments, particularly the one we are experiencing now due to Covid-19. Businesses that cater to these adjustments (products that cater to working remotely) can flourish under these otherwise harsh economic conditions.
8 Recession Proof Businesses
In any economy, starting a business requires funding, which can be difficult to come by, particularly in times of financial hardship. That’s why Seek Capital works to make it easy for small business owners to find the funding they need to get the ball rolling, providing critical services and same-day approval on loans.
Now, let’s look at some concrete examples of businesses that are likely to survive under an economic recession.
Home Repair Service
As mentioned above, pipes leak, things break, and despite the vast pool of Youtube home repair tutorials, most of the time, it’s easier or even necessary to hire a pro to take care of it. Those who are handy, especially those certified in plumbing, electric work, or HVAC repairs, will continue to stay busy throughout a recession. Additionally, receiving these certifications is significantly (and we mean significantly) more affordable than most higher education degrees while creating business opportunities that are oftentimes just as lucrative.
Car Repair Service
Similar to home repair services, car repair services are always high in demand. In fact, 69 million vehicle breakdowns occur in the US every year. Furthermore, when money is tight, people are more likely to buy used or older vehicles with heavier mileage. These older cars require more tuneups and repairs, meaning more trips to the mechanic.
While opening a brick and mortar permanent location can come with lots of expenses, providing paid mechanical assistance to friends, family or even making repairs from your own garage can help create income without needing large amounts of overhead.
Bookkeeping/Financial Planning Service
In a world filled with uncertainty, there’s one thing that all Americans count on. Each spring, you’ll have to pay your taxes. However, many people seek outside help when completing their taxes, which creates opportunities for tax specialists and financial planners.
Between stimulus payments, unemployment, PPP loans, and other forms of economic aid offered in response to the pandemic, completing taxes is more complicated than ever.
Additionally, being able to give sound financial and business advice during times when money is tight is an invaluable service.
Baby/Child Products and Services
Like the inevitability of needing car maintenance, new parents will need to buy diapers, no matter what. Baby products are necessary, and often parents don’t want to skimp on their newborns. In fact, parents are more likely to cut back on buying things for themselves to provide for their kids.
As babies grow, they need new clothes, and as they become young children, they’ll need new shoes or a backpack to take to school. Even during hard economic times, parents buy gifts for their children as well for birthdays and holidays. While children’s goods aren’t as essential as things like diapers and baby formulas, they are at the very least “recession-resistant.”
Furthermore, childcare services are resilient during hard times. Even when money is tight, parents tend to continue to pay for childcare to provide a consistent and safe space for their children. Additionally, recessions often cause both parents to make ends meet, so child care is often necessary.
During the last recession, consignment shops increased sales even while other retailers saw their numbers drop. Besides the release of Macklemore’s hit song, “Thriftshop,” other forces were at play. People love to shop and even do so (whether it’s healthy or not) as a form of therapy. Consignment shops allow people to feed their retail cravings without the high price tags.
Furthermore, discount stores and dollar stores have actually seen huge success during times of economic hardship. For example, the share price of Dollar Tree grew by 200% between 2008 and 2011. It’s clear that keeping prices low will keep customers coming through your door even during times of economic recession.
Delivery Services have become particularly relevant during the Covid-19 pandemic. When leaving your home presented a risk to your and the health of your loved ones, delivery services have become more important than ever.
Even outside of individuals ordering food and goods to their homes, businesses need to send packages to their customers and other businesses, maintaining a need for couriers.
Grocery Store/Food Beverage Business
No matter what the economy looks like, people need to eat. That is why even during recessions, grocery stores and food and beverage businesses tend to survive. While customers may be likely to dine out, keeping food on the table remains a top priority. In fact, during the 2008 recession, grocery stores saw an increase of 8%.
Not only is food a basic human need, but it can also provide comfort to those experiencing times of stress. Candy consumption, for example, increased greatly during the last recession. Between 2008 and 2010, two of the most severe years of the recession, Hershey saw a 4.7% increase in sales. Similarly, during the early days of the Covid-19 pandemic, retailers reported that ice cream sales increased by over 34%.
During times of economic uncertainty, it’s important to stay flexible. Oftentimes, this means starting your own side hustle or sole proprietorship in order to pay the bills. During times of financial stress, companies tend to lay off their employees. As a freelance worker, you act as your own boss, so you don’t have to worry about being fired. Even if your goal is to search for another full-time job, gig work is a great way to stay afloat while you are applying.
Recessions are tough for us all. However, no matter how dire the situation may seem, there is always hope for financial success. While the list above provides a few examples of inherently better businesses suited to survive a recession, there is infinite potential for entrepreneurs to find their own path for navigating times of economic hardship. The most important key to success is the passion and perseverance that you bring to the table and your desire to succeed.