Recession-Proof Businesses: Profitable Industries and Traits
A recession is a sustained economic downturn, usually caused by factors out of our control, such as war, a pandemic, fuel shortages and more. While you can’t predict when the next recession will occur, you can take steps to prepare your business before the next one hits.
Recession-proof businesses can survive an economic slump by selling products or services that meet their customer’s essential needs. Here are the top recession-proof industries, along with common traits needed to survive uncertain times.
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14 recession-proof business ideas
Industries that fulfill people’s essential needs are more likely to generate steady revenue during times of economic instability. Although launching a new business during a recession comes with certain obstacles, it could be worth it if you’re able to secure an income stream for months (or years) to come.
Here are 14 businesses that can thrive in recession:
People will always need food, even during financial hardship. While people might cut back on restaurant dining and takeout when budgets are tight, they’ll still need core staples at their grocery stores — such as bread, cereal, milk and toilet paper.
Furthermore, past recessions have shown that people indulge in more sweets during challenging times. Did you know that the Three Musketeers and Snickers bars were invented during the Great Depression of the 1930s? Also, Cadbury reported record earnings in 2008 during the Great Recession of 2007 to 2009. When people can’t afford their usual luxuries, they tend to turn to affordable sweets.
Businesses that offer financial services tend to perform well during a recession. For example, the accounting industry continued to grow during the COVID-19 pandemic, with an estimated $544.06 billion in revenue for 2020 and $573.29 billion in 2021.
Businesses of all sizes typically need accountants, bookkeeping services, insurance companies, financial planners and more. Building a business model based on these needs could be the ticket to surviving a future recession.
People and businesses will likely need courier services despite what’s happening to the economy. As e-commerce sales increase, the demand for delivery should too (since how else will people receive their products?).
The most recent Annual Retail Trade Survey (ARTS) showed a $244.2 billion increase in e-commerce sales in 2020. Establishing a courier or delivery service can help tap into the booming e-commerce market.
Companies may decide to downsize during a recession in order to keep their businesses afloat. However, doing so means they might fall behind on productivity. This allows you, the freelancer, an opportunity to come to the rescue. You only need a working laptop and a marketable skill to launch your freelance business. Although you might have to hustle to find enough gigs to pay the bills, you should find stability once you lock down a few steady clients. Plus, you’re bound to expand your expertise along the way, thus opening the door for more opportunities.
Here are some examples of high-paying freelance jobs:
- Web designer
- Virtual assistant
- Social media manager
- Business consultant
You can get started with popular freelance platforms like Upwork, Fiverr and Freelancer.com.
Secondhand buying continues to increase in popularity, especially as people try to limit their overall spending. If you have an eye for turning junk into treasure, this could be your gig. You have plenty of platforms to consider for online selling — such as eBay, thredUP and Poshmark.
It’s estimated that the online resell industry will reach $136.3 billion by 2026. A looming recession shouldn’t impact this trend since secondhand purchases tend to cost less than brand-new items, making it the perfect solution for low-budget living.
5 traits of recession-proof businesses
Although we can’t foresee when the next recession might hit, we can strengthen our business models to help avoid businesses closing during the next economic downturn.
Whether or not a business survives a recession depends on its product offering, leadership and management, location and broader industry trends.
To help prepare yourself for any economical stress to come, try adapting the following recession-proof business traits:
1. Essential or need-based offerings
Businesses that provide an essential product or service rather than luxury items might fare better during a recession. Think of critical services people and other businesses need, then shift your business (or start a new business) to meet those demands.
That said, small comfort items like candy can become a core essential during a recession.
2. No alternatives to what’s provided
Not only should your products and services be essential to your customers, they should also be relatively irreplaceable. What sells during a recession are goods and services with no practical alternatives or something customers aren’t able (or willing) to do on their own.
For example, people might attempt to make bread during a recession, but it’s unlikely they’ll try to whip up baby formula or cobble together handmade shoes.
3. Ability to adapt to changing circumstances
Companies with established financial safeguards and the ability to make quick decisions tend to react more efficiently to new information — good or bad. Preparing for as many situations as possible can help your business build resilience.
For example, in-person dance studios that quickly switched to online classes during the COVID-19 pandemic maintained a steady revenue stream. Unfortunately, many in-person-only studios ended up closing down.
4. Effective cash flow management
One mistake entrepreneurs can’t afford to make is running out of the needed cash for operating expenses. Before a recession sets in, business owners must figure out how long they can stay afloat if revenue drops but expenses remain the same. From there, start planning to reduce expenses before losing revenue.
The goal is to make strategic cuts while improving the value of the business and protecting jobs. Try to make these changes before you need to, rather than taking a wait-and-see approach.
5. Innovative planning strategies focused on long-term goals
Recession-proof businesses often make plans to handle a recession. It’s important to keep long-term goals in mind as you make modifications to the business. As your team acts urgently to counteract the immediate effects of a recession in business, you may want to implement change on a larger scale to ensure future success for your company.
How to stay profitable during a recession
Thinking creatively about your business can help you survive a recession and turn a profit. Brainstorm with your employees, shareholders and key customers to generate an improvement strategy to find opportunities during a recession.
Here are a few tips to help make a profit during an economic downturn:
Reconnect with core customers
Reconnecting with those who make up the foundation of your customer base can help you pull through a financial disaster. Make sure your marketing strategy is location-specific. A recession may impact geographic areas differently. Keep this in mind if your customer reach spans several regions.
Plan for the worst, but stay positive
Confront the reality of the situation and calculate how long the business can continue operating without running out of money. As discussed earlier, reduce expenses as early as possible. However, balance your approach with optimism — sharing a positive yet rational outlook with your team will go far.
Take any measures you can to conserve capital and save money. This could include refinancing your business debt, simplifying or altering your business model, or making a complete pivot if necessary. Diversifying your sources of revenue can provide extra insurance for your business, as long as you efficiently manage your operations.
Establish financing ahead of time
It’s wise to establish finance options for your business while you’re in good shape and learn how to get a business loan before you need funding. Opening a flexible business line of credit can give you access to cash on an as-needed basis if your business struggles in the future. Try to lock in one with a reasonable interest rate and only use what you need.
Additionally, you’ll want to save three to six months’ worth of daily business expenses, just as you would with your personal emergency funds.