Economic downturns can lead to challenges, but not all businesses suffer during these times. Whether you’re an entrepreneur looking to start a recession-proof business or are already running one, understanding which businesses perform well in tough economic times can be insightful.
What is recession?
Recession is a time period of temporary economic decline. Recession is when trade and industrial activity are reduced. Generally, recession brings decreased economic output, higher unemployment and lower consumer demand.
One of the most significant and well-known examples of a recession in recent history is the Great Recession, which occurred from December 2007 to June 2009. This economic downturn was triggered by a combination of factors, including the bursting of the housing bubble in the United States and the subsequent financial crisis that affected economies worldwide.
Following the Great Depression—a term historically considered less severe than «panic» or «crisis»—the notion of a «depression» for an economic downturn became especially alarming. As a result, economists started using the term «recession» instead.
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What makes a business thrive in recession?
A business that thrives during a recession typically has some certain characteristics that enable it to remain resilient and continue growing, even though the broader economy is struggling.
Successful recession-proof businesses are adept at managing cash flow, maintaining strong liquidity to meet financial obligations. Adaptability and innovation allow these companies to quickly adjust their business models in response to changing market conditions, whether by shifting to online sales or introducing new products. Multiple income sources further protect against market volatility, while strong customer relationships foster loyalty and trust, critical for retaining business in tough times.
In 2023, the Federal Reserve estimated the one-year-ahead recession probability to be about 35%.
Another way to thrive in recession is serving niche markets, because it can ensure more stability due to specialized demand and less competition.These are some of the qualities that help a business succeed during economic recessions.
10 recession-proof businesses
In tough economic times, some businesses not only survive but even grow. These recession-proof businesses offer essential products or services, provide great value, or meet ongoing consumer needs, making them strong regardless of the economy. Here are ten businesses that consistently perform well during recessions:
1. Healthcare services
Medical care will always be essential, and people will continue to seek healthcare services irrespective of economic conditions. During economic downturns, the need for healthcare often stays the same or even grows, as stress and financial strain can worsen health problems. Essential healthcare services, including hospitals, clinics, and pharmacies, continue to see a steady flow of patients seeking treatment for chronic illnesses, acute conditions, and preventive care.
In 2023, the altarum estimated the one-year-ahead recession probability to be about 35%.
2. Repair services
Instead of buying new items, people opt to repair them. In recession, people still use auto repair and home repair services. This trend extends to other types of repair as well, such as electronics and appliances. Businesses that offer quality repair services for reasonable prices can see increased demand, as fixing existing items becomes more cost-effective than purchasing new ones. Additionally, these repair services often generate repeat business and customer loyalty, as satisfied clients return for future needs and recommend the services to others.
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3. Funeral services
Sadly, end-of-life services are always in demand, regardless of economic conditions. Funeral homes, cremation services, and cemeteries consistently provide necessary services, helping families with arrangements during difficult times. During recessions, there’s often an increased focus on cost-effective options, and businesses that are delivering affordable funerals or cremations may see greater demand. Additionally, some funeral service providers offer pre-planning options, allowing families to plan and pay for services in advance, which can also stabilize business during economic downturns.
4. Grocery stores
Products like food and household items continue to be necessary. Grocery stores remain essential businesses, as people need to buy food, toiletries, and other daily necessities regardless of the economic climate. During a recession, consumers may shift their purchasing habits by opting for more affordable brands, buying in bulk, or taking advantage of sales and discounts. Grocery stores that offer a wide range of price points, including store brands and discount options, can attract customers looking to stretch their budgets.
In the USA, grocery stores and supermarkets in most states experienced a sales increase of 20% to 50% during the COVID-19 pandemic, according to amtrustfinancial.
5. Streaming services
In-home entertainment, like video streaming services, tends to see an increase as people cut back on going out. As economic pressures lead households to reduce discretionary spending, activities such as dining out, traveling, and attending events are often scaled back. Instead, families and individuals turn to affordable alternatives for entertainment at home.
About 16 million people created their accounts in the first three months of 2019, due to lockdown, according to BBC.
6. Accounting services
Tax preparation and accounting services remain essential. Many businesses are looking to manage their finances more effectively in these times. Businesses and individuals seek professional assistance to navigate the complexities of tax laws and ensure compliance, aiming to maximize their financial efficiency. In times of financial strain, accurate bookkeeping and tax planning become even more critical, as businesses look to manage their cash flow, expenses, and liabilities more effectively.
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7. Auto parts retailers
People may opt to maintain and repair their vehicles instead of purchasing new ones. During economic downturns, the financial commitment of buying a new car can seem daunting, leading many to invest in the upkeep of their existing vehicles. Auto repair shops, maintenance services, and parts suppliers often see a surge in demand as owners seek cost-effective ways to extend the life of their cars.
During the COVID-19 pandemic, auto parts retailers experienced a significant boost in sales as more people opted to repair and maintain their existing vehicles rather than purchasing new ones. According to a report by RevolutionParts the auto care industry saw a 34% drop in individual vehicle sales during the pandemic.
8. Cleaning services
Cleanliness remains a priority whether it’s residential or commercial, which means a steady demand for these services. In times of economic uncertainty, maintaining a clean and sanitary environment is essential for health and well-being, driving consistent demand for professional cleaning services. Residential cleaning services help homeowners keep their living spaces tidy and germ-free, catering to busy families and individuals who prefer to outsource this task.
9. Discount retailers
Companies that are selling their products at lower prices often see increased demand as consumers look to save money. During economic downturns, people become more budget-conscious and actively seek out ways to reduce their expenses without sacrificing essential goods. Discount retailers, dollar stores, and outlets that offer affordable pricing on a wide range of products—from groceries and household items to clothing and electronics—experience a notable boost in customer traffic.
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10. Childcare services
There are a lot of parents who continue to work during recession, and still need childcare services. As economic pressures increase, dual-income households become even more crucial, and parents who remain employed require reliable childcare options to maintain their work schedules. Daycare centers, preschools, and after-school programs provide essential services, allowing parents to fulfill their professional responsibilities without compromising on the care and development of their children.
Free invoicing software for all industries
Running a business can be complex and time-consuming, but invoicing shouldn’t be. At Conta, we offer free invoicing software that fits seamlessly into any industry, helping you streamline your billing process and improve your cash flow.
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Conta’s free invoicing software is the perfect solution for businesses that thrive during recessions as well as those facing tougher times, offering streamlined, efficient invoicing for all types of enterprises. Sign up for free today, no downloading software is necessary!
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