Economic downturns can lead to challenges, but not all businesses suffer during recessions. If you’re looking to start a solid business, it’s important to understand which businesses perform well in a recession and why.
What is a recession?
A recession is a period of temporary economic decline when trade and industrial activity are reduced. Generally, a recession leads to decreased economic output, higher unemployment and lower consumer demand. There are many factors that can lead to a recession.
Did you know…?
One of the most well-known examples of a recession 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.
The Great Depression, the recession that started in 1929 and lasted until 1939, of was called that because at the time «depression» was considered a less severe term than «panic» or «crisis». However, following the Great Depression, calling an economic downturn «depression» has become much more likely to cause panic. As a result, economists have started using the term «recession» instead.
What makes a business thrive in recession?
Business that thrive during recessions have certain characteristics that make them withstand an economic decline, and in some cases continue growing. 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 some factors that can help you weather a recession:
- Maintaining a good cash flow
- Maintaining a strong liquidity
- Adapting and updating your business model in response to changing conditions. Can you shift to providing services or products online? Can you introduce new products that meet clients’ changing needs?
- Having multiple sources of income
- Having strong client relationships that foster loyalty and trust
- Serving a niche market, as there’s less competition
Did you know…?
According to J.P Morgan, the chances of a recession happening around now is at 35 percent, while the likelihood of a recession by the end of 2025 is even higher, at 45 percent.
10 recession-proof businesses
1. Healthcare services
Medical care will always be essential, and people will continue to need healthcare services irrespective of economic conditions. During economic downturns, the need for can even increase, as stress and financial strain can worsen health problems. Essential healthcare services such as hospitals, clinics, and pharmacies, continue to see a steady flow of patients seeking treatment for chronic illnesses, acute conditions, and preventive care.
2. Repair services
Even in a recession, people still require auto repair, home repair and the repair of electronics and appliances. Businesses that offer quality repair services for reasonable prices can see increased demand during recessions, as its more cost-effective than purchasing new ones. Repair services can also generate repeat business and customer loyalty; satisfied clients will reuse your service or recommending it to others.
3. Funeral services
End-of-life services are always in demand, regardless of economic conditions. Funeral homes, cremation services, and cemeteries provide necessary services, helping families with arrangements during difficult times. During recessions, there will be more clients looking for cost-effective options, so it might be a good idea to run a business offering affordable funerals or cremations. Additionally, some funeral service providers offer pre-planning options, allowing families to plan and pay for services in advance. Having many pre-planned clients can also help keep your business afloat during a recession.
4. Grocery stores
Food and household items will still be a necessity, even in a recession. During a recession, consumers might change 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.
Did you know…?
In the USA, grocery stores and supermarkets in most states experienced a sales increase of 20- 50 percent during the COVID-19 pandemic, according to AmTrust.
5. Streaming services
Many people will cut back on discretionary spending during a recession such as dining out, traveling, and going to concerts. Instead, families and individuals turn to affordable alternatives for entertainment at home, such as streaming services.
Did you know…?
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 will always be essential, and many businesses will be looking to manage their finances, their cash flow, expenses and liabilities, more effectively during a recession. You can help them navigate the complexities of tax laws and ensure compliance, while maximizing their financial efficiency.
See also: How to turn an idea into a business
7. Auto parts retailers
During a recession, many will opt to maintain and repair their car instead of purchasing a new one. During 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.
Did you know…?
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 percent drop in individual vehicle sales during the pandemic.
8. Cleaning services
In times of economic uncertainty, maintaining a clean and sanitary environment is essential for health and well-being, and there’s a 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 sell their products at lower prices can be popular during a recession as consumers look to save money. During economic downturns, people become more budget-conscious and will be more likely to seek out cheaper alternatives. 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—can experience a notable boost in customer traffic.
10. Childcare services
There are a lot of parents who continue to work during recession, and they still need childcare services. In fact, having a dual-income household is more important during a recession and so parents are more likely to require childcare services. Daycare centers, preschools, and after-school programs provide essential services, allowing parents to fulfill their professional responsibilities without compromising the care and development of their children.
Still not sure what you want to do? Check out our article on how to find a business idea! 💡
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