Starting a Recession-Proof Business
The economy will inevitably have its ups and downs over time — which means entrepreneurs need to consider how these ebbs and flows in prosperity can affect their business venture.
It’s heartbreaking to pour so much time, effort, and money into a company only to see it flounder due to larger financial forces outside your control. This is why it pays to consider how to “recession proof” your business idea from the start, hopefully allowing your organization to thrive in any conditions.
Keep reading to learn more about the qualities of a recession-proof business, as well as some pertinent examples of what this may look like.
What Makes a Business Recession Proof?
What do all businesses capable of resisting a recession have in common? They tend to offer essential services.
Consider for a moment what types of non-essential expenses people tend to pare down during a period of economic stress — like entertainment subscriptions, gym memberships, vacations, etc. While these goods and services are enjoyable, people are able to live without them if push ever comes to shove. Instead, think about the types of services people still need no matter what — like groceries, clothing, personal items, healthcare, etc.
Another important aspect to crafting a recession-proof company is considering your target audience. Optimally, members of your target audience will have funds to continue patronizing your business even if the economy experiences a downturn. Thinking about who is buying your products and services in terms of demographics and behavior is the first step to optimizing your offerings to appeal to customers with a stable financial cushion.
Investopedia identifies five key characteristics of organizations able to resist recessions:
- Provides critical services (ex: trash collection)
- Sells must-have products (ex: toiletry products)
- Attracts customers shielded from declines (ex: utilities)
- Provides legally required services (ex: security)
- Provides one-of-a-kind services (ex: pharmaceutical companies)
Examples of Recession-Proof Businesses
Interested in exploring some examples of potentially recession-proof businesses? While there are, of course, no guarantees in the world of businesses, there are certainly some industries and business models that tend to perform better through economic bumps in the road.
Here are some ideas for recession-proof businesses from Verizon:
- Healthcare at home: Connecting individuals who need help at home with tasks like food preparation, transportation, companionship, housekeeping, etc. with workers who can fulfill these needs. Note: Providing actual medical care requires much more licensure, so this idea focuses on essential “life tasks” so many people outsource
- Professional services: Offering a service digitally gives you flexibility and allows you to connect with clients around the globe even in tough times, like during a pandemic. Some industries include: Accounting, law, marketing, and administrative assistants.
- Physical labor on demand: Services like housecleaning, lawncare, home repairs, and more tend to remain in-demand as many customers do not have the time or expertise to tackle them on their own.
- Essential ecommerce store: People want and need goods on demand, especially in times of turmoil like the pandemic. If your online store offers essential items, like hardware supplies, people can patronize you 24/7 for necessities.
Another aspect of recession proofing any business is trying to keep your overhead costs low and your business model flexible. This is precisely why freelancing remains a popular choice for earning income on your own terms.
Starting a recession-proof business is challenging, but certain types are more likely to succeed because they remain needed throughout any and all conditions. At the end of the day, when customers have the cash and can’t live without your service, you’re much more likely to thrive regardless of recession conditions.