Top 14 recession-proof businesses to weather the economic storm
In the post-pandemic world, the uncertainty of economic downturns and elevated cost of living pressures can be daunting. This might lead to financial struggles and tough financial decisions. However, this backdrop can also present opportunities for those involved in recession-proof businesses and parts of the economy.
While many businesses experience hardships during recessions, select industries and professions not only weather the storm but thrive and grow. Suppose you're considering launching a side hustle or a new career path. In that case, this article will help you set your sights on recession-proof businesses that can provide stability and potential for increased income, even in challenging times. First, we will explore what makes a business recession-proof. Then, we will look at several industries that thrive in a downturn.
The Power of Recession-Proof Industries
Not all businesses face the same level of adversity when the economy contracts. Some sectors will indeed see a decrease in demand and layoffs, while others will find themselves positioned to provide essential goods and services that maintain or even increase demand during such times.
These industries can offer financial security to employees and business owners (shareholders) alike, even during economic uncertainty. This might lead some to call them recession-proof.
What Makes a Recession-Proof Business? Unchanging Necessities
One of the critical aspects of a recession-proof business is it deals with necessities or non-negotiables in people’s lives.
In times of financial stress, individuals often reassess their priorities and spending habits. This presents an opportunity for businesses that offer affordable alternatives or essential goods and services.
Even in the worst economic situations we still need food, water, shelter, clothing, and so on. From there, our modern lifestyle places other demands on us – businesses which meet these basic needs are most likely to be the ones to survive, and thrive, when the economy takes a turn for the worst.
So, when deciding to pursue any line of work when a recession looms, ask yourself if the business you want to get into is necessary for people, or if your income is at risk when customers close their wallets when the going gets tough.
The Craft of Repair: A Recession-Proof Strategy
When there’s less money to spare in consumers’ pockets, consumers are more inclined to repair what they already own rather than purchase new items. Why purchase a replacement item if you can economically repair what you already have?
This aligns with tightened budgets and adds a further benefit of sustainability.
Top 14 Recession-Proof Businesses
Healthcare is a great industry which is resilient in the face of economic turmoil. People's health needs persist regardless of economic conditions, ensuring that healthcare providers continue to serve their patients with sustained demand. This stability shields the healthcare sector from the drastic cutbacks many other industries experience during recessions.
2. Public Relations (PR) Firms
In a world driven by information, PR firms hold a resilient position. Their expertise in managing and enhancing brands and government agencies becomes crucial during challenging times.
In New Zealand the number of taxpayer-funded (i.e., government) communications staff has increased by nearly 50 percent in just three years. That’s because behind every government department, there’s a team of communications staff crafting the information the public hears about.
3. Accounting and Tax Services
Taxes and financial management are constant responsibilities. During a recession, the services of accountants become indispensable as individuals and businesses strive to navigate complex financial regulations, find ways to save on expenses, and make important financial decisions.
4. Recruiting and Staffing Agencies
As businesses adjust their workforce to align with economic conditions, recruiters and staffing agencies are pivotal in facilitating employment opportunities and filling crucial roles.
Under economic pressure, businesses sometimes seek to fill any vacancies with casual, contractor, and temporary staff – which means less risk to the business if economic conditions worsen. This creates further demand for recruiters and short-term labour hire agencies.
5. Marketing Consulting Services
Smart businesses who can afford to, aim to maintain their market presence, if not expand it, during recessions. Marketing consultants provide strategies to navigate the changing landscape.
Services in the areas of electricity, waste, water, sewage, rubbish, and recycling all survive economic downturns.
After all, these areas are all critical to maintaining a basic functioning society. Interestingly, some consultancies and subcontractors that serve those utilities seem to share that benefit, as well. For example, many councils outsource work to external consultants and subcontractors.
In case you’re unaware, cobblers repair shoes. During economic turmoil, cobblers experience increased demand as people opt to fix their footwear instead of purchasing new pairs.
Repair professionals see increased demand as people opt to repair existing appliances rather than purchase new ones, aligning with tightened budgets.
9. Rental Agents and Property Management Companies
The need for housing remains regardless of economic conditions. Rental agents and property management firms provide a great service to property investors without the time or inclination to manage their own investment, and thus provide essential services to those seeking shelter.
10. Automotive Repair
During a recession, sales of new vehicles can drop significantly. Why? – because when money is tight, most people will opt to keep their cars for longer, which means increased spending on maintenance and repair.
Car maintenance costs can add up, but maintaining an older car is usually a lot cheaper than buying a new one, so it still makes plenty of sense. This creates demand for automotive repair shops.
In a usual downturn, there are several reasons for this:
Many of us might stop buying steak and instead turn to the sausages, but at the end of the day we all still need to eat. This demand for food means there is always at least a baseline demand for supermarket products, even during hard financial times.
Consumers can be more inclined to spend more at supermarkets instead of spending at convenience stores such as dairies. Dairies are usually more convenient but charge higher prices than supermarkets. So, if it takes a consumer a little longer to get to a supermarket, it might be worth it to save on the overall shopping spend!
Dining out during a recession might start feeling like an extravagance, especially with the current cost of living pressures. Therefore, supermarkets see an increase in sales as people choose to cook more meals at home and even entertain their friends at home more often.
During the pandemic and economic upheaval over recent years, New Zealand supermarket chains have probably expanded. This is partly due to:
Lockdown restrictions, especially in Auckland, which meant many small food providers such as butchers, greengrocers, and bakers had to remain closed. In the meantime, nearby supermarkets were packed with shoppers. Because some of these small businesses never reopened the supermarkets were able to expand their market share. In other words, the big supermarkets expanded while small and mid-sized businesses including bakers and greengrocers were shuttered.
Even in a recession, supermarket and shop shelves still need goods, tradies still need to get to-and-from jobs, farmers are still farming, and commuters are still commuting – even if they may be more inclined to try out public transport instead of self-drive. This means there will continue to be demand for petrol and diesel.
Data shows petrol consumption in New Zealand has been remarkably consistent for 10 years’ now. This is despite the uptick in electric vehicles (EVs) and pandemic-induced lockdowns which reduced demand.
13. Home Maintenance Stores
Companies in the business of providing tools and materials for home improvement, maintenance, and repair projects are likely to see stable or even increasing demand during a recession.
Many people will choose a do-it-yourself (DIY) home renovation or upgrade rather than consider selling and moving during a recession. Cost-effective renovations can also be tempting for people who may spend more time at home to save money that might have otherwise been spent on travel, dining out, or hobbies.
14. Bargain and Outlet Stores
People cut back on luxuries during a recession, but that doesn't mean they never buy anything that isn't strictly necessary. A great variety of other cheap items can be purchased at bargain and outlet stores. People who otherwise never step into a two-dollar shop might rethink their shopping habits when a recession hits!
Seizing Opportunities in Recession-Proof Ventures
For individuals considering the world of entrepreneurship or seeking to change their career paths, the concept of recession-proof businesses holds immense appeal. Launching a side hustle or establishing a new venture in an industry that thrives during economic downturns might be a terrific idea. For examples of recession-proof businesses, look no further than household names like General Electric, IBM, Disney, Hyatt, FedEx, and Microsoft, all of which arose during adverse market conditions. Others like Salesforce, Google, and Facebook launched immediately before an economic winter, and these companies survived recessions to become some of society’s most prominent business names.
While no one can predict the exact trajectory of the economy or which new technology might emerge to upend an entire industry, the historical resilience of certain sectors offers a strategic advantage.
The Bottom Line: Work in a Recession-Proof Industry
While recessions can trigger apprehension, they also prompt innovation and adaptation. By choosing a recession-proof path, individuals can not only sustain their income but also position themselves for growth. Whether it's the enduring demand for essential services, the practicality of repair, or the stability of certain sectors, the lessons from recession-proof businesses offer a roadmap for financial stability in times of uncertainty.
So, as you contemplate your next career move or entrepreneurial endeavour, consider the lessons from these recession-proof industries. In doing so, you may find yourself not merely weathering the storm, but thriving instead!
You may also like:
What is a debt-to-income ratio?
And will debt-to-income ratio caps be introduced in NZ?