There's a lot of talk about a new recession coming. And it's further amplified by the economic uncertainty being caused by the coronavirus. As a result, you’re probably a bit worried. Maybe you’ve even been laid off from your job or you work in the gig economy and don’t have a steady income.
Unemployment soared to over 10% during the last recession in 2008 and 2009. So whatever concerns you have right now are legitimate ones.
If you’re worried about job security or want to start a business, then consider looking at recession-proof businesses. Historically these businesses have thrived or at least been unharmed during an economic downturn.
But first, let's discuss what a recession means.
What does a recession mean?
A recession happens when there is a temporary widespread drop in spending, as consumers become concerned about the economy or have lost their jobs and means of income.
It is officially defined by economists as a fall in the gross domestic product (GDP) for two consecutive quarters. GDP is how overall economic activity is measured for a country. When a recession is officially declared, it’s usually already been going on for a few months.
The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.” This means recessions can impact a wide variety of industries across the board.
What is a recession-proof business?
A recession-proof business is usually in an industry not being impacted by a decline in the economy. This industry is usually one that everyone needs, even when finances are tight.
Businesses in industries that provide staples are the type of businesses that tend to do best when the economy heads south. For example, businesses in homes and vehicle repairs, public services like plumbing and electricity, grocery, etc, all tend to do well.
If you’re looking for recession-proof businesses to switch into, then keep reading to find out which ones have the best chance of riding out an economic storm.
10 businesses that are recession-proof
1. Baby products
Having a business that caters to child needs tends to be somewhat recession-proof. After all, if you have a baby when the recession hits, that’s not going to prevent you from needing diapers and bottles. Many parents will cut down on their own expenses before they cut back on buying things for their children. While they aren’t totally recession-proof, children's products tend to be recession-resistant.
Parents might not be able to spend hundreds of dollars on toys at Christmas during a tough year, but they will still buy presents. Babies grow fast and constantly need new clothes. And kids will always want a new pair of shoes to wear to school come September.
If you are looking at starting a business that can withstand a recession, then consider something that caters to kids and especially babies.
2. Food and beverage
Even during a recession, people need to eat. While people may cut back on splurges like eating out at restaurants, they will still splurge on some small things.
Sales at grocery stores, candy sales, and alcohol sales all tend to increase during a recession. In fact, the New York Times found that sales of chocolate company Cadbury skyrocketed by 30% in 2008. And Snickers and Mars Bars were invented during the Great Depression. This goes to show you how much we crave sugar when we are stressed out.
Grocery stores are a good sector to be in, as people tend to eat in more. That means they will spend more time on home-cooked meals. And of course, toothpaste, laundry soap, and other staples will always be needed, no matter the economic situation.
3. Retail consignment
When things get tough, one of the first things people cut down on is new clothes. But that doesn’t mean people want to give up their love of shopping.
According to CNN, secondhand stores saw a 35% increase in sales during the last recession even as other retailers’ sales dropped. In fact, the thrift store craze stayed after the recession was long gone and it’s just as popular to buy used clothes as it is to buy new.
Retail franchises and other second-hand shops are a good field to be in if you want to stay in business during a recession.
4. Courier and delivery services
Mail still needs to be delivered, be it rain, shine or a recession. Courier and delivery services tend to be less vulnerable than other sectors to a recession. Even though sales might decline, there is a need to send packages. And with more and more people turning to buying and selling secondhand online, the need for delivery is only likely to rise.
Some businesses might even outsource their courier services needs.
5. Childcare / daycare
Remember what I said earlier about baby items being recession-resistant? This is also true for childcare. While it can be difficult for parents to pay for things like daycare when budgets get tight, it’s one of the last expenses they cut out.
This is especially true when both parents are working or in single-family homes. Even if a parent loses a job or has to cut back on hours, they will opt to keep their kids in childcare. There are a lot of benefits for younger children to be in a safe and secure environment, especially when there is a lot of change going on that they might not understand.
6. Health and senior services
Healthcare and other services for seniors are expected to grow by 24% by 2024, according to the Bureau of Labor Statistics. This is an area of services that has already been expanding rapidly over the last decade.
Demand is likely to continue as more and more people in the Boomer generation reach retirement. Seniors will still need help with basic needs as they get older and that’s unlikely to change when a recession hits.
Even if seniors aren’t living in a care home, they may need to hire a caregiver to help around the house or run errands for them. Working with seniors is essentially a recession-proof business.
7. Technology and IT
If anything, quarantines and social distancing has shown that there will be even more demand for technology in the coming years. Telecommuting and working from home are only likely to get more popular, especially with so many businesses realizing it’s possible and saves on overhead costs like rent.
The popularity of working from home is also likely to increase demand for businesses that cater to IT, as companies everywhere need to spruce up their telecommunications. Even doctors are turning to technology as they urge patients to call in instead of going to the hospital.
Technology support for at-home services and companies will most likely be the sector to benefit the most from a recession.
8. Repair services
Even in the best of times, things break down. Repairs will always be needed. During a recession, people may even turn to repairing things instead of buying new things, or at least holding off as much as possible.
Companies that focus on repair services for necessary items like auto mechanics, roofers, and plumbers, are likely to see just as much work during a recession as when times are good. Automotive services that offer a wide variety of services do especially well during a recession compared to companies that are more specialized.
9. Cleaning services
No, I don’t mean home cleaning services are going to rise during a recession. It’s other areas that are legally required to have cleaning services that tend to be recession-proof.
Any workplace has to have a cleaner- a bank, office spaces, classrooms, hotels, lobbies. Usually, these services are outsourced to a cleaning company. Even if a company has to cut back on its employees, it will still need a cleaner. Corporate cleaning companies will usually provide a steady source of income, even when the economy crashes.
10. Accounting services
Accounting services are another sector that will be in demand even when times get tough. In fact, they might be in even more demand during a recession as businesses use their services to find ways to cut down on costs.
Even during a recession, businesses will still need to pay their bills and keep track of payments and revenue. They aren’t likely to get rid of the person who knows the numbers. If you’re good with math, then turning to accounting or opening up a similar company might be a good recession-proof move.
Despite the gloomy reports from the news, there are many opportunities during times of economic recession. And while things might be tougher, it's definitely possible to move into a recession-proof career or build a successful recession-proof business during trying times.
Not quite ready to start your business yet? Check out these top recession-proof jobs!