What businesses do well during a recession?
If you have a business then you need recession-proof business planning. Businesses that succeed are those that can adapt to a recession’s downturns. For example, in the current recession that we find ourselves in with COVID-19, many businesses are failing to meet customer demands because of the restrictions that have been placed upon them by the government.
However, some businesses are deemed “essential.” Which businesses are essential? It is any business that is necessary to keep the economy on its feet and allow the nation to be able to meet its basic needs. Businesses need to ask themselves whether their product or service is based on luxury or every-day needs. Luxury products or services will only be fruitful during times of economic upturn. Businesses that capture that every-day necessity will be able to stay afloat in many economic conditions, even when the rest of the world is caving in.
How can a business be recession proof?
Think of what you or your family do during a recession. You still eat food, you still talk to friends and family via technology, you need to sleep, you need basic utilities, etc. The world does not shut down during recessions, it only slows and collapses the weaker companies, while the truly prepared companies flourish and compete in the smaller yet existing market.
Those essential businesses who cater to their customers’ needs will find the necessary revenue to succeed. Some companies offer curbside or drive thru pick up, such as fast food restaurants, which allows them to keep serving their customers. Their business strategy almost seems to excel in this recession because not only are they serving their current customers but also all the other customers that are not able to eat at their usual dine-in restaurants anymore.
Every time I pass by a Chick-Fil-A restaurant during lunch time, the drive thru line is at least 10 cars long. And the crazy thing is that their product is so good that people are willing to wait 30 min to an hour just to eat there. Chick-Fil-A isn’t open “24/7” and they usually aren’t the first thing that pops into your head when you think “essential”, but they’ve nailed down a business strategy that allows them to continue to survive and excel during a recession.
What industries suffer most during a recession?
Small businesses’ biggest concerns lie in the fact that they rely so heavily on social interaction and foot traffic for business. Those who haven’t appropriately prepared for this by creating a solid social media platform in which to market their business to the world are bleeding clients and revenue.
What if I were to say that a business earned one million dollars in a year. You might think: “Wow! That company must be really successful!” But what if I then said: “They also had one million dollars’ worth of expenses.” Obviously, this business is not very successful at all. It seems basic, but many businesses start without a budget or a financial goal.
Can you start a business in a recession?
Most people would shy away from starting a business during a recession, but I can’t think of a better time to recognize a need in the marketplace. Areas of the market that suffer the most are those that do not satisfy the needs of the common consumer. If you can identify a need that isn’t meeting demand, find an alternate solution to the mainstream company and offer new opportunities, then you’re all set for success. Also, when starting a new business you should take a look at the tax side of things to be able to take the most advantage for yourself and your business: https://molentax.com/5-tax-tips-for-small-business-owners/.
How do you stay afloat during a recession?
A social media platform is an absolute must in the world we live in, where technology is how most of world now communicates. Businesses must get their foot in the door with technology. Those who haven’t yet will have been missing out on way more opportunities and money since before COVID-19 came. The world is quickly changing, and those who don’t keep up will most certainly be left behind. An online presence will create more traffic in your business, which will in turn grow your customer base exponentially and increase your revenue.
Any good business will know that in order to make money you have to have a good hold on your finances. This is imperative to run an efficient business and to ensure your company is ready in case of an economic downturn. A solid financial system in place will help business owners know in advance when things are going downhill. This blog will give you additional insight on how to efficiently run your business: https://molentax.com/3-ways-to-run-your-business-more-efficiently-to-save-time-and-money/
What about debt and savings?
On the topic of finances, another very important business strategy is paying down debt and focusing on savings. If you are worried about job security, then the best way to relieve that burden is to pay off any outstanding debt. First you should pay off credit card debt, then other types of loans, like auto loans or mortgages. Removing debt from the equation gives room for you to save and invest in a fund used for emergencies. From the very beginning a successful business must live within its means when the economy is both up and down. This will permit you to both pay off debt and save for the future.
When investing in stocks, people will often try to use the past as a guide to predict the future. This is a recipe for disaster! The same goes for investing in your business. Nobody knows what the future holds. Instead, one of the best investments you can make is in networking, looking at trends, and keeping up on the latest education in your field. Maintaining connections with your fellow businessmen and businesswomen will be one of your greatest intangible assets.
What businesses thrive in a bad economy?
There will be those out there that claim they have found a list of “recession-proof” jobs that you can bet on to never lose. Like anything though, if it isn’t properly built to last the storm then the business is just as likely to fall as the neighborhood kids’ lemonade stand. It matters less on what the job is, as it does on the business strategies that are used.
However, with the right business strategies and successful implementation, these businesses will do particularly well during a recession:
- Landscaping Services
- Repair Industries
- Cleaning Services
- Food and Beverage Companies
- Information Technology
- Health Service Industries
The economy is constantly changing and if you want to be successful, then you need to formulate a business strategy with the proper platforms that allow your business to continue running and grow, even when extreme circumstances present themselves.
Hunter Lewis
Tax Advisor
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