The top recession-proof businesses are transportation, healthcare, accounting, IT, contractor, e-commerce, education, and more. A recession is a period of significantly reduced economic activity. These recession-proof businesses continue to operate and succeed despite an economic downturn.
Investing in a business that’s resilient to economic downturns is crucial if you’re looking for financial security. A recession-proof business offers stability and growth potential, helping you succeed even if the economy falters.
The Great Recession of 2008 had a lasting impact on the global economy; it’s only natural for entrepreneurs to be wary of starting another business in such uncertain times. Investing in a recession-proof industry that provides goods and services people need regardless of the economic environment makes you more likely to maintain steady income streams during an economic recession.
Some recession-proof business ideas also have the potential for high investment returns, making them particularly attractive options when considering long-term plans. Recession-proof businesses protect you from volatile market conditions and unpredictable economic climates.
In this article, you will learn what recession is, the definition of a recession-proof business, and the top recession-proof businesses and industries to invest in.
Let’s dive in.
What is a Recession?
A recession is a significant contraction of economic activity for a couple of months or years. It results in few sales, loss of work, and low economic output in a country.
Recession is a vicious cycle of economic contraction; when people spend less, production decreases to match the reduced demand.
Due to the reduced cash flow, there’s a loss of income across the nation from company to company hurting sales, causing layoffs and a further reduction in production.
A recession happens when a country’s economy experiences the following:
- High unemployment levels
- Negative GDP (Gross Domestic Product)
- Reduction of retail sales
- Contacting measures of income for a long time
- Decline in manufacturing for a long time
Is a Recession Inevitable?
A recession is inevitable since it is part of the business cycle.
A business cycle is the natural decrease and increase of the economy over time. It has four stages:
- Expansion: The business cycle curve represents expansion as an upward movement. It represents an increase in productivity, GDP, and the stock market. The economy thrives at this stage, and businesses receive more funding since people have more to spend.
- Peak: The peak is the highest part of the business curve, where expansion is at its limit. The peak can last weeks to a year before the contraction starts.
- Contraction: The part of the curve that consistently decreases is contraction. Contraction represents a period when economic growth shrinks, leading to a recession.
- Trough: Trough is the lowest point of the curve when the rate of GDP reduction is lowering, and the economy starts transitioning to expansion.
What Causes a Recession?
There are many reasons why a recession can begin. Some of the main ones include:
- Sudden economic shock: These are sudden issues that create financial damage. For instance, the 2020 Corona outbreak led to the collapse of production and consumerism. Banks and employment were under pressure causing the stock market to crash.
- Excessive debt: The Great Recession is an excellent example of debt that leads to a recession. When people or businesses take on excessive debt, it becomes hard to repay the debt to the point where they can’t pay their bills. Increased bankruptcies and defaulted debts lead to a recession.
What is a Recession-Proof Business?
A recession-proof business means a company, asset, or entity resistant to recession effects. It is a business that is not significantly affected by the results of a recession. Total recession-proof enterprises do not exist since every downturn is different.
When you look at past recessions, some industries still fared relatively well. For example, a business dealing with basic needs and services does well in a recession. It’s no wonder that Dollar Tree and Walmart had high-returning stocks in the Great Recession of 2008. Other services, such as freight, healthcare, etc., still do well because people still need them even when money is too tight.
Recession affects businesses that provide goods and services people enjoy but can live without. Economic hardships make people cut off travel, restaurants, self-care, leisure, etc., saving their disposable income for necessities.
Best Recession-Proof Businesses
Some of the best recession-proof business ideas include healthcare, finance, drop shipping, repair, and Information Technology. They prove to be recession-proof during economic contraction.
Researchers determined that the healthcare sector remains stable in business cycles. In fact, healthcare employment rises or remains steady while countries experience economic downturns. However, some experts suggest that the healthcare sector is not as resistant proof as it was.
Logic does dictate that people need healthcare services amid economic hardships. But recession will still affect the healthcare industry even though the effects will hit later. When a recession starts, people lose jobs leading to the loss of employment-sponsored health insurance. Still, the Affordable Care Act has changed a lot of things in healthcare since the Great Depression.
These changes include:
- Expansion of Medicaid in almost 36 states: Medicaid coverage doesn’t cease when someone loses a job during the recession. But, the states can break their promises due to the financial pressure of Medicaid.
- Establishment of federal exchanges: One can go to the marketplace if one loses employer-based insurance. Also, with low income, one can qualify for premium subsidies that help them afford a plan providing a cushioning effect for individuals.
- Movement to non-hospital settings: Patients can find the best value at the lowest costs, which wasn’t possible before the great depression.
To ensure your healthcare company remains recession-proof, understand customer demand. Patients need transparent and convenient care; hence meeting community needs is critical for long-term success.
Analyze data on the high/low spending behavior of patients. This information helps you create a strategy for messaging, marketing, and patient services.
2. Accounting and finance
Financial niches like accounting are more recession-proof than others. Industries like healthcare, software development, commercial construction, etc., will still employ financial professionals during a recession.
Look at some Accounting and Finance recession-proof businesses:
During a recession, the Internal Revenue Service (IRS) continues collecting taxes. The IRS can give people an extension of six months to file their returns, but only in some cases. Business and people still file their annual tax returns. Companies also need to control their expenditure and make the right choices on where to cut spending. As such, tax and accounting services are crucial.
Individuals and small business owners need bookkeeping services to avoid tax penalties and costly fees. Financial advisers and planners also offer advice on how to save money and redo the budget.
A business’s first instinct during economic contraction is to cut costs and maintain finances. Business owners need accounting professionals to look at expenses, manage resources, and advise on handling financial struggles.
Wealthy individuals and companies are also unsafe during a recession. Without proper financial planning, their wealth could quickly diminish.
To ensure that your finance business is recession-proof, you can use the following tips:
- Widen your client network by being the go-to person for different departments when they have any finance questions.
- Improve your portfolio with Information Technology(IT) skills, licenses, and certifications.
3. Real estate and property management
Real Estate and property management can be an excellent investment during a recession. People still need the three basic needs during an economic crisis: housing, food, and healthcare. Even though a property market crisis caused the Great Recession, not all business recessions impacted home values. The Gulf War Recession (1991) and Dot Com Recession (2000) hardly affected the housing market.
Look at different ways of using Real Estate to your advantage during a recession:
- Rent a property that will do well during the recession because people need a place to live. Rental agent businesses can also do well in this area since they can find tenants and enterprises needing space.
- Look for properties opening up to property stagers. A professional property stager helps house owners make sales and boost property prices.
- Invest in farmland. People still buy food during a recession. You can purchase land and look for someone to farm and open grocery stores.
4. E-commerce and dropshipping
Dropshipping allows you to add products to your inventory without investing any capital. Rent and staff salary can be a financial struggle during a recession. Unlike retail systems, drop shipping doesn’t have stock storage, full-time staff, or rent commitments.
Suppliers, online platforms, and stock availability help retailers practice dropshipping with ease. You can connect with suppliers, see what they provide and post the products on your website. When people order a product, you communicate with suppliers to ship the products to the location. While some retailers complain that dropshipping has lower profit margins, it does have a lower risk because you don’t buy or store any inventory.
5. Information technology and software
The IT industry is recession-proof despite economic contractions. CEOs and CFOs are increasing expenditure on digital business initiatives. The forecast of global spending on IT will be $4.6 trillion in 2023. This includes communication services, software, data centers, and devices. Companies need UX and UI designers to succeed since they form an online presence that businesses need to communicate with clients.
Other IT recession-proof businesses include:
Companies must recognize information security even as the budget tightens. Sensitive data can leak to the wrong people without proper information security professionals. Hackers and cybercriminals are still on the hunt for helpful information, whether there is a recession or not.
Programmer / Developer
The US Bureau of Labor Statistics projects that Software developer jobs will increase by 25% by 2031. A recession can slow down the 25% projection but will not end it. Mastering coding languages like Python and popular frameworks make your skills valuable to start a recession-proof business.
Companies rely on data analysis and prediction before making initiatives. As such, they need someone to store and manage their data to make informed decisions even during an economic crisis. Data analysts study the data for different uses, including security intelligence analysis, target advertising, etc.
An economic downturn calls for changes, adapting, and creating new projects. A project manager efficiently manages active prioritized projects based on organizational goals. With limited finances, project managers must communicate with decision-makers to maintain attainable goals.
Glassdoor ranks DevOps Engineer as the fourth best job in America, which makes it an interesting service business idea.
DevOps engineers are responsible for ensuring the smooth running of software development and deployment. This includes automating processes, enhancing system performance, investigating and debugging issues, and managing resources. They also help to manage cloud services or virtualization technologies.
6. Digital marketing services
The most effective way to reach customers is through social media, email marketing, SEO, and other digital marketing channels.
Digital marketing allows companies to reach a much wider customer base than traditional marketing methods, with far more precision and control over who sees the message. With digital marketing, businesses can target potential customers within their local area and worldwide.
Businesses use digital marketing services to stay ahead of their competitors. For example, they can track all the business websites to create accurate buyer personas and tailor their marketing messages to these ideal buyers.
Reasons why digital marketing will survive:
- Digital marketing is a quick and cost-effective marketing method compared to TV ads and other similar channels. Companies can hire web designers, SEO experts, or copywriters per-project basis.
- Digital marketing companies get into 6-month to 1-year contracts, which businesses can hire depending on their budgets and organizational goals. The short-term commitment make digital marketing an attractive option for businesses.
- Digital marketing channels also allow companies to make money from past clients without extra funds for outbound marketing. They do this through channels like email marketing.
- Finally, digital marketing allows companies to track and evaluate their campaign efforts. Businesses can measure customer activity on all their websites and social media platforms.
With that data, they can test different marketing methods, see what works and adjust their marketing strategy to achieve the highest return on investment.
7. Courier, freight, and logistics
Courier services are recession-proof because there’s a need to send packages even during economic downturns. Courier companies also gain new customers during a recession whenever companies decide to cut transport costs. In countries like Canada, the courier service fared better during the Great 2008 depression.
Despite the economic contraction, the courier and local messengers generated $8.7 billion in revenue, compared to the 4.2% operating revenue in 2007.
Courier freight and logistics are connected to drop shipping and e-commerce. People order products while couriers, freight, and logistic companies deliver the packages. Businesses cannot outsource delivery to cheaper labor markets. As such, they still use domestic courier and freight services to deliver their products to customers.
With more businesses turning to e-commerce solutions and an increased need for imports and exports, the demand for courier services has risen significantly.
Courier companies can quickly adapt to the changing market conditions and continue to provide their services at a time when other industries may be struggling.
Transport businesses also offer low overhead costs, permitting them to remain viable during difficult financial times.
Lastly, delivery companies deliver basic needs like food and health products. People still require food and healthcare during an economic crisis. Law firms, financial institutions, pharmaceutical distributors, and the food and beverage industry use courier services frequently.
8. Academic and education
Businesses offering education and training courses have success during a recession because people are always learning. People who lose their jobs want to retrain in other areas to boost their business education. Work from Harris Dellas shows that more people enroll during recessions to accumulate knowledge. Unemployed people also want to learn new skills to earn or make money.
Different ways educators cease a recession as an opportunity:
- Sell a training course: You can create a short course on something you are good at and post it on Udemy or Skillshare to make money.
- Post free content on Youtube to earn via ads: You can also create and post videos on YouTube. Showing people how to go about something for free can help you increase your engagement and get paid by Google Adsense.
- Sell homeschooling programs: You can tap into the growing trend of homeschooling by offering one-on-one tutoring or group classes. With demand likely to remain steady even during a recession, academic and education businesses are an excellent option for those looking for a solid investment opportunity. You can teach people a language, subject, or skill.
9. Contractor, repair, and automotive businesses
Contractor, Repair, and Automotive industries are one of the few recession-proof businesses. They encompass utility services like plumbing, HVAC, electrical services, auto repair, maintenance, etc., which often remain in demand regardless of economic conditions.
When consumer spending is at its lowest, individuals may delay big purchases or renovations but still need to continue servicing their existing property and vehicles. With the right marketing approach, contractors and automotive specialists can utilize the opportunity to reach out to customers. Competitive pricing or incentive packages can help you stay ahead of your competition.
Let’s look at each of these recession-proof businesses:
Large companies and small businesses hire contractors to complete specific projects and have fewer long-term overhead costs than other business models. Contractors keep their businesses afloat during challenging economic times by continuing to build relationships with new clients. Plus, contractors work on short-term projects instead of permanent hires, limiting financial strain during a recession when larger companies cut back their budgets and staff.
During an economic downturn, people tend to hold on to their belongings longer, making them look for affordable repair services. This can help keep a repair business running as people turn to repairs instead of buying something new. If you specialize in repairing luxury items or rare goods, there will always be demand regardless of what the economy is doing.
While new car sales may slow during a recession, vehicles will still need servicing and repairs, meaning the industry can remain profitable even during tough economic times. People may buy used cars or repair existing ones instead of buying new ones when their budgets are tight.
Sell Your Business With Sigma Mergers & Acquisitions
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