While no company is completely immune to a downturn, many industries and business models are recession-resistant, meaning they fare well even when other companies are slashing costs and struggling to survive. Factors that contribute to this phenomenon include the fact that some goods and services, like food and healthcare, are necessities. In addition, consumers are affected by a recession on a spectrum: Some barely change their habits, while others spend only what they must. For most, small splurges still make the budget.
Even if your business is not recession-resistant now, you can take lessons from those that are to prepare or pivot to make the best of hard times.
What Are Recession-Proof Business Models?
A recession-proof business or business model continues to perform well during times of economic duress, when other business types may be forced to cut costs, reduce their workforces or even shut down. These countercyclical businesses either provide necessities that consumers require even during a recession or find their products or services in higher demand due to economic hardship.
- Consumers still buy necessities during a recession but may prefer smaller quantities and less expensive options to cut costs.
- Those unaffected by economic volatility will still spend on luxury brands and more expensive staples that they believe last longer.
- Along with healthcare and childcare, pet care has become a mandatory expenditure for both younger and older generations willing to spend on their “fur babies.”
Recession-Proof Businesses Explained
For a business to survive a recession, it needs strong leadership, an excellent product or service, attentive customer care and a handle on industry trends. However, certain types of businesses are positioned to handle negative economic conditions better than others due to the nature of what they offer and how consumers adjust buying patterns in their favor during tough times.
12 Recession-Proof Business Models to Know in 2022
Food and creature comforts
Recessions mean that families and businesses alike forego big-ticket items like vacations, company gatherings, fancy dinners out and expensive catered lunches. However, food is still a requirement, and inexpensive creature comforts can feel like a splurge for a less expensive price tag. Plus, for many, food and alcohol can feel like a necessary escape when financial times are tough.
- Candy sales: Sales of a less expensive creature comfort, candy, went through the roof during the 2019 pandemic. “For many, sugar lifts spirits dragged low by the languishing economy,” says Christine Haughney for The New York Times. “For others, candy also provides a nostalgic reminder of better times. And not insignificantly, it is relatively cheap.” While a high-quality confection may be considered a luxury by many, the price point means that more buyers can “splurge” for a sweet treat and may do so more frequently than more expensive indulgences.
- Grocery stores: While restaurants may see a dip in eat-in dining when a recession strikes, convenience stores and other low-cost grocery outlets often see an increase as shoppers look for convenient ways to pick up staple items. In the UK, 41% of shoppers began using local shops over larger supermarkets during the short-lived COVID-19 recession. Not only are they looking to shop nearby, but they’re buying food items in smaller quantities. Shoppers are also interested in supporting small, local businesses during recessionary periods.
- Food delivery services: Purchases of another small indulgence, orders to food delivery services, increased during the COVID-19 pandemic lockdown. For consumers who were stuck at home but may not enjoy cooking, meal delivery kits like Blue Apron or Gobble were a middle-ground option between in-restaurant dining and DIY meal planning and preparation. For those who could afford restaurant options, use of app-based takeout and delivery ordering services increased as consumers transitioned to work and school from home. These food delivery companies saw such a boost during the latest recession that DoorDash filed for its IPO in December 2020, and Instacart raised over $200 million in capital around the same time.
- Vending machines: Vending machine businesses perform well in recessions for similar reasons as candy stores. Not only do they offer an inexpensive treat, they often provide daily necessities like food and beverages on the go. For business owners, the benefits include the ability to move the vending machine to higher traffic areas if sales slow in the original location.
- Alcohol: As employment decreases, data shows an increase in alcohol consumption. During the Great Recession, beer sales dropped, but sales of spirits increased dramatically in comparison. In the latest recession, alcohol outlets that pivoted to online sales and shipping continued to see growth. Demand for alcohol also shifted throughout the pandemic: “When Covid-19 first hit, there was a trend toward value in bulk,” says Steve Tartaglia, wine buyer and manager at The Party Source, for Craft Brewing Business. “But then, about midway through, [people] realized they had more disposable income since they were no longer commuting or going out to bars and restaurants.”
- Fast food: Vices often top the list of recession-proof businesses, and fast food falls under that umbrella. However, many people also flocked to coffee shops and other quick-service restaurants that provided free WI-FI during the Great Recession and the COVID-19 pandemic. For the price of a sandwich or breakfast, consumers felt they paid their dues to use the internet to apply to jobs, build their own websites and work outside the house.
Healthcare and in-home care
Healthcare can’t stop even when the economy lags. It’s especially important for seniors and older adults, who often still have the disposable income during a recession as they’re already out of the job market. As such, doctor offices, in-home care, pharmaceuticals and senior living care are recession-proof business models.
- In-home care: Oftentimes the services covered by in-home care or home healthcare are not optional for patients, therefore it’s often one of the last services that families cancel. Family members generally cannot provide the specialized care that in-home nurses or aides can, so there isn’t a less expensive alternative. Not only that, but Medicare covers home health care if prescribed by a doctor.
- Senior living: Regardless of the economic climate, the population continues to age. As many reach the period when their children or in-home caretakers can no longer keep up with their needs, senior living centers become the next level of care. Data shows that those 65 and older are insulated from recessions as they often own their homes outright, or no longer own homes, and depend on Social Security and pensions that are not affected by fluctuations in economic climate. Senior living centers, whether partial or full service, weather economic changes well because their target market is less affected by a recession.
- Pharmaceuticals: Just like with other healthcare, people still need their medications even during a recession. While a lot of healthcare in the U.S. is employer-based, those who require certain medications still need these lifesaving drugs regardless of whether prices are up or down. Recession-inspired policy changes are the biggest challenges that can affect pharmaceutical businesses during times of economic downturn.
With more millennials foregoing marriage and having kids, data shows they’re adopting animals at a higher rate to replace that missing companionship. “Millennials make up 25% of the U.S. population, but they own 35% of all pets, making them the largest pet-owning cohort in the country,” according to Robert Ross from Market Watch. Not only that, but older generations are taking on pets for companionship as well, and those consumers tend to have higher disposable incomes.
- Veterinarians: Just like human healthcare is necessary in a recession, so is pet healthcare. Overall, pet care spending increased steadily from 1991 to 2015, according to Ross. That increase timeline included two recessions. “America is pet obsessed,” says Ross. “Pet ownership is up. Spending on pets is up. In fact, we actually spend more on our pets during a recession.”
- Pet grooming: Depending on the type of pet people have, grooming is another way to keep their fur babies healthy. Certain animals require regular, professional grooming services to prevent painful overgrowths in hair and nails, ensure oral and joint health and detect early signs of disease. For those who want to save money during a recession, though, DIY grooming means increased sales of shampoos, electric shavers, brushes, nail trimmers and other pet grooming supplies.
- Pet essentials: While recession-conscious shoppers may cut out fancy foods and luxuries for themselves, they often won’t for pets. The latest recession also accelerated the ecommerce options surrounding pet food ordering and delivery, meaning pet owners could get their specific brands and food types delivered directly to their homes. “Although the pandemic is far from over, and its economic fallout is likely to linger for many months if not years, the pet food market is expected to maintain strong growth, bolstered by the infusion of new pets and U.S. pet owners’ willingness to spend on their beloved ‘fur babies’ even in the midst of a health and economic crisis,” according to Packaged Facts consumer research on pet food in the U.S.
Home and business services
The home and business services sector performs well during recessions because people see regular, ongoing maintenance as a wise investment. Consumers and businesses want to prevent major malfunctions — and therefore major expenses — via smaller repairs and regular upkeep. If a big purchase will net them better longer-term savings, like in the case of a more energy-efficient HVAC system, then it might make sense to make the purchase now when suppliers are desperate for buyers, but until then, make small fixes work until finances are in a better place.
- Plumbing and HVAC: When recession hits, people and businesses alike look for ways to reduce overhead. Not only are plumbing, heating and air conditioning a requirement for many, but recessions mean people are looking for the best ways to save money on these services. During the Great Recession, many businesses invested in newer, more efficient HVAC and plumbing technology to save energy and water and reduce utility bills. While a smaller expense, individuals investigate water-saving toilets and faucets and maintain their HVAC units incrementally during recessions to avoid the major expenses of replacement or significant repair.
- Automotive repair: Just like with home repair, consumers want to avoid the major expense of a new car during a recession. By maintaining their vehicles regularly, they can budget for small repairs and upkeep. While the COVID-19 recession meant many people worked from home and used their cars less, the lockdowns caused a delay in vehicle production, making used cars even more valuable. As such, regular automotive maintenance was key in avoiding the expense of a vehicle loan but also the inability to get around if needed auto repairs weren’t made.
- Utilities: Even with the financial changes that come during a recession, the need for electricity, water, natural gas and trash services remains steady. Utility services tend to generate constant earnings even during tough economic times. Consumers may find ways to cut down their consumption, but it often cannot be eliminated completely.
- Equipment repair and service: On the business side, companies do not want the expense of brand-new equipment when they can preserve what they have. Many companies already have maintenance plans for their most expensive equipment, too, so it’s likely that the service is already budgeted or even pre-paid. Equipment and technology businesses that focus on repair and regular maintenance can weather a recession well for this reason.
Children’s products and services
While other areas of life may be paused during a recession, being a parent never stops. Baby products and other services related to children continue to be in demand and often required regardless of the country’s financial situation. Parents may be able to cut some part of their budget for “nice-to-haves,” but diapers, daycare and education are necessities.
- Baby products: Parents will often reduce other expenses before they cut baby products. Extravagant birthday parties may be on hold, but formula, baby food, bottles and diapers are not optional for infants or toddlers. Kids continue to grow and will always need the next size up in clothes. While there are ways to reduce costs, like cloth diapers, secondhand clothes or homemade baby food, money saved will often be spent elsewhere, like in laundry and organic groceries.
- Childcare services: The COVID-19 recession highlighted the need for childcare to help the economy run and recover. In fact, many parents stepped back from their jobs during the recession to make up for lost childcare, which resulted in losses in economic activity and tax revenue. Even when parents lose jobs or are laid off, childcare continues to be an expense they keep on the budget, not only to give them time to look for new jobs, but because it can often be difficult to re-enroll children when open spaces are limited and waitlists are long.
- Tutoring/online education: Online education can be done anywhere, at any time. As jobs, school, money and schedules change with a recession, online tutoring and learning can fill in gaps. Online education can be less expensive than in-person classes — especially for college and other higher education institutions. And, it became the main schooling format for many students from kindergarten through college, and even graduate school, during the first stage of the pandemic. Many families have decided to continue digital tutoring or classes even after they’re allowed to go back to classes in-person. Plus, if workers are shifting jobs after being laid off, online education can help them close skills gaps.
Financial and accounting services
While no industry or profession is 100% recession-proof, financial and accounting services come close. Nothing brings money to the forefront of people’s minds like a recession. Businesses and individuals alike want to ensure that they’re using their money in the best way possible now while making certain that their future financial success is protected. CPA, bookkeeping and financial planning services are always in demand, no matter the economic climate.
- Tax preparation: Businesses and individuals alike will still need help preparing their tax paperwork and submitting it to the IRS. Plus, they’ll want to minimize what they owe, so using a professional service is paramount.
- Accounting: CPAs have a much lower-than-average unemployment rate during recessions. Businesses rely on accountants to sort out the best financial solutions when hard economic times hit. Many in the industry hope that as AI advances, it’ll continue to help them be even more efficient and accurate — and therefore even more in-demand regardless of the economic climate.
- Bookkeeping: A specialized skill, bookkeeping practices can often make or break a business. Financial record-keeping is critical during recessions because businesses want to maximize their value and minimize their expenses. Bookkeepers often work in tandem with accounting and tax preparation teams, so they’re just as valuable during good times as during bad.
- Financial planning: Recessions force individuals to face their financial mistakes and think about planning for the future — and future recessions. The demand for financial planners increases during times of economic hardship as consumers want to protect their wealth and ensure they’ll have enough to retire.
While residential cleaning may take a hit during times of recession, certain business types cannot stop their commercial cleaning services. Doctors’ offices, schools, daycares, retail facilities and other essential services still require cleaning, and often up to specialized standards. During recessions, commercial cleaning companies may see an uptick in services if on-staff custodial employees are laid off and replaced with a less expensive third-party service.
When finances get tight, splurges slow down. However, many consumers still want the stress-relieving effects of retail therapy. Pawnshops and discount stores replace banks and grocery stores for loans and basics, respectively. For those wealthier consumers unaffected by a recession, luxury goods are still top of mind, especially items with a reputation for quality and timelessness.
- Pawnshops: Pawnshops perform well during recessions because many consumers use them as a stop-gap source for small loans when more conventional forms of credit may not be available.
- Discount stores: Spending at dollar stores and other discount outlets increases during recessions as unemployment ticks up. Those looking to find steeper price reductions pass up Target and Walmart for discount stores to make their money go further. But even as consumers start making more money when recessions wane, they stick with discount shopping patterns. “The same consumers opting for a small bottle of detergent at a dollar store instead of a pricier jug at Walmart stuck with their bargain-hunting habits,” says Leticia Miranda for NBC News.
- Luxury retail: For those who can afford luxury retail in the first place, investment in expensive pieces meant for the long-term doesn’t stop. Consumers of luxury products are less affected by the economic fluctuations of recessions and can continue their buying habits, which insulates luxury brands. Plus, higher priced items are seen as being of higher quality.
Technology usage doesn’t decrease dramatically during a recession. In fact, during the COVID-19 recession, IT professionals were even more in demand as companies had to determine solutions and vet technology for work-from-home and remote-office models. When major technical issues occur, it can bring work to a stop, something businesses want to avoid in an already tense financial time. IT support ensures that everyone can get as much work done as possible without technology being a constraint.
When a family member passes away at home, in a hospital or in a senior living facility, professionals are called to handle the remains and prepare them for burial or cremation. While families may opt for less expensive funeral services, caskets and cremations during a recession, the fact is that funeral directors and staff will still be in demand even when financial times are tough.
It may seem counterintuitive that staffing firms can weather a recession while many employees are suffering layoffs, but businesses often need to replace labor lost to layoffs with less expensive alternatives. Staffing agencies that provide contractors and temps as well as those that cover employee benefits (so a company does not have to) will be in higher demand when businesses still need labor but can’t afford full-time workers.
Digital marketing services
As the COVID-19 recession proved, companies that kept or increased their digital marketing budgets continued to perform well, or, at a minimum, stay open during tough times. Whether in email, SEO, PPC or social media, businesses must reach consumers where they are. Companies invested in digital marketing services, especially from agencies as opposed to hiring in-house, not only because they saw results, but because it’s an easily trackable form of marketing or advertising, so companies know what’s working and how to improve their ROI.
Characteristics of Recession-Proof Business Types
Recession-proof businesses share certain characteristics that help them make it through hard financial times. It’s about more than just toughing it out and crossing your fingers. Many businesses fall into specific categories of goods and services that consumers and companies still need even when times are tough. Others can be flexible and pivot to survive an economic downturn.
Businesses that sell essentials like food, healthcare, childcare, diapers, clothes and the like are required even when financial times get tough. While consumers may look for less expensive alternatives, they will still need to purchase these items regularly or eventually. Children will outgrow clothes. Dinner will get made. And doctors’ appointments will be scheduled. If a business sells necessary products and services, it’s more likely that it will survive or even thrive during a recession.
Provides important repair services
Many consumers and businesses want to avoid having to buy new during financially tough times. Maintaining a vehicle may mean you’re able to put off purchasing a new car. Fixing your refrigerator may prevent or delay a trip to the appliance store. It’s easier to spend a bit of money on mending an issue than to take on a monthly payment when times are tough. Companies that offer these repair and regular maintenance services will see less of a dip in business during a recession than others might.
Effective cash flow management
If your business isn’t any of the types listed above, you can still adjust if you understand how to manage cash flow for hard times. Asking for shorter payment terms from customers, for example, and start now to build up your cash on hand.
Serves consumers unaffected by recessions
One key to surviving a recession is to serve the types of customers who aren’t affected by dips in financial markets. Those who are already wealthy or used to buying luxury items often will continue to do so. Plus, customers may switch to higher-priced brands with reputations for quality, knowing the item will be durable. While inflation doesn’t necessarily correlate to recessions, luxury goods often hold their value during this time, so demand may rise. And, B2B organizations that serve these recession-proof businesses will not see as big a drop in accounts receivable.
Sells specialized products unavailable elsewhere
For trademarked or specialized products with minimal competition, there are no other businesses out there trying to beat you on price. Being in “blue ocean” territory has its benefits any time, but during a recession it helps because your business is the only one to offer a specialized product or service. This is one benefit of serving a niche market, too.
Provides mandated goods or services
Products or services required by law or by certain institutions will always be in demand, regardless of recession. States require car insurance, for example, for individuals and businesses that require transportation. For businesses, permits and safety regulations require investments in and regular maintenance of equipment. Businesses or organizations that provide products or services related to these mandates will typically not see a drop during recessions.
Adapt well to change circumstances
Regardless of what products or services a business sells, the keys to weathering a recession are agility and adaptability.
That means quickly adjusting plans and strategies to adapt to new circumstances. Restaurants, for example, pivoted quickly in the COVID-19 recession to offer online ordering and no-contact delivery and pick up after lockdowns forced them to close indoor dining rooms. Some hotels, which were hit hard by the slowdown in travel, started offering day rates for work-from-home employees who wanted to escape the house. And when news of the pandemic supply chain issues hit, distilleries stopped manufacturing alcohol and raced to make hand sanitizer. Being able to pivot and shift to what the time calls for can mean the difference between struggling and thriving during tough times.
NetSuite: Efficiently Manage Your Financial Processes to Stay Recession-Proof
When it comes to staying agile and managing cash flow efficiently, NetSuite Financial Management software has every tool your business needs in a single application. NetSuite financial management solutions expedite daily financial transactions, reduce budgeting and forecasting cycle times, ensure compliance and accelerate the financial close. Our cloud-based platform delivers real-time visibility into the financial performance of any business, from a consolidated level down to individual transactions. This means you have the information you need to adapt quickly as financial markets shift and can focus on strategies to help your business weather any financial storm.
Not every business can be countercyclical or recession-proof, but companies can still protect themselves during economic turmoil by thinking in advance about how they can adapt to various scenarios. Along with staying agile and preserving capital, businesses can re-engage their core customers for repeat purchases, plan for the worst, even engage capital beforehand to have access to cash when they need it. The question is not if the next recession is coming, but when. Preparing today can keep your business open and flourishing.
Recession-Proof Business Model FAQs
How can a business be recession proof?
Recession-proof businesses have revenue steadily coming in, whether the economy is up or down. These companies can pivot to serve the changing needs of their target customers during times of financial hardship or zero in on niche markets to ensure they are the only ones serving that audience. Staying recession-proof is all about being needed by your customers, regardless of how the economy is faring.
How can a business save in a recession?
The best way to save during a recession is to manage business cash flows and clamping down on spending. This might mean introducing shorter payment terms for clients, creating incentives for early payments and managing your own vendor relationships to extend payment terms. Cutting overhead and eliminating waste are other strategies for saving money when company finances get tight. And, lastly, some businesses eventually do need to resort to layoffs and other cost-cutting measures when business suffers.
How does recession affect small businesses?
In a recession, customers may reduce purchases or take a longer time to pay invoices as they’re also trying to save cash and reduce waste. Small businesses suffer greatly from both this loss of demand and slower payments. Budget cuts lead to marketing constraints and staff reductions. It’s also often difficult for smaller businesses to acquire credit, meaning it’s more difficult to overcome these cash flow issues through lending.