Understanding what makes a business recession-proof is invaluable, whether you’re looking to start something new or just see your current company through an economic downturn.
What is a recession?
A recession is a period of decline in economic activity that can last anywhere from a couple of months to a few years. Often this decline is measured in terms of gross domestic profit (GDP), but recessions are usually also visible across other financial markers, such as a general decline in employment, real income, wholesale-retail sales and interest rates.
Our last big recession came in 2020 as a result of the COVID-19 pandemic. It only lasted 2 months, but it hit the economy hard. Before that we had the Great Recession of 2008, following the subprime mortgage economic crisis. It is interesting to note that the 12-year gap between these two major recessions was the longest period of continuous growth in the US since 1854.
What makes a business recession-proof?
Whatever your industry, there are certain features that will make your business more likely to survive tough economic times. A business model has a much better chance of being recession-resistant if it is adaptable, is focused on preparation, and has consistent consumer demand.
Adaptability
Flexibility and a willingness to adapt to prevailing conditions are essential in getting the best out of an unpredictable economy. Taking customer feedback and changing market demands into consideration is important, especially for small business owners.
Preparation
Ensure that you are financially prepared at all times for economic troubles. This way, you will be ready even in the face of a sudden recession or economic crisis. There are many aspects to financial preparation—from keeping a solid emergency fund to making sure your overheads are as low as possible and sticking to your budget. If you can save money on the regular and cut costs in advance, you’re more likely to maintain positive cash flow when the next recession hits.
Consistent consumer demand
When everything gets more expensive—due to inflation, economic downturn, or otherwise— consumer demand tends to decline because people either tighten their purse strings or can’t afford the things they usually buy. Recession-proof businesses tend to retain a relatively high demand, even when prices rise.
There are certain recession-proof industries that have particularly consistent consumer demand. Some might even do better during economic slumps. Let’s find out what they are.
Ten recession-proof business ideas (with real examples)
If you want to start a business during a recession, choosing the right sector is key. In times of economic uncertainty, the best business opportunities can be found in recession-proof industries. Here are 10 business ideas to help you begin your research.
1: Healthcare companies
The healthcare industry is full of essential services that are truly recession-proof. No matter the economic situation, people will always need to take care of their health. Healthcare is one of the fastest-growing sectors of the American economy according to the U.S. Census Bureau, employing over 22 million workers in 2019.
Pharmaceuticals
There is very stable demand for all forms of medication. They are an essential aspect of healthcare that people will not forgo, regardless of the financial struggles they are facing. Even during the most difficult times, research into life saving treatments continues, and pharmacies need to stay open for people to obtain drugs that help fight colds, control cholesterol, and combat other common ailments.
Care work
Care workers do some of the most valuable work in our society, assisting seniors, people with disabilities, and other individuals who might need help looking after themselves on a daily basis. It’s an area of the healthcare sector that is always looking for new solutions.
There is continuously increasing demand for care workers as an ever-higher percentage of the US population gets older and lives longer. The U.S. Census Bureau projects that 21% of the American population will be over the age of 65 in 2030, whereas in 2017 that number was just 15%.
2: Financial services
Most of us will turn to financial advisers at some point in our careers, be it for starting a new business, going freelance, or getting clarity on taxation laws in a new state. Financial services are often in particularly high demand in difficult economic conditions when people are looking to make the most of their income.
Accounting
Whether you’re a small business owner, freelancer, or CEO of a major company, when it comes to taxes, you’ll probably need an accountant. From tax preparation to bookkeeping services, accounting is definitely a recession-proof business.
Financial planning
Like accounting, financial planning services are always in demand, on both a personal and business level, to help save money and maximize profits. Financial planning spans services from retirement funds to wealth management, investment strategies to business plans.
3: Beauty services
Not all businesses that do well in economic downturns provide an essential service. In fact, according to the lipstick effect, people tend to spend more on affordable luxuries during recessions. When we’re stressed out by the state of the world, we often use small acts of self-care to lift our mood, which makes beauty services a great recession-proof business idea.
Beauty products
There are plenty of small businesses out there selling beauty products, but if you can find your niche, it can be an incredibly lucrative business.
Not only are beauty products a recession-proof commodity, but they are also highly scalable. As you bring more money into the business, you can add more products to your line, helping you scale more sustainably and with demand. For example, Glossier started out with only 4 products, and has now become a billion-dollar beauty brand.
Beauty salons When times are tough, we still want to look good. There are some services, like waxing and hairdressing, that most of us just don’t have the skills to execute well at home. In general, anything requiring expertise is hard to replace or do without, and therefore more recession-proof.
If you’re looking to start a business, especially if you have a background in cosmetology, a beauty salon might be exactly the right place to start. In fact, the number of beauty salons across the nation grew by 14.4% during the Great Recession in 2008, proving that they truly are a recession-proof business.
Tattoo Studios It might seem like a strange choice to start a tattoo studio during a recession but, aside from constituting a skill that most of us would definitely look to outsource, they are also a great example of the lipstick effect.
In times of uncertainty, many people see tattoos as a way to treat themselves. And they’re only becoming more popular. In 2019, an Ipsos poll showed that 30% of Americans had more than one tattoo, up from 21% in 2012.
4: Logistics companies
Logistics is undeniably a recession-resistant business, representing essential demand in the freight industry. Even in tough times, there is always demand for goods somewhere, and these items always need to be transported from a holding location to their final destination.
Courier services
E-commerce retail is already a huge industry. In 2021 alone, e-commerce sales totaled about $5.2 trillion globally, and they’re predicted to grow to $8.1 trillion by 2026. As a result, courier services are in demand now more than ever.
Aside from online shopping, courier services also provide essential shipping services for the healthcare and tech industries, among others.
Delivery companies
Food delivery services are recession-proof—just like lipstick, they represent a small luxury that most people can indulge in. Ordering a favorite meal or snack is much more accessible—and justifiable!—than more expensive indulgences.
5: Repairs and contracting services
Repairs are a consistent demand. We need the machinery of our lives to keep running whatever the status of the global economy. From our cars to our heating, our electricity to our pipes, there are certain things that require upkeep, even in an economic recession.
Plumbing and utility services
Plumbing and utility repairs are an essential service. If your boiler breaks down or your water stops running, it’s a fix you can’t put off. As a result, working as an independent contractor or starting your own utility repair company are great options for a recession-proof business.
Auto repair
So many people rely on their cars to get to work, to school, or to stores. They’re an absolute necessity and, regardless of economic climate, they need to be kept in working order.
Hardware stores
Plumbing and utility services are specialist skills, but for smaller home repairs, many people will look to cheaper alternatives. Hardware stores offer solutions for DIY home repairs that are accessible for most. They are also pandemic-proof businesses—during the 2020 recession, nearly twice as many consumers were shopping at hardware stores than before COVID-19 hit.
Cleaning services
Commercial and home cleaning services are always in demand and are among the many small businesses that are well set up to be recession-proof. There are laws and regulations across the US that stipulate a level of cleanliness for businesses, and many will hire external firms or contractors to carry out the work, rather than employing individuals within the company.
6: Real estate businesses
Though the Great Recession in 2008 was caused by a property crisis, this is by no means the case for every recession. In an economic downturn, central banks tend to encourage investment by lowering interest rates, so it’s often the best time to get in on the housing market.
Real estate agencies
Real estate agents are experts in the housing business, and their connections and skills get properties sold. Agents are not easily replaced, and people always need houses, making real estate agencies another recession-proof industry.
Property management
Many people can’t afford to buy their home outright, especially during a recession. As a result, the rental market is particularly important and can take off during this time. Property management firms take care of rental properties on behalf of a landlord, dealing directly with tenants and mediating with estate agents.
With property management, you shoulder less risk than you would if you owned properties outright, but it still allows you to reap the rewards of the real estate market during a downturn.
7: Food and beverage industry
There will always be demand for food and drink. Just like other recession-proof industries, there are parts of the food industry that represent essential services, and others which fall under the umbrella of small luxuries.
Grocery stores
Unless you are a self-sufficient farmer, groceries are an absolute daily necessity, so prices tend to remain pretty stable during recessions. People often cut back on eating out at restaurants, so demand for grocery store products might even increase.
Confectionary companies
Even with a decreased disposable income, sweets offer an inexpensive (and delicious) dopamine spike. You’ve got it—they’re another example of the lipstick effect in action. Compared to grocery stores, confectionary stores are a slightly different, but still very stable, recession-proof business option.
8: Tech services
Traditionally we think of the three basic needs as food, water, and shelter. But without technology, so much of modern life starts to break down. Just like other essentials, we are always in need of tech services.
Cybersecurity companies
Since the onslaught of cybercrime, every aspect of technology now needs cybersecurity defenses—from our computers, smartphones, and tablets to the websites and apps that we access. This demand doesn’t fluctuate with the economy because we always need to stay protected online.
IT support services
With so many businesses relying on technology, IT support services have high recession resistance. There are plenty of areas of tech support expertise, from helping a client recover lost data to talking them through new software solutions. Each of these sectors represents an opportunity for you to start a new business.
9: Freelance services
Unlike some of the other businesses mentioned here, freelance services focus on your skills as an individual, rather than your ability to start a successful company. During recessions, businesses often look to outsource their work to freelancers, who often fill specific gaps where a full-time hire would be too expensive.
Freelancing has less job security than a permanent position but spreading yourself across multiple freelance projects means that if one falls through, you have other streams of income to support you.
Virtual assistant
Many companies won’t have the budget or need for a full-time assistant, but still have administrative tasks that need fulfilling. That’s where virtual assistants come in.
As a freelancer, you might also be able to take on multiple part-time virtual assistant roles at once, earning significantly more than you would otherwise with just one full-time role.
Copywriting
Copywriting is another great freelancing opportunity. Just like virtual assistants, copywriters are hired when companies don’t have the budget or demand for a full-time writer on the team, or when they have a particular project that requires extra work.
There are so many different types of copywriting you could look into, depending on your areas of interest and expertise. Some of the highest demand (and highest pay) comes from digital marketing companies looking to boost their search engine optimization (SEO).
10: Digital marketing companies
Digital marketing is a fast-growing area for a recession-proof business. Without the need for a physical office space, digital marketing businesses have fewer overhead expenses than traditional marketing agencies, making them more adaptable to adverse economic conditions.
Online marketing, with a focus on techniques like SEO, social media campaigns, and email marketing, is less expensive than billboards and direct mailers. It can often also provide more specific and accessible information about your audience, allowing you to better target and grow your customer base.
Starting a business during an economic downturn can work in your favor
We’ve seen some business ideas that are well placed to weather the storm of an economic recession. But it’s not just about survivability. It’s often better to start a new business, especially a recession-proof one, in economic downturns. If you have enough funds set aside, the cost of starting a business can be much lower with reduced interest rates. And with less work, suppliers will be more willing to negotiate prices than in times of economic prosperity.