While it can be riskier to launch a business during a recession than in a booming economy, some sectors and businesses survive—and even thrive—during economic downturns.
Businesses that sell essential goods such as groceries or provide health care services or IT support often continue to be in demand in difficult times.
That’s because despite tightening budgets, people still need life’s necessities, whether it’s food or a car that runs so they can get to work. Fulfilling such needs can offer business opportunities for savvy entrepreneurs.
What is an economic recession?
An economic recession is a downturn in economic activity that spans two or more consecutive quarters of negative gross domestic product growth. There’s usually a knock-on effect across employment, wages, sales, and interest rates as people find themselves spread thin.
The last economic recession was in 2020, a result of the COVID-19 pandemic. While it lasted only two months, it had a considerable impact on the economy because it led to the closure of retailers and restaurants across the country. The US is currently not in a recession by the traditional definition, but there are indications that one is on the horizon. This has forced business owners to think about the longevity of their businesses and how they can survive (and thrive) during tough times.
Can a business be recession proof?
There is no way to ensure a business earns a profit during a recession, which is typically characterized by reduced economic growth, mass job layoffs, and stock market losses. Still, some businesses are considered recession proof, meaning they have a higher probability of weathering widespread economic slumps. Traits of recession-proof businesses include a track record of growth, increased sales, new locations, and strong name recognition.
During the Great Recession in the US, from late 2007 to mid-2009, some companies did well. Noteworthy examples include:
- Dollar Tree.Discount brick-and-mortar retailers like Dollar Tree gained popularity during the recession, selling basic household goods at low prices.
- Nestlé. A multinational food conglomerate, Nestlé experienced a reported 11% increase in profits during the Great Recession.
- Netflix. The streaming service Netflix experienced both increased sales and revenue.
- Walmart. Giant discount retailer Walmart’s net sales increased 6.8%, to $255.7 billion, in 2009.
10 recession-proof business ideas
Looking for a way to thrive and future-proof your business for economic downturns? Here are some recession-resistant business ideas to get you started.
- Grocery retail and food
- Auto repairs
- Information technology (IT) support
- Discount stores
- Financial services
- Plumbing and electrical services
- Home improvements
- Pet services
- Health care
- Beauty products and services
1. Grocery retail and food
The recession-proof nature of selling groceries can be attributed to a simple fact: Humans need to eat. Businesses selling staples like groceries, snack foods, and fast food tend to do well during economic slumps. In such times, people tend to cook more at home to try and save money, eat more snacks to cope with the stressors of a recession, or turn to less expensive food options.
Examples of recession-proof grocery retail and food businesses:
- Food trucks. Mobile food vendors fare well during recessions due to their lean and nimble business model. Plus, consumers can recreate the dining-out experience for a fraction of the cost.
- Grocery stores. People tend to cook at home more to save money, which means they visit grocery stores to buy ingredients and get meal inspiration.
- Meal delivery services. Companies like Blue Apron and HelloFresh capitalized on the rise in stay-at-home eating, delivering delicious meals to folks across the country.
Erica Cohen planned to open an upscale restaurant when the 2008 recession hit. At $900,000, it was simply too risky. Instead, she scaled down her dream, bought a $30,000 boxy truck complete with a kitchen, and opened a traditional burger joint on wheels.
2. Auto repairs
According to the Associated Press, US drivers keep their cars longer instead of buying new—even though older cars break down and need more repairs. Businesses that cater to the consumer demand to fix cars or are business-to-business (B2B) sellers of car parts are more recession-proof because they provide an essential service.
Examples of recession-proof auto repair businesses:
- Online part stores. During recessions, people try and cut money where they can. They’ll try their hand at auto repairs themselves and buy the parts they need from online retail stores.
- Repair shops. People still need their vehicles during a recession. Those who aren’t an ace at mechanics will still seek out places to fix their car when needed. This is especially true during difficult times, since people don’t want to risk buying a newer, more expensive car.
3. Information technology (IT) support
Information technology (IT) businesses that install computer systems or provide consulting services, as well as businesses that offer IT support, are consistently in demand. Even in a recession, businesses and consumers will need repairs, tech support, system upgrades, or other essential services when issues arise. According to Phsy.org, the tech industry added 77,000 jobs during the 2008 financial crisis.
Examples of recession-proof auto repair businesses:
- IT support businesses. Technology remains consistent during a recession—in fact, it was critical during the COVID-19 pandemic, when millions of people were served work-from-home orders. People will always need tech repairs and system upgrades.
- Computer parts stores. The people who can do it themselves will buy the parts they need and troubleshoot the issue with their knowledge and skills.
4. Discount stores
Brick-and-mortar shops selling discounted staples such as shampoos, snacks, soaps, and house cleaning supplies did well during the 2008 recession. Often branded for their dollar price point, lower-cost goods and services were a way for consumers to try and save money.
Examples of recession-proof discount store businesses:
- Dollar stores. The Dollar Tree fared particularly well during the 2008 recession, since people were keen to bag a bargain. Consumers who had never set foot in a discount store started to count their pennies and visit dollar stores to cut back.
- Low-cost retailers. Walmart saw a huge uptick in sales in March 2020, just after the pandemic hit, and it was a similar story during the 2008 recession. As consumers tighten their purse strings, they lean on low-cost retailers to buy their essentials.
5. Financial services
Finance-related professional services such as accounting, bookkeeping, and financial planning are considered recession-proof because taxes must be paid, investments protected, and businesses’ expenses logged and organized—even when the economy slows. For example, in the early part of the 2008 economic crisis, revenue at tax preparation provider H&R Block rose 11%.
Examples of recession-proof financial services:
- Accounting companies. Regardless of what’s going on in the world, accounts still need to be balanced and taxes still need to be paid. Accounting companies help people and small businesses make the most of their tax benefits and better understand their income and cash flow.
- Financial planning. Money worries are prevalent during recessions, so it makes sense that financial planning companies fare well. On a personal and business level, financial planning advisers help people manage their money and maximize profits.
6. Plumbing and electrical services
Clogged drains, pipe leaks, and electrical wiring issues can cause problems whether during a bear market recession or bull market boom. While many plumbers and electricians working on construction sites typically lose their jobs or have to relocate, businesses that fix or redesign plumbing systems and do electrical work are typically busy in all economic scenarios.
Examples of recession-proof plumbing and electrical services:
- Emergency plumbing. If someone springs a leak, they need to get it fixed ASAP, regardless of whether there’s a recession or not.
- HVAC providers and repair companies. People tend to stay home more during a recession to save money, which means their houses become their castles. During the hot summer months or the biting cold of winter, people want to feel as comfortable as possible in the place they spend the most time.
7. Home improvements
Businesses like general contractors, house painters, and even sole proprietors specialize in fixing, replacing, and upgrading home appliances and fixtures, among other items, as well as decorating the home. Carpenters and painters tend to find consistent work during economic downturns as property owners typically tackle smaller projects rather than embark on expensive renovations.
Examples of recession-proof home improvement businesses:
- Hardware stores. Fewer people move home during a recession. Instead, they focus on those small, DIY tasks they’ve been meaning to do for years to create a comfortable living space. Nearly twice as many consumers shopped at hardware stores in 2020 than before the COVID-19 pandemic.
- Painters and decorators. As more people stay home during a recession, they try to make their houses as enjoyable as possible—especially if they can’t afford to move. Painters and decorators are in high demand even in the toughest times, as people seek out joy in their homes.
During the 2008 recession, The Home Depot pivoted to reach more DIYers after fewer tradespeople came through its door. Through strategies like slashing the prices of more than 1,000 products, offering free delivery, and running DIY workshops, the store managed to increase sales by 3% toward the end of 2010.
8. Pet services
Fido will not get neglected during a recession, as people often find comfort in pet ownership, and use services to take care of those pets. Businesses from dog walking and pet sitting to creating and selling specialized dog food or apparel, can find steady customers during a recession, as they did during the Great Recession, when the pet industry experienced 5.1% growth in sales.
Examples of recession-proof pet services:
- Pet care technology. Pet wellness company Idexx develops lab tests for pets so veterinarians can better diagnose problems. It has gained considerable value, even during periods of decline. People will always want to make sure their pets are healthy, often with no regard for cost. Similarly, MySimplePetLab allows people to test and diagnose their pets from home.
- Pet food brands. Just like humans need to eat, so do pets. People continue to buy food for their animals during a recession, which makes pet food brands pretty resilient.
9. Health care
People get sick, have accidents, and go to the doctor, whether there’s an economic slowdown or not. Health care businesses could include sellers of medical devices and uniforms, staffing agencies that provide home health care aids or physical therapists, and traditional health care providers like doctors.
Within this industry is telemedicine, a rapidly growing sector within the health care industry that experienced an uptick during the pandemic. According to the Centers for Disease Control and Prevention (CDC), 37% of adults saw their doctors or other providers remotely. Businesses specializing in telemedicine tech, for example, are also good bets in a slower economy.
Examples of recession-proof healthcare businesses:
- Contact lens subscription services. People’s eyesight is paramount regardless of the economic climate and they’ll continue to pay to receive contact lenses or eyewear.
- Pharmacies. The demand for medication remains stable throughout a recession—people rarely jeopardize their health. Pharmacies continue to stay open and thrive even during the most difficult financial times.
- Menstrual products. Women still need menstrual products during their time of the month. The swathe of new brands selling eco-friendly tampons, towels, and cups continues to do well despite the potential incoming downturn.
10. Beauty products and services
Even in times of dire economic uncertainty, people continue to spend money on looking good. Dubbed The Lipstick Effect, this phenomenon follows the idea that people aspire to maintain their aesthetics even when their bank balances are suffering. In fact, a study by The Beauty Study in 2010 found that, in the throes of the 2008 recession, 80% of women intended to maintain or increase their spending on skin care and cosmetics.
Examples of recession-proof beauty products and services:
- Cosmetic brands. Companies that sell makeup, skin care, and cosmetics will fare better than most during a recession. People continue to buy products that make them look and feel good, even if their external reality is very different. Ulta Beauty saw sales rocket by 200% during the downturn caused by the pandemic.
- Beauty salons. The number of beauty salons across the US grew by 14.4% during the 2008 recession—another reminder that people will continue to pay to keep up appearances during economic downturns. If you’re good at hair or makeup, this can be a low-investment business idea that weathers a recession.
7 tips to make your business resilient during recessions
1. Make and operate within a budget
Business owners should adhere to their budgets regardless of the economy, but it’s especially important to operate within a budget when sales are lagging. To get a clearer financial picture, assess all revenue streams, identify fixed costs, consider variable costs, and calculate your profit margin.
2. Keep low monthly overhead
Pause and consult with financial experts, your accountant, or mentors before making any big business moves that could increase monthly expenditures. For example, renting a larger space, hiring new employees, or leasing a business vehicle in good times could be beneficial during a recession. However, these decisions can significantly increase monthly overhead when it’s necessary to go lean.
3. Build professional relationships
Clients are often looking to cut costs during a recession, so creating strong relationships by offering discounts or perks programs, or even small personal gestures like writing a simple thank you note, could be the deciding factor in retaining a business contract. Additionally, professional networking among colleagues is beneficial because it’s a two-way communication channel for business recommendations and other useful industry information.
4. Maintain a lean inventory
Stock surplus can be a financial burden when sales are weak. Extra inventory takes up costly physical space for storage, could result in product loss if it spoils or otherwise expires, and can disrupt cash flow and tie up capital. Keeping a lean inventory enables you to invest in other parts of your business, from sales and marketing to new product development. One way to face this challenge is to buy only enough inventory to meet customer demand.
5. Invest in marketing
Marketing gets your brand in front of new customers. Investing in strategies that grow brand awareness and drive sales is crucial for reaching potential buyers and increasing your market share. Try social media marketing, running ads on Google and social platforms, and investing in content marketing to generate traffic to your brand.
6. Diversify your revenue stream
Relying on one stream of income can be risky, especially during an economic downturn. What if that revenue stream suddenly dries up? You’re left scrambling, trying to maintain sales in an uncertain landscape. Instead, diversify your revenue streams so that your income is coming from multiple sources. Maybe you create subscriptions, run workshops, or offer consultancy services alongside selling products.
7. Have an emergency fund
When business is booming, business owners can set aside funds to be used only for emergencies, one of them being slumped sales. The amount may vary depending on your business needs, but a good starting point may be enough to cover three to six months of operating expenses.
