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10 Best Recession-Proof Businesses
1. Grocery Stores
No matter how tight one’s budget gets, keeping food on the table stays the N1 priority for most families. This explains why grocery sales appear to resist the recession while other businesses suffer from it.
Moreover, a number of people who eat out at restaurants during the normal times also switch to preparing food at home, even increasing the grocery sales.
According to the data collected by USDA, Americans drastically cut back on spending money in restaurants during the Great Recession (2007-2009). The study showed that restaurant sales fell by 18% or $47 billion in total and didn’t return to pre-recession numbers until 2016.
On the other hand, grocery sales stayed strong and even increased by 8% from pre-recession to 2016.
2. Fast Food Restaurants
Recession or not, everyone still needs to eat. While regular restaurants aren’t considered as recession-proof, fast-food restaurants are proven to resist economic downturn.
But why does it happen?
Fast-food restaurants are typically much inexpensive compared to traditional restaurants. And while not everyone is fond of cooking, fast food is a great way for them to eat inexpensive food that’s already prepared for them.
Some people even crave fast food like pizza or McDonald’s meals. Others simply have no time to prepare food.
But a fast-food restaurant alone isn’t a guarantee that it will resist the recession. In today’s world, where drive-throughs and delivery services are at the hype it’s more than essential for a fast-food restaurant to have those.
Especially none of the restaurants would have resisted the 2020 pandemics without providing delivery services.
3. Candy, Comfort Food & Beverages
At a time of recession – especially now that everyone stays home – people crave more comfort food, sweetness and fun beverages to calm their nerves and enjoy their time at home a little more.
Chocolate is especially considered as something that relieves stress. That’s why people also make various chocolate desserts at home as a new way of spending quality time at home.
4. “Sin Businesses”
Let’s recall, how many times have you recently seen a post of your social media friends indulging in alcohol at home, even when they are alone?
As people’s stress levels rise during the time of uncertainty, alcohol and tobacco sales increase as well.
These products are often called “sin products” because everyone knows they do more harm than good to people’s health.
5. Repair & Maintenance Services
Unfortunately, things break down or at least need maintenance over time.
That’s why there will always be demand for repair and maintenance services will, even during the recession.
In fact, people may even want to repair more things when times get tough than they normally would to avoid spending money on new stuff.
Companies that provide repair services for essential items like roofers, plumbers and auto mechanics are most likely to see just as many customers during a recession as before the downturn.
Handy.com is a great example of recession-proof businesses. It not only provides essential services, but focuses on its customers’ convenience by offering their services online and accepting online bookings.
As more businesses go online than ever, the demand for hiring freelancers over full-time employees is increasing as well.
The main reason freelancing is gaining traction is because hiring freelancers typically save time and money to business owners while receiving professional services.
Compared to a full-time employee, freelancers get paid only for the tasks they do. This way, businesses are able to eliminate the expenses related to renting an office, paying for utilities, buying a computer for the employee and paying for their insurance.
On the other hand, you as a freelancer can benefit from freelancing more than you would as an employee because you’re able to set prices for your services yourself and have as many clients as you can handle.
Both platforms allow you to offer a variety of freelance services and ensure your safety by handling your contracts and payments.
7. Information Technology
Information Technology has proven to be the fastest-growing business sector in the United States, even during the Great Recession of 2007 to 2009.
According to the Bureau of Labor Statistics, employment in the IT sector grew by 37% from 2003 to 2013, which includes the Great Recession period.
In today’s world and Covid-19 recession, IT skills and businesses are in even greater demand than ever before.
As companies are going online and their workforce has moved on a remote basis, they need system administrators, software designers and cybersecurity specialists to ensure the flawless work from home experience.
8. Health Care
Health care has always been considered as one of the most recession-proof businesses.
And there’s a simple reason behind it. Recession or not, people get sick and getting better is a priority for most of the people, even when finances are tight.
This is especially relevant during the current economic downturn caused by Covid-19 outbreak. The demand for health care providers has especially increased to combat the virus.
As a result, health care provider businesses didn’t see any decrease in cash-flow, if not benefited from government funding to fight the new virus.
9. Accounting services
Even during recession, businesses will still need to keep track of their payments and revenue and pay their bills.
That’s why accounting services will be in demand no matter what.
In fact, demand for accounting services may even increase during an economic downturn as businesses need to find ways to cut down on costs.
So if you’re good at math and finances, accounting is a good career or even a business opportunity that can resist tough times.
In today’s world we cannot imagine having no telecommunication options. Especially the internet has become one of the top priorities after food and health care.
Now that people are working from home and can’t visit their families due to Covid-19 outbreak, curing the internet and phone expenses is not even an option.
Whether it’s communication with friends or families, getting information about what’s going on in the world or working, the internet is something everyone needs.
What Does Recession Mean?
Normally, a country’s economy grows over time.
But there are times of recession that obstruct economic development.
Recession is a significant decline in economic activity, lasting for more than 2-3 months or even several quarters in a row.
Recession affects the whole population of the country. First, it affects businesses, then employment within those affected businesses and lastly, it is all reflected in significantly decreased GDP (Gross Domestic Product).
And the financial downturn recession causes usually can’t be recovered throughout several years. For example, it took the US economy to recover 4-5 years from the Great Recession that happened in 2008.
How Does Recession Impact Businesses
Whether large or small, recessions impact all kinds of businesses.
There are 3 main reasons why:
- Demand for certain products get slower
- People lose their jobs
- Regulations restrict some businesses from operating
- There’s a general fear and uncertainty in the air
All of these reasons lead businesses to significantly decreased cash-flow, sometimes even leading to bankruptcy and permanent closure.
What is a Recession-Proof Business?
While recession affects most businesses, there are some that are identified as recession-proof.
A recession-proof business is basically any business that doesn’t see a decrease in their cash-flow during the time of uncertainty.
Typically the businesses provide products or services that everyone needs, even when people are on a tight budget.
5 Characteristics of Recession-Proof Companies?
The reason why some businesses are recession-proof compared to others is that they provide products or services that are essential to people.
Here are 5 characteristics of recession-proof businesses:
- Sells consumer essentials
- Serves customers insulated from downturns
- Provides mandated products or services
- Provides critical repair services
- Sells proprietary or specialized products
Invest in Recession-Proof Stocks
While recession affected quite a lot of businesses worldwide, there are still companies out there whose value increased during the Covid-19 recession.
But which stocks are recession-proof and where to invest your money in this time of uncertainty?
The answer is simple – stocks of companies that provide essential products/services no matter the economic situation. These could be supermarkets, repair services and stores selling cheap stuff.
Some great examples of recession-proof stocks are:
- Walmart (NYSE: WMT)
- O’Reilly Automotive (NASDAQ: ORLY)
- Dollar General (NYSE: DG)