It’s the biggest “are we or aren’t we” of the century. We’re halfway through 2022, and some would argue that we are in a recession, considering that our GDP has shrunk for the second quarter in a row. But a recession’s definition isn’t as cut and dry as many think. It’s actually decided by the Business Cycle Dating Committee, and they have not declared a recession as of the end of July.
The truth is that every recession is entirely different, brought on by specific economic circumstances and therefore with various symptoms as well. This year, while the GDP shrinks and inflation is high, unemployment rates have stayed at their lowest numbers in years, and consumer spending remains strong.
However, the strongest predictor of a recession is the yield curve, which has preceded every recession since 1955. It has moved into an inversion during July and warns that the recession is coming. So, while it may not seem like the best time to start a new business, if you do some research, there’s a chance for you to thrive. Here are some recession-proof small businesses that can survive the next economic decline.
A recession-proof business is one that is not as heavily impacted by the economic effects of a recession, typically stemming from industries that provide basic needs. Because they offer needed products and services, they are the last industries to be affected by changes in consumer spending.
To be clear, there is no such thing as a fully recession-proof business. As we mentioned, every recession is completely different and impossible to predict. For example, the real estate market crashed in 2008 but actually thrived during the early 2000s recession. However, some recession-proof industries are much more likely to weather the storm.
Looking at data from past recessions, we can see which industries fared the best. Generally speaking, businesses that do well in a recession provide basic needs and services, particularly at an affordable price. For example, cheap grocers like Walmart and Dollar Tree saw high returning stocks in 2008. Other services that people can not cut just because money is tight also do well compared to other businesses, such as health care, telecom, and freight.
Whether we keep heading towards a recession in 2022 or manage to turn things around, setting yourself up with a recession-proof business is a solid plan either way. You never know what the future holds, and these business ideas can give you some peace of mind now and for years to come.
While we’re sure you can think of some obvious recession-proof businesses, here are some less obvious ideas to get your mind turning.
The automotive services industry includes all post-purchase services necessary to keep a car in working order, such as oil changes, tire repairs, air conditioning, electrical inspections, plus body repair, painting, and much more.
The market is expected to register a 3 percent compound annual growth rate over the next five years and reach a value of $76.91 billion by 2027.
If people aren’t out buying new cars, you can best believe they’re doing everything they can to take care of the ones they have. Cars inevitably need maintenance as they age and have more miles put on them, even during a recession. Plus, as long as the freight industry continues to remain strong, there will be a need for servicing on big rigs and delivery trucks.
Times have changed, and more and more families have two working parents, whether out of necessity or personal preference. Paid child care services provide supervision, care, and sometimes education to infants and young children.
Child care services were valued at $54.3 billion in 2019 and will continue to grow. From 2020 to 2027, there is an expected compound annual growth rate of 3.9 percent.
During a recession, parents may have to work longer hours or even more than one job. While historically expensive, child care services are still one of the last costs parents abandon. Not to mention they usually make up a significant part of their budget. It’s not just about a safe place to leave your child while you’re at work. For many, it’s the first step of their growth and education.
The real estate industry involves the sale of land, residential, commercial, and industrial properties. But, there are other businesses involving real estate that may also thrive during a recession, like property management or investment firms.
Zillow Group expects that home value will continue to rise, going up 7.8 percent in the next 12 months.
It might surprise you to see real estate on our list when you consider the Great Recession. However, historically speaking, a recession does not always mean the housing market will crash. As of right now, home prices continue to soar, but even if prices drop, it may be the perfect opportunity for investors.
While prices fluctuate short term, the sector is usually more stable in the long run. Real estate even proved to be one of the most pandemic-proof businesses as the housing market boomed.
Millions of businesses and firms seek outside help regarding accounting and other financial information services, as do individuals. With rules and regulations getting more complicated and confusing, consulting experts seems to be the go-to move. Services offered include tax preparation, bookkeeping, and invoice outsourcing.
Worldwide, the financial services market grew from $2.5 trillion to $3.3 trillion between 2010 and 2018.
Even if the economy slows down, it never comes to a full halt. In fact, financial services drive the economy. So, many financial and accounting services continue to do well during hard times.
2022 has been the year of real estate, fueling the home improvement industry as well. As home values go up, it creates excess funds for improving homes for many families. Plus, as homes start to age, they will need to be updated and repaired to maintain value.
The home improvement industry accounted for $538 billion in 2021 and is expected to reach more than $620 billion by 2025.
Certain services this industry provides, such as HVAC repair, electric, and home repair, are necessary even during a recession. AC units don’t care about the economic situation, but many Americans live in areas where you simply cannot live without it. Damaged roofs, leaking pipes, and other issues will still need to be repaired immediately. Home improvement also turned out to be a covid-proof business, with people stuck at home, many decided to fix up their house.
Americans sure do love their pets. The animal care industry is massive and covers many different categories, including medical care, toys, daycare, and more. As people become more educated on animals’ needs and welfare, they are highly aware of where they put their money when it comes to their pets.
The global pet care market is expected to grow to more than 325 billion by 2028, with dog products and services pulling in the highest revenues.
If you believe everything you read on the internet, millennials have canceled having children and are having pets instead. Especially after the pandemic, the pet industry is breaking records, and proper pet care is not something most people are willing to forgo when money gets tight.
Business consulting includes a broad range of professional services other companies need help with, such as strategy, market research, or public relations. Consultants or consulting firms are meant to help their clients by solving specific problems or issues, often saving them money.
From freelancers to large firms, consulting businesses are generating up to $300 billion in annual revenues.
Consulting businesses can stay afloat during recessions because of their ability to be flexible and adapt to market situations. If companies are struggling to make money and you can help them create growth or optimize during a recession, they will want to keep you around. Plus, staying profitable will be much easier with no inventory and little overhead.
The SaaS market has grown at insane speeds over the past ten years and isn’t likely to slow down. Software as a service is delivered via the internet rather than installing complicated software and hardware. As a cloud-based service, the ease, scalability, and security are high, and users typically pay a monthly or yearly fee.
The rapid growth is expected to continue, with the market estimated to be worth about $208 billion by 2023, with US companies leading the way.
The SaaS industry is another with little to no overhead, making them easier for businesses to maintain during a recession. In addition, many of these software are fully integrated into business processes, so companies can’t afford to ditch them during a recession.
Starting an entire business from scratch can be costly, take a while to get things moving, and have no guarantee of success after all your hard work and dedication. A recession-proof franchise can take a lot of the guesswork out of the equation and help you get your business up and running much faster.
If you’re looking for an opportunity for business owners in a sector that will thrive during all economic conditions, a cost reduction consulting franchise with P3 Cost Analysts could be the right move. If you have a passion for helping other business owners and want to help them cut costs during a recession, then you would shine with a cost reduction consulting franchise.