As a business owner, the thought of having to potentially navigate your business through a period of recession can be a terrifying prospect to imagine. But, economic downturns and recessions do happen and can affect different businesses on different levels. With this in mind, establishing a more recession proof business can allow you to continue to thrive during recession periods.
Spending habits dramatically shift during a recession, where individuals generally have limited disposable income. Purchases are more carefully calculated and many non-essentials and luxury items are cut right out.
It’s always prudent to be prepared for the unknown impacts of economic slowdown caused by a recession. Although there are no guaranteed recession proof business ideas, there are some businesses that emerge as success stories, seeming to face very little impact and even appearing unaffected by the difficult economic times.
How can you assess your business preparedness for a recession?
An effective way to assess your business is to do a SWOT analysis. This stands for Strengths – Weaknesses – Opportunities – Threats. A SWOT analysis can help in building a strategic business plan for many situations. While business opportunities and threats are external and cannot always be controlled, the strengths and weaknesses of a business are internal and, when identified, can be managed and even adjusted.
While a period of recession may be an external threat to a business, strengths of a business that may be able to strategically counteract this threat may include low prices, products or services considered essential, and the ability to operate online and offer these products or services across borders.
Take some time to complete your business’ SWOT analysis, so you can take stock of the positive opportunities your business has to best prepare for hard economic times or other threats that may emerge.
What businesses do well in a recession?
If you are looking for new business you can start, we’ve compiled a list of different business ideas that have proven to do well throughout an economic recession. We’ve broken them down into three categories, from those seeing virtually no impacts of a recession, those that generally experience a low impact and those having a more moderate impact but are still able to remain active.
There are some businesses and industries that provide much more stability through hard economic times. These businesses, it seems, are able to thrive regardless of the economic situation that exists around them, sometimes even seeing increased demand. Here are a few of those businesses that appear to be recession proof:
As some businesses scale back their workforce to cut costs, they may start to look to outside resources they can utilize for specific projects. When cash flow is limited, it is much more economical for a business to hire a freelancer for a single job than to keep an individual on payroll continually. Freelancers are also able to offer their services across borders, so even if there is a period of recession where you live, there are businesses around the world that may need your services.
When budgets are tight, people will try saving money wherever they can. This means buying in bulk, as well as shopping around to find the best value. Places where people can find their necessities at a low price, such as discount and dollar stores, do incredibly well during a recession.
Another lesson 2020 taught us is that, not only are online stores virtually immune to recessions, but they can actually thrive in hard times. Physical locations can be costly for many stores to maintain, but when you operate virtually, you can ship directly to your customers without the need for an actual store location. Online shops can also be a very easy and low cost business opportunity to start up. In fact, options like dropshipping or starting a Shopify store have very little initial investment needed.
E-Learning and tutoring businesses
It’s been shown that, during a recession, many people seek out options for improving their skills or learning new ones. Bolstering your resume can help you land a better job, even when the economy is struggling. E-learning is a great option for many, because they don’t have to travel and quite often can complete work at their own pace. This is a great business opportunity, as this is a business you can start with very little initial investment, as long as you have the subject knowledge required.
Among the lesser-impacted businesses are those that are considered more essential to people, regardless of the economic situation. Although they may scale back on their spending, it’s still likely that they will continue patronizing these businesses.
People may think twice before purchasing that high-end crib or stroller, but necessities like diapers, lotions and other baby products will always have a demand. Plus, everyone loves buying things for a new baby! Businesses selling baby products have proven they can thrive during recession periods.
No matter the economic situation we’re in, if a parent has to go to work, they will need to find care for their children, if they are not yet school aged. Whether you run a daycare within your home or open a location separate from your home, offering child care services has proven to be a lesser-impacted business when a recession hits.
Even during a recession, many people want to still look and feel their best, and treating themselves with a hair cut or other personal care services can go a long way in relieving some stress and making people feel happier and more confident. This is especially important if someone is on the hunt for a new job and needs that extra confidence boost.
Some businesses, although impacted by the economic downturn, only experience a medium-level of impact and are still able to continue doing business. Although business may slow down temporarily, they are still able to navigate their way through.
Although many products sold at bakeries, including cakes and other treats, may seem like non-essential luxury items, many people tend to find comfort in these treats during stressful times of uncertainty. There are also other items, like bread, that people will continue to buy throughout a recession. Starting a bakery that offers a variety of fresh baked items is a great idea for creating a business that can withstand the economic impact of a recession.
Repair and maintenance services
There is a constant need for repairing and maintaining anything from home furnaces to computers. This does not change during a recession, as even when budgets are tightened, if there are repair and maintenance services needed, something else is likely going to be cut to find the money.
If a car needs fixing, it’s an unavoidable expense. People need their cars for all aspects of life, from getting to and from work, visiting family and friends and getting shopping and errands done. Auto repair costs are one essential that cannot be cut out completely.
If 2020 has taught us anything so far, it’s that cleanliness and sanitation cannot be taken lightly or overlooked. Keeping businesses and homes clean is essential, no matter what the economic situation may be. While some people will opt to do this themselves, many businesses and individuals just don’t have the time to commit to getting this done and seek the services of professional cleaning companies to get the job done.
How to keep business costs low during a time of recession?
Managing costs is always an important factor for any business, but at no time is it more important than during a time of recession. Business activity may slow significantly, directly impacting cash flow, so it’s essential to determine where money can be saved and budgets tightened.
Turning to social media to promote your business and stay in contact with customers is always a great opportunity for businesses. But, when marketing budgets may be strained, social media is the perfect platform to reach out to customers and promote your business at no cost. Plan your social media ahead, so it’s automatically set to post and you can focus on other aspects of the business.
Do it yourself
If you’ve had to reduce staff, it will likely be necessary that all remaining staff take on additional duties that they normally wouldn’t have – this includes the business owner, as well. As an entrepreneur, it’s sometimes necessary to step in and do work that you’ve delegated to others. In tough times, this is one way to save costs on staff or outsourcing work.
Cut out the non-essentials
This goes without saying, when cash flow slows down, you will want to take a close look at business expenses, both current and planned, and evaluate what is necessary. Those things that are considered luxury items can almost certainly be cut or scaled down. For example, if an office remodel is being planned, it may be a good idea to put those plans off for the time being.
Register your business
A period of recession does not mean that the entire global economy grinds to a halt. There are plenty of opportunities to build a thriving business that can withstand the impacts of a recession.
When you’re ready to get started, Ontario Business Central can assist you with registering as a small business or incorporating. There are several differences between the two types of registrations, and different benefits associated with each.
We can assist with registering or incorporating your business in the following jurisdictions:
REGISTER YOUR BUSINESS
INCORPORATE YOUR BUSINESS
At Ontario Business Central, our commitment is to assisting entrepreneurs, as they embark on their undertaking to build and grow a thriving business. If you have any questions about getting started, please reach out to our helpful and knowledgeable staff.
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Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.