Posted on: April 14, 2020 |

Starting and running a business can be rewarding, but it’s also risky. The success or failure of your business depends on you, but also on the economy. Those concerned about an impending downturn in the economy might wonder about businesses that stay steady or perform well during recessions. While many factors go into a business’s performance, some businesses are very close to “recession-proof.” During the 2008 recession, and during the COVID-19 recession, sales have stayed the same or increased for these businesses. If you’re looking for a low-risk start-up, take a look at these 6 recession-proof businesses.

6 Recession-Proof Businesses For Savvy Entrepreneurs

Economic principles can help in determining a recession-proof business. Not all industries are equally affected during a recession. Goods and services that fall into the following categories tend to hold steady or even perform better in a recession 

Substitutions: Low-cost substitutions of higher-priced products allow consumers to save money during tough times. (Ex. Generic brands compared to name-brand products)

Inexpensive luxuries: Many people don’t have disposable income during a recession to splurge on expensive luxuries, so inexpensive ones fill the void in the meantime. (Ex. candy, spas)  

Grocery items: Expensive restaurants are also hard to afford during a recession, but food is a staple, therefore more people cook at home and shop at the grocery store. 

Discount stores: Clothing and some household items are also essential for a modern lifestyle, yet these are tough to afford in a recession. Therefore, discount stores tend to perform better than high-end stores. (Ex. thrift shops, consignment stores, dollar stores)

Vices: Stress goes up during a recession, and the consumption of vices goes up right along with it. (Ex. Alcohol, cigarettes)

Resale businesses: Tough times can require quick cash, which widens the demand for resale businesses. (Ex. Ebay, pawnshops, consignment stores)

Repair: When buying new is too expensive, consumers make do with repairs. (Ex. car mechanic shops, electronics repairs)   

Needs: A recession doesn’t change the fact that humans need food, water, shelter, cleanliness and medicine. Industries that serve these needs are truly recession-proof in even the worst of times. (Ex. pharmaceuticals, trash collection, utilities)   

Industries in the above groups can be recession-proof (or as close to recession-proof as possible), however the type of business is not the only factor. A recession-proof business should have steady demand, low volatility, and low risk. This means relatively low up-front investment and costs, in addition to residing in a reliable industry. If you want to start or invest in a business, but you’re concerned about the effects of recession, consider the following. 

1. Ice and Water Vending 

Ice and water vending businesses combine several factors from the recession-proof business list. Ice and water are needs; they keep perishables cold and, of course, give us water to drink. The circumstances of a recession don’t change the demand for needs. Ice and water vending machines also supply cold, clean water that might not always be available at home without extra purification. Finally, ice and water vending machines provide more supply at a lower price than convenience stores, while still being fast and easy. This puts them in an affordable substitution category in addition to a need. 

2. Thrift Shop 

Thrift shops also fall into multiple categories in the recession-proof businesses. A thrift shop might also operate as a consignment or resale shop, offering customers a way to resell items when in need of cash, as well as an affordable alternative. If you buy and resale upscale items, such as designer clothing or purses, a thrift shop can also be an inexpensive luxury, offering “retail therapy” in stressful times. Thrift shops also have relatively low startup costs, requiring only a small space, initial inventory, and business savvy. 

3. Repair Shop 

If you have skills repairing electronics, appliances, cars, or other relatively expensive goods, a repair shop might be your ideal business. This business requires little in the way of upfront investment, and is mostly dependent on your skill. Though a storefront can help, you can most likely run this business from your home. 

4. Candy Vending

Candy is one of the few consumer products that actually sells better in a recession. For some, candy is a stress-relieving vice, for others an inexpensive luxury, for many it’s both. Investing in candy vending machines can be a low-cost way to take advantage of this recession-proof business opportunity without the need for a storefront. 

5. Spas and Salons 

Getting a manicure, massage or a new hairstyle also helps to relieve stress during difficult times. These expenses often take the place of more expensive self-care efforts, like vacations or expensive clothing, so they don’t sink drastically with a recession. These businesses also require relatively low cost. A savvy hairstylist can run a business from their home with the right licenses and fixtures, or a group of experts might collaborate to invest in a storefront. 

6. Bar 

If you have a talent for mixing drinks, brewing beers, or making spirits, you may have the makings of a successful, recession-proof business. With the right location, licenses, some inventory and a bit of ambiance, you can set up a neighborhood bar, pub or tavern. You might start with drinks alone, serve coffee in the morning and drinks at night, allow customers to bring in their own food, or collaborate with a restaurant to serve food without taking on the extra work. There are many ways to run this type of business, and plenty of space to find a model that works for you. 

No one can say for certain that your business will be recession-proof, but working with products that perform better in a recession and utilizing relatively low upfront investment will improve your odds and reduce your risk. Look carefully at your location, make sure you have the business skills as well as the passion to run your business, and you will continue to thrive in any economic conditions.