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What business does well in a recession?

Who’s afraid of the big bad recession? Unless you live under a rock, you have heard economists and business leaders talk about the potential recession – or possibly that we are already in one! But not every business is affected negatively by market downturns. Knowing what companies do well in recessions may help you reposition your team for resilience or growth.

Discount and cost-conscious businesses

Budget-friendly products see revenue growth during recessions as consumers become thrifty. We are already seeing this as sales shift from premium boneless skinless chicken breasts to whole chickens.

Strategic Takeaways: If you are a premium product or service, now is a great time to introduce a budget-friendly alternative to cater to sensitive groups. If you are already a discount business, you are poised to do well in a recession. Prepare yourself for growth in market share.

Consumer staples

Food, water, and utilities must be purchased constantly. Consumer preference may shift from premium boxed meals to essential cooking ingredients, but steady demand exists nonetheless.

Strategic Takeaways: If you are in consumer staples, your business should hold steady during a recession. Take advantage of high unemployment to hire great talent. Use the downturn in demand to purchase automation equipment at discounts.

Clinicians and medical service providers

Medicaid and Medicare are recession-proof customers, so clinicians and medical businesses will do well through most downturns (pandemics aside.)

Strategic Takeaways: If your customers are clinicians, focus your sales effort on that market since it will be more resilient to the downturn.

Gyms, Bars, and Education providers

Unemployed workers find themselves without an outlet for their time and energy. This energy is often directed to self-improvements like physical exercise, education, and skill development; or self-destruction like alcohol and drugs. If you provide services or products in either market, you may find a short-term burst in demand.

Strategic Takeaways: Prepare some self-improvement products or services. For example, you could create web-based learning content to drive revenue or an informative podcast to build brand awareness. If you operate a bar or cannabis dispensary, prepare for a surge in demand and serve customers responsibly to avoid problems.

Government contractors and grant recipients

US government spending is recession-proof, and 2022 is no exception. Build Back Better allocated trillions of stimulus dollars over the next several years regardless of economic conditions.

Defense is another area of steady spending, so defense contractors should see little disruption.

Grant funding also remains a viable source for both for-profit and not-for-profit organizations.

Strategic Takeaway: Consider what government funding your business is eligible for. Visit Sam.gov for a list of federal programs or your state’s economic development center for local opportunities. Check out grant opportunities, too, often available through your local SBA small business development center.

Business best practices at the beginning of a recession.

In addition to shifting your business toward a more recession-proof market, consider implementing the following best practices for companies entering a downturn:

  1. Increase the frequency of your financial forecasting.
  2. Secure cash through presales, debt financing, or equity financing.
  3. Lock in long-term contracts.
  4. Lower inventory through discounting or scrap sales.
  5. Proactively cut under-performing staff members rather than wait for layoffs.

Most importantly, work with your team of managers and advisors to navigate the fast-changing environment.

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