Recession Proof: 15 Businesses That Thrive During Recessions

By Wesley
Recession Proof: 15 Businesses That Thrive During Recessions

It’s always been a puzzle to some economists why the overall market has gone boom and bust in a cyclical fashion since the beginning of modern capitalism. Thriving boom cycles last a few years but are followed by deep recessions. Then comes an inevitable rally, recovery, and subsequent boom that begins the cycle anew.

Still, there are certain sectors and kinds of businesses that tend to do well even during a recession. These sometimes even expand while the rest of the economy is contracting and everyone else is scared. We broke down 15 such businesses. Read about them in our list below.

1. Startups

Startups do very well during a recession. Because everyone is cutting costs, prices are lower and startups can take advantage of this situation to get a start with bargain prices on the things they need for their business. It’s the opposite of struggling to raise the money for the sky-high prices that happen during economic booms. Big-budget businesses can afford to pay these. So recessions even out the playing field a little and give the underdog a chance to get in the game.

As big businesses cut spending on the things that startups need to get going, inventories just sit there taking up space and costing money, and companies become desperate to move them. Advertising space, for instance, can also be had at a bargain price for startups during a recession. That initial cost to get to the market can be a big barrier to entry, but for a bargain, it might make sense in the initial cost structure for a new business. They can give themselves a chance to reach the volume necessary to continue even after the recession is over and prices go back up.

Proving that, a fascinating number of major Fortune 500 companies today got their start during a recession. They include 3M, Adobe Systems, Apple, Bath and Body Works, BET, CNN, Chevron, Dave and Buster’s, Disney, Electronic Arts, Exxon Mobil, FedEx, General Electric, Microsoft, Pizza Hut, and Whole Foods.

2. Discount Retailers

As belt-tightening accelerates in a deep recession, discount retailers tend to grow sales during these downturns. Big box discount retailers such as Wal-Mart tend to do well no matter what, But during the good times of a boom cycle, they can lose sales to retail outlets that charge more for higher-quality products.

Their profits will usually either suffer from a loss in sales or a slowdown in growth as these premium-priced products soak up the boom money. Of course, when they choose to go this route, big-box retailers can suffer from a loss in profit margins on the goods they do sell, so a discount retailer is just not positioned to take advantage of a booming economy no matter what strategy it takes.

In a recession, on the other hand, these discount retailers can go back to focusing on their core generic products and use their low prices, economies of scale, and consumer demand for cheaper goods to move massive volumes of inventory and make a sizeable profit. People may not like to shop at a big-box discount retailer, but during a recession more of them do and they buy more when they do. This is also true of thrift stores and recessions.

3. Sin Businesses

So-called “sin businesses” tend to do well during recessions. This isn’t always a guarantee, but in many cases, it is true that “the bad” does well in bad times. Although it may seem these excesses such as drinking or tobacco might be the first thing to go during a recession, people actually spend more on them during a recession as a way to have some simple comforts while they wait out the bust cycle.

All of the big-ticket items like a new car or new clothes tend to go during a recession, and to substitute for those, people buy more packs of cigarettes or more bottles of liquor. Now that marijuana is legal in 29 U.S. states, expect that to be another booming industry during any future U.S. recession because it’s relatively cheap. People turn to sin industry products during a recession as a way of coping and numbing themselves from the general malaise, worries, and stress of a recession, especially if their own livelihood is one of the harder hit industries.

More drinking, smoking, and stress eating of junk food mean more profits for these businesses. Not every sin business prospers during a recession, though. The ones that offer a little comfort and respite for a small sum do well. The more extravagant and expensive vices like gambling tend to do worse during recessions. Gambling is very pronounced in how it rolls with the economy because people feel lucky during a booming economy and unlucky during a bust cycle.

4. Substitutionary Services

Most industries that provide services will see their sales drop during a recession because companies and households are willing to take on more work themselves to save money. They may cut their own grass to save money or clean the house themselves and hire the maid service again when there is more money.

But there is also a certain class of select services that will actually see their sales increase during a recession. For instance, companies that upgrade, retrofit, and maintain existing equipment, infrastructure, and products can do well during a downturn in the economy. People and businesses seek to save money by repairing and maintaining what they already own instead of buying something new.

In the real estate business, for example, there’s an old saying that renovators hire as builders fire. During a recession, the number of orders for new home construction decreases while people looking to upgrade go ahead and have their kitchen and bathroom remodeled. It’s not just real estate in which this general principle holds true. People spend more on maintenance and repairs for their cars instead of buying new ones during recessions.

5. Repos, Collections, and Removal Services

There are a few sectors of the economy that are well-positioned during recessions to act like scavengers, or opportunists. They play their important role in the economy when circumstances warrant and it works out for them during bad times when other sectors are struggling.

Tough times are great news and mean big business for the repossession industry, which provides unsavory but necessary services like repossessing vehicles for its true owner when someone, fails to make their payments. During that 2002 recession for example, repossessions of vehicles jumped as high as 60 percent over the previous year in the United States.

In 2008, during the very worst part of the Great Recession that struck the global economy, an astounding total of 1.67 million automobiles were repossessed for banks and financing companies. That was a 12% increase over the already high repo numbers from the year before when the crisis started.

Junk removal does well during recessions for the same reasons as the repossession industry. More homes are foreclosed as people can no longer pay their mortgage. When that happens, the bank needs to pay somebody to come in and move all the junk out of the foreclosed home if the homeowner skips town and leaves a mess behind. Some of these junk removal companies saw their business go up by an order of magnitude during the great recession.

6. The Three Cs: Candy, Cosmetics, and Contraceptives

Stressed-out American workers always enjoy a quick, easy, and affordable pick-me-up to get them through their day. This is even truer when recession strikes. While sin businesses do well during the recession for this very reason, not everyone indulges in drinking or smoking. But that doesn’t mean they don’t indulge.

Workplace-acceptable ways of blowing off steam include candy. Candy consumption in the U.S. during the Great Recession went into the stratosphere. Cadbury’s profits went up by 30 percent in 2008 and Nestle jumped up 11 percent during that time. Inexpensive, sugary treats that break the doldrums without breaking the bank are perfect for people dealing with hard times. It’s a pattern that’s held true through many ups and downs in the U.S. and global economy. Back during the Great Depression in the 1930s was when several new candies got their starts.

Cosmetics companies and nail salon services also do well during recessions as women look for budget-friendly ways to pamper themselves a little. Some economists even track lipstick sales as an inverse relationship indicator to the health of an economy. Another essentially free way to feel better about life when the economy is down is simply to have more sex, and that’s exactly what couples do. Of course, it can be incredibly expensive if a pregnancy occurs, so contraceptive sales usually get a nice jolt from a lagging economy.

7. The Statics

Of course, there are businesses that don’t necessarily see a significant increase during recessions but don’t see a significant drop either. They might continue their steady growth through a recession. These are the sectors and companies that provide goods for which there is a highly inelastic demand meaning people will buy the same amount even if prices go up (within reason).

These kinds of inelastic product and service businesses include pharmaceuticals, healthcare companies, tax preparation and compliance companies, funeral homes and services, gravediggers, garbage collection and waste disposal, water and other utilities, and others. They may not get the same bump from a recession as the other sectors on this list, but they often get by without taking the same hit to sales that many other non-recession proof companies suffer.

The demand for these goods and services is inelastic because people need them no matter what the economy is like. In a good or bad economy, people still have to pay taxes and remain compliant, they have to use water and other basic utilities, they have to have garbage collected, they get sick and need a doctor, and they die and need to be buried. A good rule of thumb or litmus test for whether a business is in the static category when it comes to recessions is how boring is it? In many cases, the more boring a business is the more likely it is to be one that provides a necessary support function in the economy.

8. Auto Repair and Maintenance

Few people can afford to buy a new car during the recession. Despite the significant role automotive travel plays in our lives, it becomes an unnecessary expense to buy a new vehicle. Driving is a beautiful experience when you have a car that runs well. If it doesn’t leak, creak or stall, and it stops when you want it to, then it’s one less thing to worry about.

To keep your car in such condition drivers look to have the engine in great shape. The engine responds to your needs positively and when it’s neglected, it will refuse to cooperate and stall on the roadside. This is the time when you trust the services of your mechanic and garage. During a recession, the auto repair and maintenance industry rakes in a lot of money. Garages have several clients who can’t afford a brand new car. Due to this, people have no choice but to pay a few hundred dollars for repairs.

Auto repair and maintenance garages rely on giving out the best experience to keep customers. When the customers are fully satisfied with your services they are likely to come back. During recessions, these companies make huge returns on their investments through such customers.

9. Daycare

The benefits of daycare for young children cannot be overstated. The service is a necessity for most of the families when both partners are working. Daycare services offer children many benefits. There are various social, economic and academic benefits for the little ones and their families.

In an economic downturn, it becomes a big challenge for families to keep children in daycare. This is especially true when one partner or both is no longer working. Another factor is that there is someone to take care of the child if that person lost a job during this period.

Studies have indicated that children from the ages of six months to four years benefit from the daycare environment. The advantages include quality instructions, structure and social lessons. Recession can bring depression in individuals and this may have an effect on the children. This is the reason most parents still take their kids to daycare for its safe environment. This applies to those who are working because they can’t manage the children when they have a job.

10. Computer Systems Design and  Services

The growth of automation and internet services has changed the business environment. This industry involves designing, building and/or implementing software and hardware. During previous recessions, there was already a steady growth in the internet. This boosted computer systems design and services, which had to deal with the rise in demand.

The computer systems design and services industry has also changed the way people spend their money. A majority of the customers are now seeking the products that give them value. Some customers have no idea about technological evolution because they have never lived without it. They only know about smartphones, the internet or Google. Digital is their way of life.

In 2009, there was one of the worst recessions ever. Although many industries were affected, computer design and related services come out unscathed during such periods. The reason being was that demand for automation and the internet over the last decade was high. The industry even managed to have a growth rate of double digits during the recession.

11.  Tattoo Artists

While some people see this period as an opportunity to save money, others are the opposite. There are people who still have money for a few luxuries during a recession. A tattoo is something that will last for a lifetime. Those who are unemployed take this opportunity to get tattoos because they no longer have to follow the company’s regulations.

According to the Random Facts website, there are over 20,000 tattoo studios in the United States. There’s a new one opening doors for clients every day. 21% of Americans have tattoos. This consists of 23% women and 19% men. These figures are a true reflection that this industry is growing and does even better during an economic downturn.

The growth of the industry has brought in other related services. The tattoos will last you for a lifetime and people get tired of them. Some individuals get tattoos without really good reasons. Therefore, there are tattoo removal services. For those who got their tattoos after losing their jobs, they may want them removed to get another occupation.

12.  Restoration

Financial problems affect people differently. Some go into depression and others want to express their inner feelings. However, there is always something good to remember about when going through a troubled period like a recession.

Antique restoration involves recreating scrapped items back to their working order. The intention is to refurbish that item back to almost its original state. This business is critical during a recession because it brings back cherished childhood memories. Some people are able to withstand the hardships during this time through such memories. There are also other people who keep a childhood item that they used to play with when life was easier and simpler. Others keep their parent’s objects.

Restoration can be expensive. However, people will fork out the cash just to get their childhood memories. There are many restoration businesses available. Some of the companies do general restoration while others have specialized services.

13. Freelance/Temp Work

Freelancing is a great way of offering your services for necessary income. During a recession, most people and companies look for expert services. This extends to any other period because work still needs to be done despite the state of the economy. This results in getting rid of some employees to save their financial resources. In such situations, they look for someone who does not cost a lot to fill the gap left by the employees.

Lack of sufficient staff can adversely affect the performance of a company. In some cases, they rely on temporary employees to get tasks done. There is usually a set time period in which temporary workers offer their services. Freelancers set the rules and make more money. They sell their services for a fee that’s mutually agreed upon.

Most of the time, there are milestones that are set. They will work per assignment and get paid for doing the task. They can move on to another company for another assignment and have a choice to work with the same company again. There are different fields in the freelancing market. The most common one is the writing market.

14. Fast Food

The food industry is one of the oldest industries that’s still growing. A healthy diet is recommended, but during a recession, most people cannot afford that luxury. During recessions, a quality meal costs a lot of money. People have no choice but decide to eat cheaper food so they opt for fast food.

Fast food is not renowned for its dietary standards but it’s an industry that thrives during recessions. For instance, McDonald’s announced an increase in annual sales during the years of recession. The same results were shown by other fast-food franchises. This goes a long way to show that the fast-food industry reaps a lot of money from customers during recession.

15. Education

During a recession, jobs are lost, but people’s hunger for education grows. Many people go back to school or decide to continue their education when they lose their job. The demand for education increases because people are still optimistic to achieve their goals. People look for the best options to find another job and getting more education becomes a priority.

There’s also high demand for teachers at schools, colleges, and universities. The high demand for online teaching makes it favorable for most people. It’s critical that people manage their finances during a recession, and taking an online course proves to be cheaper.

These teachers normally start with a small number of students before getting more students. Through word-of-mouth, they are able to build up their student numbers to suit a classroom’s capacity. This works well when the teachers start at their place of work. If you are teaching in your area of specialization, then you are in a position to get more students. This supplemental education is a big sector offering financial opportunity to the teachers. In fact, the recession sort of acts as a blessing in disguise because it promotes their field of work.

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