Every entrepreneur should keep an eye on economic trends. Certain events can have a rippling effect on your business. For example, if a customer loses their job or takes a pay cut, they might not be able to buy your products or services.
With that said, there are certain industries I predict are more likely to survive an economic downturn. As a general rule of thumb, the most recession-resilient industries produce necessary items. I specialize in information technology, marketing and e-commerce, so I'm paying attention to these trends.
From my perspective, a few of these industries include:
• Grocery and discount stores: Grocery and discount stores provide much of the food that people eat, as well as staple items such as toothpaste, laundry detergent and clothing. Even during a recession, people still need to buy essentials. For example, you still need to brush your teeth, replace the garbage bags in the kitchen, etc. This is why I predict these stores will remain relatively stable should the economy take a downturn.
• IT development and troubleshooting: As an IT executive, I've also seen that during difficult times, tech roles such as cybersecurity are still needed to help protect businesses in a variety of sectors.
• Alcohol: This is often considered a recession-resilient industry, though recessions could mean less consumer spending in restaurants and bars. According to The Post and Courier, more people were buying alcohol from stores and drinking at home during the 2008 recession.
• Health care: Nurses and doctors are always in demand. People have to see doctors in the case of an emergency and primary care for basic maintenance. "The Great Recession had little negative effect on job growth in healthcare compared with its effect on the national economy," according to a report by the U.S. Bureau of Labor Statistics.
• Assisted living and health aides: This ties in with health care, but as many people age, they need support from medical professionals, whether because they've fallen ill or have been injured. Business Insider recently reported (subscription required) "home health aides saw a 17.8% increase in jobs during the Great Recession," which is why I predict this industry will also remain resilient in an economic downturn.
• Cosmetics and beauty: Although consumer spending tends to decline during recessions, according to Reuters, beauty products tend to be an exception. If a person likes makeup, I predict they will stick to the brands they like, while others will stick to the necessities, such as sunscreen in hot climates.
How can you recession-proof your business?
Despite the resiliency of these industries, it's important to note that even sectors typically considered "recession-proof" should take steps to protect themselves in an economic downturn.
No matter what industry you're in, I have a few recommendations to help your organization prepare:
Identify your business's strengths and highest-earning projects. Run the numbers and identify which products and services are the most stable in your company. Then, invest the resources you have into these successful projects. Specialization is a traditional strategy toward turning a profit, and you might find this approach helpful during a recession.
Find out where you can thrive during an economic crisis. I believe there is always an opportunity in a recession. Think about if there are any sectors you can serve with decreased consumer spending in mind. According to Entrepreneur, when people cannot afford traditional items, new firms can enter the field and cause technological or social disruptions. AirBnB is cited as one example; temporarily staying in a home or apartment helps travelers save on the costs of hotels or rentals. Another example would be a firm that specializes in bankruptcy.
Make changes to provide customers' necessary products and services. As illustrated above, people still need a certain amount of products and services to live, no matter the circumstances. Is your business able to provide necessary products and services? Are they relevant to the industries that are recession-proof? If not, then you need to add relevance and necessity.
Reduce unnecessary expenses. I always recommend seeing which overhead costs and expenses are hurting your bottom line. In times of recession, negotiate with landlords, water and energy facilities, and suppliers for discounts. See if certain office perks such as gym memberships are being used. Identify inefficient operations relative to your return on investment.
Find alternative cash flows. This applies both to for-profit and non-profit businesses in the case of low revenue and customer conversions. If you qualify, apply for government and nonprofit grants that can help make up any deficits. Reach out to investors and shareholders to strengthen those relationships. If your business involves raising funding from donors, increase the efforts within budget.
Pay off debt. You should crunch numbers regardless of the economy's state, but it is especially important during a recession. This is a time when many homeowners, borrowers and businesses default on loans. As a business owner, you do not want that to happen. If you default, your credit is destroyed and you are sent to collections. Prevent this proactively by seeing how much debt you have, and reduce it as much as possible. Pay off credit cards in full and contact your bank about alternative payment plans on mortgages and asset loans.
During an economic downturn, times are tough, but your business can survive. Don't panic. Instead, prepare for a potential downturn well ahead of time.