Cash is the lifeblood of your company. If you run out of money, you’re in the red, not making a profit, and you’ll have to close your doors. As a result, you must guarantee that the revenue is included in your accounts receivable.
Follow up on late payments and communicate with consumers who are unable to pay for your products or services. During a recession, there are occasions when people may not be able to pay the full amount, but you must inquire to see if they can. Collections should only be used as a last resort and, preferably, not at all. Someone’s credit could be damaged, and they could not return.
What should businesses do in a downturn?
Make arrangements for financial help. Examine the possibility of obtaining a small company line of credit. To keep your firm afloat, apply for small business grants and small business loans. Small business loans like Kabbage might make the difference between survival and bankruptcy.
What businesses thrive during a downturn?
What makes the list of recession-proof business ideas may surprise you. These are, nevertheless, items and services that are in high demand even amid a downturn. In a terrible economy, here are 12 good businesses to start:
Baby products
Baby items are one of the recession-proof sectors. After all, just because you have a kid when the recession hits doesn’t mean you won’t need diapers and bottles.
Many parents will cut back on their personal spending before cutting back on their children’s purchases. Children’s items are usually recession-resistant, even if they aren’t completely recession-proof.
During a difficult year, parents may not be able to spend hundreds of dollars on goods for their children at Christmas, but they will still buy gifts. Babies grow quickly and require new clothing on a regular basis. And, come September, youngsters will always want a new pair of shoes to wear to school.
Consider creating a business that caters to children, particularly babies, if you want to start a firm that can weather a recession.
Food and beverage
The food and beverage businesses are also recession-proof. People still need to eat, even amid a downturn. People will splurge on certain small things even if they cut out on splurges like eating out at restaurants. During a recession, food store sales, confectionery sales, and alcohol sales all tend to rise.
Why do these recession-proof firms continue to prosper even when times are tough? Because they are regarded as “affordable pleasures” during difficult times! As a result, people will continue to treat themselves to these products before making a larger purchase.
Did you know, for example, that Snickers and Mars Bars were created during the Great Depression? This demonstrates how much sugar we crave when our stress levels raise.
People prefer to dine at home, thus grocery stores are a wonderful industry to be in. That implies they’ll devote more time to preparing meals at home. And, of course, people will always require toothpaste, laundry soap, and other essentials, regardless of the economy.
Retail consignment
One of the first things people cut back on when times are tough is new clothing. However, this does not mean that people are willing to give up their passion for shopping.
During the last recession, sales at secondhand stores increased by 31% while sales at other merchants decreased. Indeed, the thrift store frenzy persisted long after the recession had passed. Furthermore, buying worn garments is just as popular as buying new ones.
People frequently try to save money by buying used electronics, jewelry, musical instruments, and other items. In a difficult economy, retail franchises and other second-hand shops, such as pawn shops, are good enterprises to establish.
Courier and delivery services
Mail will always be required. As a result, courier and delivery services are among the most recession-resistant industries. Courier and delivery services are less susceptible to recession than other industries.
Even if sales are down, there is still a need to dispatch packages. And, as more people resort to the internet to buy and sell used items, the need for delivery is only going to grow.
Some companies may even choose to outsource their courier services. So, whether it’s pouring, sunny, or in the midst of a recession, delivery services are always in demand.
Childcare / daycare
Remember how I claimed that baby things are recession-proof earlier? This is also true in the case of daycare. When resources are tight, it can be difficult for parents to pay for things like childcare, but it’s one of the last things they cut out. This is especially true if both parents work or if the family lives in a single-family home.
Even if a parent loses their job or has to reduce their working hours, they will maintain their children in childcare. There are numerous advantages for younger children to remain in a safe and secure setting, particularly when there is a lot of change that they may not comprehend. As a result, childcare services are one of the recession-proof businesses.
Health and senior services
According to the Bureau of Labor Statistics, healthcare and other services for seniors are predicted to expand by 23% by 2024. This is a service area that has been quickly increasing during the previous decade.
As more members of the Baby Boomer generation reach retirement age, demand is expected to increase. Seniors will continue to require assistance with fundamental requirements as they age, and this is unlikely to change in the event of a recession.
Even if they don’t live in a nursing facility, elders may need to hire a caregiver to help them around the house or run errands. So, basically, any sector that works with elders can be excellent recession-proof business opportunities!
Technology and IT
Quarantines and social isolation, on the other hand, have demonstrated that technology will be even more in demand in the next years. Telecommuting and working from home are only going to grow in popularity, especially now that so many companies are understanding the benefits of doing so and saving money on overhead expenditures like rent.
As firms everywhere look to improve their telecoms, the popularity of working from home is anticipated to increase demand for enterprises that cater to IT. Even doctors are urging patients to call instead of traveling to the hospital, citing the benefits of technology.
Technology-enabled at-home services and businesses are also becoming recession-proof.
Repair services
Things break down even in the best of circumstances. Something will always need to be repaired, no matter what! During a recession, consumers may opt to repair rather than acquire new items, or at the very least postpone purchases as much as possible. Repair services are one of the best businesses to start in a difficult economy because of this.
Repair services for essential products, such as auto mechanics, roofers, and plumbers, are likely to see just as much work during a recession as they do when circumstances are good. When opposed to organizations that are more specialized, automotive services that offer a wide range of services do particularly well during a recession.
Cleaning services
No, I don’t mean that home cleaning services will become more expensive during a downturn. Other regions where cleaning services are legally needed likely to be recession-proof. A cleaner is required in any job, including banks, office spaces, classrooms, hotels, and lobbies.
Typically, these services are contracted out to a cleaning agency. Even if a company has to reduce its workforce, it will require a cleaning. Corporate cleaning companies are regarded as recession-proof businesses since they generate a consistent stream of revenue even when the economy is in decline.
Accounting services
Accounting services are another industry that will continue to be in demand even when times are difficult. In fact, during a recession, their services may be even more in demand as organizations look for methods to cut costs.
Businesses will need to pay their bills and maintain track of payments and earnings even during a recession. The individual who knows the numbers is unlikely to be fired. If you’re skilled with numbers, accounting or starting a similar firm could be one of the finest recession-proof businesses to start.
Freelance services
When a recession strikes, businesses turn to freelancers as a cost-effective alternative to recruiting full-time workers. As a result, freelancing is one of the most recession-resistant professions to consider.
The best part is that you can diversify your services to generate numerous revenue sources. You could, for example, work as a virtual assistant and freelance writer. This manner, you’re not reliant on a single source of revenue for your entire income! Check out our guide on how to get started freelancing if you have no prior experience.
Pet care business
In 2020, the national pet industry’s sales surpassed $100 billion for the first time in history! As a result, pet care and supplies have been proven to be recession-proof enterprises. Another encouraging and heartwarming statistic is that 54% of pet owners would rather spend less on themselves so they could spend more on their dogs!
Despite the economic downturn, veterinary appointments, grooming sessions, and vital pet goods thrived. So, if you’re looking for recession-proof company ideas, think about these areas!
Which industry is immune to the downturn?
A recession-proof business can be extremely profitable for people in both good and bad times. Whatever the state of the economy or the stock market, certain company concepts, such as those listed below, have a good possibility of succeeding despite the rest of the financial doom and gloom.
Many well-known or historically successful enterprises were founded during economic downturns. The Walt Disney Company was created in the late 1920s, at the commencement of the Great Depression, and the Hewlett and Packard electronics company was founded in the late 1930s, during the second recession.
Rising interest rates and shifting GDP pose far less of a threat to the finest recession-proof enterprises mentioned below than they do to most other businesses, with many of them having the ability to do even more business than usual.
Food and Beverage Business
Because everyone still needs food and drinks to live, the food and beverage business is one of the most recession-proof industries. Because it is not a luxury that can be put aside in difficult times, enterprises in this area can thrive even in a downturn.
In a downturn, what sells?
- While some industries are more vulnerable to economic fluctuations, others tend to do well during downturns.
- However, no organization or industry is immune to a recession or economic downturn.
- During the COVID-19 epidemic, the consumer goods and alcoholic beverage sectors functioned admirably.
- During recessions and other calamities, such as a pandemic, consumer basics such as toothpaste, soap, and shampoo have consistent demand.
- Because their fundamental products are cheaper, discount businesses do exceptionally well during recessions.
A recession favours whom?
Question from the audience: Identify and explain economic variables that may be positively affected by the economic slowdown.
A recession is a time in which the economy grows at a negative rate. It’s a time of rising unemployment, lower salaries, and increased government debt. It usually results in financial costs.
- Companies that provide low-cost entertainment. Bookmakers and publicans are thought to do well during a recession because individuals want to ‘drink their sorrows away’ with little bets and becoming intoxicated. (However, research suggest that life expectancy increases during recessions, contradicting this old wives tale.) Demand for online-streaming and online entertainment is projected to increase during the 2020 Coronavirus recession.
- Companies that are suffering with bankruptcies and income loss. Pawnbrokers and companies that sell pay day loans, for example people in need of money turn to loan sharks.
- Companies that sell substandard goods. (items whose demand increases as income decreases) e.g. value goods, second-hand retailers, etc. Some businesses, such as supermarkets, will be unaffected by the recession. People will reduce their spending on luxuries, but not on food.
- Longer-term efficiency gains Some economists suggest that a recession can help the economy become more productive in the long run. A recession is a shock, and inefficient businesses may go out of business, but it also allows for the emergence of new businesses. It’s what Joseph Schumpeter dubbed “creative destruction” the idea that when some enterprises fail, new inventive businesses can emerge and develop.
- It’s worth noting that in a downturn, solid, efficient businesses can be put out of business due to cash difficulties and a temporary decline in revenue. It is not true that all businesses that close down are inefficient. Furthermore, the loss of enterprises entails the loss of experience and knowledge.
- Falling asset values can make purchasing a home more affordable. For first-time purchasers, this is a good option. It has the potential to aid in the reduction of wealth disparities.
- It is possible that one’s life expectancy will increase. According to studies from the Great Depression, life expectancy increased in areas where unemployment increased. This may seem counterintuitive, but the idea is that unemployed people will spend less money on alcohol and drugs, resulting in improved health. They may do fewer car trips and hence have a lower risk of being involved in fatal car accidents. NPR
The rate of inflation tends to reduce during a recession. Because unemployment rises, wage inflation is moderated. Firms also respond to decreased demand by lowering prices.
Those on fixed incomes or who have cash savings may profit from the decrease in inflation. It may also aid in the reduction of long-term inflationary pressures. For example, the 1980/81 recession helped to bring inflation down from 1970s highs.
After the Lawson boom and double-digit inflation, the 1991 Recession struck.
Efficiency increase?
It has been suggested that a recession encourages businesses to become more efficient or go out of business. A recession might hasten the ‘creative destruction’ process. Where inefficient businesses fail, efficient businesses thrive.
Covid Recession 2020
The Covid-19 epidemic was to blame for the terrible recession of 2020. Some industries were particularly heavily damaged by the recession (leisure, travel, tourism, bingo halls). However, several businesses benefited greatly from the Covid-recession. We shifted to online delivery when consumers stopped going to the high street and shopping malls. Online behemoths like Amazon saw a big boost in sales. For example, Amazon’s market capitalisation increased by $570 billion in the first seven months of 2020, owing to strong sales growth (Forbes).
Profitability hasn’t kept pace with Amazon’s surge in sales. Because necessities like toilet paper have a low profit margin, profit growth has been restrained. Amazon has taken the uncommon step of reducing demand at times. They also experienced additional costs as a result of Covid, such as paying for overtime and dealing with Covid outbreaks in their warehouses. However, due to increased demand for online streaming, Amazon saw fast development in its cloud computing networks. These are the more profitable areas of the business.
Apple, Google, and Facebook all had significant revenue and profit growth during an era when companies with a strong online presence benefited.
The current recession is unique in that there are more huge winners and losers than ever before. It all depends on how the virus’s dynamics effect the firm as well as aggregate demand.
How can I keep my company in Covid?
Take advantage of these seven contingency and business planning recommendations to keep your firm healthy throughout the coronavirus outbreak and well-positioned for success once it’s done.
How do small businesses fare during a pandemic?
The coronavirus has caused unprecedented retail and business closures in the United States and around the world. Policy mandates, downward demand movements, health concerns, and other issues have forced stores, factories, and many other companies to close. Because owners are unable to pay ongoing bills and survive the shutdown, many of these closures may be permanent. Small enterprises all over the world are expected to be severely impacted.
Because the government does not share timely business-level data, the early implications of COVID19 on small businesses and entrepreneurs remain unknown. This research solves this issue by using monthly Current Population Survey (CPS) microdata files to estimate the number of business owners. I explore how COVID19 affected small company owners in mid-April 2020, the first month to capture the widespread shelter-in-place regulations in the United States, using these current data. The analysis is then expanded to span the next two months, when several states that had restrictions began to ease them.
The Bureau of Labor Statistics (BLS) uses the CPS data to track unemployment rates, and it has been utilized in prior studies to look into the factors that influence company ownership (e.g., recently, Fairlie & Fossen, 2019; Levine & Rubenstein, 2017; Wang, 2019). The CPS records the business owner’s current work activities as well as whether or not the business is currently operational. The number of active business owners can thus be recorded in the statistics, but there is no means of knowing if the closures are temporary or permanent. Many of the inactive business owners, on the other hand, are likely to close their doors permanently, especially if the COVID19-induced slump continues. Even brief closures brought on by the epidemic are troublesome because they reflect income losses for business owners during the months when they are not operating.
From April 2020 CPS microdata, this study gives the first estimates of COVID19’s early stage effects on small business owners. Because to COVID19 rules and health and economic-driven demand shifts, the number of working business owners fell from 15.0 million in February 2020 to 11.7 million in April 2020. The highest reduction on record was 3.3 million active company owners (about 22 percent). The losses are significantly greater when conditioning on working 2 or 4 days each week (28 percent and 31 percent , respectively). The total number of hours worked by all business owners has decreased by 29%. Despite the fact that incorporated enterprises are more growth-oriented and solid, they had a 20% dip from February to April 2020.
Alarming findings emerge when patterns are examined across gender, race, and immigrant status. African-Americans suffered the greatest losses, with 41% of active company owners being black. Latinos also suffered significant losses, with 32 percent of business owners ceasing operations between February and April 2020. Immigrant business owners saw a 36 percent decline in business activity, while female company owners saw a 25 percent drop in business activity.
Using these findings as a foundation, this study extends the examination of COVID19 consequences into the second and third months after extensive shelter-in-place restrictions across the country, in May and June 2020. The study answers if there were more small business closures or if there was a partial comeback as small business owners attempted to reopen or partially reopen. According to the statistics, there was a partial rebound from April 2020 levels in May, as well as a second rebound in June. From February to May 2020, the number of active business owners rebounded by 7 percentage points, resulting in a 15% decline in business activity, and an additional 5 percentage points rebound in June, resulting in an 8% drop in company activity.
The disproportionate effects of COVID19 remained into May and June, according to patterns across gender, ethnicity, and immigrant status. African-Americans continued to suffer the most losses, with 26 percent of active company owners losing their jobs in May and 19 percent in June. In May, 19 percent of Latinx business owners were idle, and 10% of Latinx business owners were inactive in June. Immigrant business owners saw a 25 percent decline in business activity in May and an 18 percent drop in June.
The only exception was agriculture, which had a significant reduction in the number of active business owners in April. COVID19 caused a significant drop in the number of active business owners in construction, restaurants, hotels, transportation, and personal/laundry services. Simulations show that the high concentrations of female, black, Latinx, and Asian firms in pandemic-affected industries contributed to these groups’ larger business activity losses in April than the national average. Most industries had a moderate recovery in May and June.
Overall, the first estimates of COVID19’s impact on small businesses from the April 2020 CPS show that losses were spread across demographic groups and types of businesses, indicating that no demographic or business type was immune to the negative effects of social distancing policy mandates and demand shifts. They do, however, show a partial recovery for all categories. Although there is no way of knowing whether these business closures will be permanent at this time, each month of inactivity has an impact on these enterprises’ sales, profits, and employees.