A position in the medical industry, whether you’re a doctor, physician assistant, nurse, or radiographer, is an excellent location to work during a recession.
What is going on in the economy has no bearing on our physical or emotional wellness. Even in a downturn, people will become unwell. Appendixes will break, babies will be born, and accidents will occur.
If you want the most employment stability, a career at a hospital or clinic is a good option. People will get sick and injured, regardless of what happens in the stock market or with GDP growth. They will require medical attention. Many recession-proof occupations are available in the healthcare business.
What opportunities exist in a downturn?
Even the most ardent optimists must now recognize the reality: regardless of how one defines a recession, we are either in one or on the verge of one. We’re officially in recession in the UK, and there’s even talk of a depression. The news and media are full of doomsday projections and dreadful predictions, but for once, they’re all in agreement: the economy is awful, and it’s only going to get worse before we can even hope for a recovery.
Many people and corporations have had their heads buried in the sand for far too long, but even the strongest denialists have had to come to terms with reality, and what they’re seeing isn’t nice. Some people are in a condition of mild to severe panic, fearing that their businesses, plans, and way of life are doomed. Others argue that the media’s grasp of reality has elevated the concept of exaggeration to previously unseen levels. As is often the case, the truth lies somewhere in the middle.
Those expecting a recession to be a minor issue or threat are likely to be disappointed. There are other comparisons being used, but my personal favorite compares a recession to a tremendous storm. Those caught in one will surely be harmed, but the severity of their suffering could range from minor inconvenience to life-altering calamity. It depends on where you are, how long the storm lasts, how exposed you are to its impacts, and how much you stand to lose. The analogy is apt since, other from basic protection and preparedness, it frequently feels as if there are raging elements beyond your control.
However, it is not all doom and gloom, and there is plenty that can be done to not just survive, but perhaps even profit from the recession.
Despite all of the obvious negative effects of a recession, it can also be an excellent time to expand and develop your firm, as many of your competitors will most likely be doing the exact opposite. Despite the seeming fear, consumers and businesses continue to seek solutions to their problems; nevertheless, they may begin to look for greater value. If your product or service meets that need, this recession-fueled demand could become an opportunity for you.
The similar concept might be used to current clients and users. A smaller version of what you normally sell, as well as a cheaper and/or more basic version, can be appealing.
But why confine your analysis to existing markets? Other marketplaces are out there; you just have to look for them. Older people, for example, are less affected by recessions because their mortgages and loans have largely been paid off, and they are not typically salaried. Now would be a good time to tap into these users if there is a means to do so.
A recession can also provide opportunities for businesses to grow their market share, and those who have the bravery and insight to boost their marketing expenses will benefit in the long run. When a company’s income begins to decline, the natural reaction is to reduce spending. And the marketing budget is frequently one of the first to be cut. This is unquestionably a blunder.
Boarding up the windows and shutting off the lights when the number of customers entering your shop begins to decline is a terrible idea.
And, while we’re on the subject of optimism, don’t forget that a recession can shake up any firm. While this may be uncomfortable at first, it can eventually lead to more flexibility, better spending habits, and more creativity.
But, let’s be honest, this isn’t going to happen. You’ll feel ill for three days if you go to the doctor for an immunization and then spend three days shivering in bed as your body builds up resistance. However, recognizing that there is a light at the end of the tunnel can help you get through the pain in the near term.
And don’t forget the obvious: your company not only makes money but also spends it. In a desperate bid to boost revenue, several businesses are lowering prices, resulting in some fantastic offers on software, products, hardware, services, and more. As the economy worsens, don’t make the mistake of ceasing all spending. Spend with caution, make more informed decisions, and take advantage of the available savings.
It’s also a wonderful time to put money into your current supporters. It’s critical to keep their loyalty during these trying times, and a little kindness now could pay dividends in the long run. You already know that recruiting new clients is more expensive than keeping existing customers happy, but are you reassuring and impressing them now, while the going is still good?
Under no circumstances should you abandon plans for new products or services at this time. You could want to put a recession/savings spin on them, but new products and services are just as likely to be popular now as they were a year or two ago for many goods and services. Sales may take longer to come in, but spreading the word and developing a name takes time.
So much for theory and confidence. What should you be doing to ensure that you not only survive but but benefit from the recession?
Begin with your most important asset: your consumers. Now is the moment to learn more about who they are, where they came from, and how the recession may effect them. Now is the moment to establish a regular communication channel with them. And now is the moment to figure out what they want and how to meet those needs. Many small firms take a sloppy approach to invoicing their customers. This is precisely the type of problem you want to avoid during these times, aside from the fact that it is bad business practice. Allowing your customer’s inefficiency or unwillingness to pay on time to run rampant could lead to cash flow issues for your company. It’s a problem that can be difficult to fix, but it’s also one that can be avoided.
Threats or harassment aren’t necessary when encouraging clients to pay on time. However, invoices should clearly state payment terms, and clients should be aware that failing to pay on time would result in additional fees. Why should you be any different? They anticipate this from most of their other vendors, so why should you be any different? However, keep in mind that there’s no need to be overbearing. You certainly don’t want to lose a long-term customer. Make sure the balance is correct.
The next stage should be to think about any and all expansion options. New products or services, new licenses, new pricing models but while we’re on the subject of pricing, don’t just decrease rates to try to boost sales volume. It’s a way too simple plan that, in addition to risking a revenue reduction, can cheapen your company’s reputation and make you appear desperate. Customers require extra reassurance during a recession, so don’t make prospects wonder if you’ll be around in a few months.
And, despite my repeated pleas not to cut marketing budgets or discontinue spending, now is a good time to do so where it makes sense. Saving money on phone calls and utilities, for example, may be found with a little study, and for some businesses, cutting down on unneeded travel can also be a good way to save. All of this should have been done before the financial crisis, but as the phrase goes, better late than never.
However, don’t throw the baby out with the bathwater, as the phrase goes. Switching to a cheaper internet service provider to save a few bucks per month may turn out to be a false economy if your new connection is slow and unreliable. Reduce unnecessary spending, but don’t scrimp on quality.
The importance of cash flow cannot be overstated. Despite the fact that many small businesses believe that such notions only apply to larger corporations, cash flow can be the difference between a company’s survival and death. Using your accountant’s abilities or even software such as QuickBooks, you can get this information right now. Keeping track of cash flow is simple, easy to plan around, and could save your life.
If you anticipate short-term cash flow issues, don’t be afraid to take whatever steps are necessary. Even if your company has always been self-sufficient, borrowing money to fund critical expansion makes a lot more sense than failing to launch a promising endeavor.
Last but not least, a word of warning. Nobody knows how long the current recession will persist, or how our businesses will be affected in the months ahead. Even if your company is doing well or even thriving right now, there will be a lot of change ahead. Most new initiatives require time to develop and implement, so now is the time to take a look around, examine your options, and begin putting ideas into action.
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.
During a recession, who suffers the most?
The groups who lost the most jobs during the Great Recession were the same ones that lost jobs throughout the 1980s recessions.
Hoynes, Miller, and Schaller use demographic survey and national time-series data to conclude that the Great Recession has harmed males more than women in terms of job losses. However, their research reveals that men have faced more cyclical labor market outcomes in earlier recessions and recoveries. This is partly due to the fact that men are more likely to work in industries that are very cyclical, such as construction and manufacturing. Women are more likely to work in industries that are less cyclical, such as services and government administration. While the pattern of labor market effects across subgroups in the 2007-9 recession appears to be comparable to that of the two early 1980s recessions, it did have a little bigger impact on women’s employment, while the effects on women were smaller in this recession than in previous recessions. The effects of the recent recession were felt most acutely by the youngest and oldest workers. Hoynes, Miller, and Schaller also discover that, in comparison to the 1980s recovery, the current recovery is affecting males more than women, owing to a decrease in the cyclicality of women’s employment during this period.
The researchers find that the general image of demographic patterns of responsiveness to the business cycle through time is one of stability. Which groups suffered the most job losses during the Great Recession? The same groups that suffered losses during the 1980s recessions, and who continue to have poor labor market outcomes even in good times. As a result, the authors conclude that the Great Recession’s labor market consequences were distinct in size and length from those of past business cycles, but not in type.
What industries do best during a downturn?
- 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.
In a downturn, who benefits?
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.
Who profited from the financial crisis of 2008?
Warren Buffett declared in an op-ed piece in the New York Times in October 2008 that he was buying American stocks during the equity downturn brought on by the credit crisis. “Be scared when others are greedy, and greedy when others are fearful,” he says, explaining why he buys when there is blood on the streets.
During the credit crisis, Mr. Buffett was particularly adept. His purchases included $5 billion in perpetual preferred shares in Goldman Sachs (NYSE:GS), which earned him a 10% interest rate and contained warrants to buy more Goldman shares. Goldman also had the option of repurchasing the securities at a 10% premium, which it recently revealed. He did the same with General Electric (NYSE:GE), purchasing $3 billion in perpetual preferred stock with a 10% interest rate and a three-year redemption option at a 10% premium. He also bought billions of dollars in convertible preferred stock in Swiss Re and Dow Chemical (NYSE:DOW), which all needed financing to get through the credit crisis. As a result, he has amassed billions of dollars while guiding these and other American businesses through a challenging moment. (Learn how he moved from selling soft drinks to acquiring businesses and amassing billions of dollars.) Warren Buffett: The Road to Riches is a good place to start.)
What happens to high-end items during a downturn?
Regardless of the state of their underlying economies, all corporations seek for growth and excellent earnings. Some, however, fail owing to a lack of understanding of actual customer loyalty, product/service positioning, and/or the contagion that can spread from elsewhere. During a recession, three-quarters of businesses see a drop in sales, but just 14% see an increase in revenue and profitability.
Stocks that are recession-proof are classified as such by institutional investors “Defensive”: enterprises that have been shown to be impervious to economic shocks, with the proviso that their performance during good times is not as stellar as others. In the year leading up to September 2019, Goldman Sachs’ defensive stock index returned 11 percent, while the S&P 500 returned only 1.9 percent.
To be recession-proof, however, a firm must either provide something that is a high enough priority that even the most frugal consumer will buy, or conversely, see demand surge owing to the difficult economic conditions.
The graph below shows the growth of a number of industries throughout the 2008/09 crisis, and it’s evident that a number of them performed well due to their recession-proof properties.
Here are some instances of industries that have shown to be recession-proof. Pay special attention to the behavior that surrounds the product/service, rather than the product/service itself “protection.”
Household Staples: Sustenance
The term “staples” is important since it refers to the basic, everyday products that we require for nourishment and personal hygiene. So, instead of caviar, choose bread and soap over false tan.
To maintain their weight, an adult man and woman need 2,500 and 2,000 calories per day, respectively. This does not change during a recession, and businesses that offer the basic necessities of life will remain unaffected. To overcome a TAM ceiling of population * calories, food firms have decreased the nutritional content of their products over time in order to induce more snacking.
When you look at a consumer goods company like Proctor & Gamble or Unilever, you’ll see that their portfolio is full of household staples and brands that cater to a variety of budgets. Such a strategy assures that they are malleable enough to deal with demand spikes, and that their performance during a recession can fluctuate between consumer preferences while still maintaining overall sales levels.
The same approach applies to businesses that provide personal or household hygiene goods, as well as pet supply stores.
Heritage Luxury Brands: Respected Quality
Despite their high cost, luxury items are remarkably resistant to recessions. A recession can actually lead to more consumers choosing to heritage companies with generations of expertise and brand cache, as their tastes become more sophisticated. The intangible promise of quality, distinction, and long-term worth accounts for a significant portion of the price of a luxury item. For example, luxury timepieces are marketed as heirlooms to be passed down down the generations.
Inflation does not always coincide with recessions, but when it does, demand for luxury items soars since the item retains its worth and does not devalue. Inflation is a problem in Argentina, and businesses are spending every dollar on high-quality inventory to build up large runways as an inflation hedge. This is because they are purchasing products that will not depreciate in value.
Vices: Addictive Pleasures
The easiest approach to define what binds this section together in terms of an economic concept is to put addictive activities together. Because addiction is inelastic, alcohol, nicotine, and gambling are pleasures that can withstand economic hardships. Sugar and caffeine could potentially be included in this category. There’s also the more abstract notion that these hobbies might serve as “escapes,” which can provide much-needed relief to stressed customers during difficult times. Alcohol sales increased by 9% during the US recession of 2008.
Addiction is a difficult topic, but many corporations try to instill euphoria in their customers about their products in the hopes of inducing inflexibility. Consumer intelligence and behavior monitoring have been pushed up to highly complex levels by Internet enterprises. As a way to create addictive loyalty, consider items like social media, the infinite scroll, and in-app purchases in games.
Healthcare: Necessity
Businesses that focus on providing healthcare are generally stable enterprises that are unaffected by economic downturns. This is owing to the fact that health is a mortal problem that must be taken care of and will take precedence over all other expenditures.
This industry has numerous sub-sections, one of which is resident care. The aging demographics of the wealthy baby-boomer group approaching retirement suggest that healthcare spending will remain stable in the future.
Budget Travel: Value
For the past 45 years, Southwest Airlines has been profitable. Low-cost airlines had the effect of fundamentally disrupting the notion of air travel, extending its market reach to previously unreachable lower-income groups; the cost of a trip has decreased by 50% in real terms in the 50 years leading up to 2013.
Budget travel, which includes long-distance bus travel, staycations, and public transportation, is a dependable industry. During upturns, it performs well because to its necessity (those relatives can’t come to see you) and value, which breeds loyalty and greater frequency from frugal flyers. Its popularity grows during downturns as a result of its cost advantages.
Budget airlines’ operational management is critical to their success since they operate on razor-thin profit margins and hence need to have effective and streamlined business procedures. Ryanair, for example, has a fleet of 419 planes, all but one of which are Boeing 737-800s. By using only one plane model, it is possible to keep parts, repairs, maintenance personnel, and all other necessary operations as simple as possible.
Utilities: Protection
Infrastructure that transports goods into our lives is not the most glamorous of industries, but it is one that can withstand any storm due to its necessity. During a recession, the needs for gas, water, electricity, and telephone service do not vary. These industries also benefit from their ties to government regulation, which can either give subsidies or hinder outside competition, providing a cloak of recession-proof protection.
What is the most secure investment during a downturn?
U.S. Treasury bond funds are at the top of the list because they are considered to be one of the safest investments. Investors are not exposed to credit risk since the government’s capacity to tax and print money reduces the risk of default and protects the principal.