If you’ve ever worried about the stability of your income during an economic downturn, starting a recession-proof business could be the solution. A recession-proof business remains largely unaffected by the ups and downs of the economy, and service-based businesses that fulfill essential human needs often provide steady demand and income regardless of what’s happening on Wall Street.
In this article, we’ll explore some service-based business ideas perfect for surviving and thriving through any recession. Keep reading to find an idea that matches your skills and interests.
What makes a business recession-proof?
A recession-proof business is one that continues to thrive even when the markets are down, unemployment is high, and/or other businesses are at high risk of failing. There are a few factors that can help protect a business throughout any recession or economic upheaval. Here are the main elements:
Businesses that provide essential products and services
Businesses providing products and services that people always need, no matter what the economy is doing, are more likely to be recession-proof. This includes verticals like health care, auto repair, and financial services because people will always need medical care, a working vehicle, and help managing their money.
Businesses that deliver affordable and high-value goods
Recession-proof businesses also tend to provide products or services that are both affordable and deliver high value for the price. While people may cut back on luxuries during a recession, they continue spending on reasonably-priced necessities that offer a lot of bang for their buck. People are even willing to occasionally treat themselves, even if the economic outlook is dire, as long as they feel that they are getting good value for money.
Businesses with a strong existing customer base
No matter what vertical you’re in, if you have a well-established and loyal customer base it can insulate your business from economic ups and downs. Satisfied repeat customers provide stability for every company. They continue to spend even when times get tough because they already value what the business offers.
Business with low operating costs
Even the most popular business providing the most necessary products and services can run into trouble if expenses outpace income. Businesses that keep operating costs low and run efficiently without excess waste or overhead are better set to survive a recession. Lower costs mean lower prices for customers and higher profits for the business, which is a win-win during any economic circumstances.
Top 10 recession-proof small business ideas in the service industry
The service industry, in particular, contains many recession-proof opportunities. Home and business cleaning services, pet care services, and tutoring and education services can all attract customers even in difficult times. If you provide essential, affordable services and keep costs under control, your business is more likely to weather any financial storm.
Here are some of the top recession-proof small business ideas in the service sector:
Healthcare and personal support services
Healthcare services like nursing, physical therapy, and home health aides are always in demand. To a lesser extent, people also continue to use hair stylists, dog walkers, and personal trainers, even if they have to cut back on some other areas of spending.
Accounting and tax services
Taxes are a constant no matter what the economy is doing, and so are business obligations to manage payroll and keep accounting records accurately. As a result, tax preparation, bookkeeping, and payroll services remain steady during recessions.
Grocery and food-related businesses
People have to eat even if the economy has taken a nosedive, so grocery stores, meal prep services, and food delivery businesses are good options. Although people might cut down their spending on high-end, food-related luxuries, bakeries, catering companies, and restaurants that provide affordable fare tend to weather recessions well.
Insurance and financial services
While people may adjust their coverage details, they need insurance during every economic situation, and financial guidance can be even more in demand when the economy is down and people seek expert advice for making the most of their money. Insurance brokers, financial advisors and planners provide necessary services even in downturns.
Home and vehicle repair
The stock market might be plummeting, but customers still need to fix a leaky roof or repair their car. Services like plumbing, electrical work, lawn mowing, auto repair, and locksmithing are always in demand because the need is urgent and unrelated to the economy.
Education and tutoring services
Private schools, tutoring services, test preparation, and career coaching often thrive during recessions, because many people decide to go back to school, seek additional training, or think about a career pivot when jobs are scarce or they’ve just been laid off.
Legal and security services
People and businesses still need security and legal help even when money is tight, so these verticals tend to be insulated from economic shocks. Security systems installation and monitoring, private investigation, process serving, and many legal services remain in demand during downturns.
Cleaning and maintenance services
Businesses offering residential and commercial cleaning services, carpet cleaning, landscaping, and pool cleaning are largely recession-proof, especially those that focus on basic and essential activities, because these services are necessities for homes and businesses.
Funeral and bereavement services
Unfortunately, people continue to pass away during recessions, so there’s no option to skip paying for funeral services. Funeral homes, crematories, and related services remain in demand regardless of economic conditions.
How to recession-proof your existing business
If you’re already a small-business owner, you’ll want to know how to recession-proof your existing business, rather than which type of business to open. No matter what vertical you’re in, there are steps you can take to protect your revenue, secure your cash flow, and improve your chances of surviving, and even thriving, through a recession. Here are the main steps you need to know.
Build strong customer relationships
Your loyal, long-term customers are your lifeline during an economic downturn. Double down on customer service all the time, not just during a recession. Make sure your clients know how much you value them by sending small perks and personalized messages at intervals and offering loyalty programs and incentives for referrals to keep them engaged.
Diversify your revenue streams
It’s never a good idea to rely on a single source of income. Instead, look for ways to generate revenue from multiple complementary sources. For example, a pet grooming business could offer pet sitting, dog walking, or pet food delivery in addition to grooming. This way if one stream slows down, the others can help make up for it.
Keep tight control over costs and spending
Go over your budget with a fine-tooth comb and cut any unnecessary expenses. If you have an office or business premises, consider downsizing or eliminating unused office space. Managing cash flow is critical, so extend payment terms with creditors if possible, and renegotiate with vendors and suppliers to get the best possible rates.
Build up emergency cash reserves
If you don’t already have an emergency fund, you should start building one now. Every business should aim to have at least 3 to 6 months of operating expenses in savings, so you have a financial cushion in case revenues take a major hit. If possible, set aside money from each payment you receive to build up your reserves.
Maintain a line of credit
Having access to a line of credit or business loan provides a safety net if your cash reserves start to run low. Work with your bank or lender to establish or increase your business’s line of credit before a recession hits. That way credit is available if you need it, so you won’t suddenly find yourself in desperate need of cash with no way to access it.
While no business is 100% recession-proof, taking these proactive steps will help ensure yours survives and thrives.
Prepare a business that can survive any recession
So there you have it, several service-based recession-proof business ideas to give you stability and peace of mind the next time the economy starts looking shaky. By focusing on essential services, building a loyal customer base, keeping costs low, and providing great value, you’ll have a business that can weather any economic storm.