Buy a Recession-Proof Business

A common question I get asked, especially in the current economic climate is what’s a good business to buy in a recession?  While no business is truly "recession-proof," some industries tend to fare better than others during economic downturns.

Here are a few examples:

Healthcare:

The healthcare industry is generally considered to be recession-proof since people will always need medical care, regardless of the economic climate.  In fact, during economic downturns, people may cut back on other discretionary spending in order to prioritize their family’s healthcare needs. Additionally, government healthcare programs and health insurance companies tend to provide a reliable source of revenue for healthcare providers, even during tough economic times.

Education:

Education is an investment in the future, and people tend to prioritize their own and their children’s future prospects even during recessions. Additionally, people may use economic downturns as an opportunity to retrain or learn new skills to make themselves more marketable in a tougher job market. For this reason, businesses that offer education and training services, such as community colleges or trade schools, tend to fare well during recessions.

Essential goods and services:

During economic downturns, people tend to cut back on discretionary spending in order to focus on their basic needs. Businesses that offer essential goods and services, such as groceries, housing, communication and utilities, tend to be more resilient during recessions since people will always need these things regardless of the state of the economy.

Discount retailers:

When times are tough people tend to look for ways to save money, and discount retailers often offer cheaper alternatives to more expensive products. For this reason, businesses that offer low-priced goods and services, such as dollar stores or discount clothing retailers, tend to do well during recessions.

Repair and maintenance services:

During recessions, people tend to hold onto their possessions for longer instead of buying new ones. This means that there is often a higher demand for repair and maintenance services, such as auto repair or appliance repair, as people seek to extend the lifespan of their existing possessions. This can make businesses that offer these services more resilient during economic downturns.

It is sometimes said that alcohol and cosmetics are recession proof as people will want to drown their sorrows and look good doing it.  Is this true?

Alcohol sales may see a temporary increase during the beginning of a recession, as people may turn to alcohol as a coping mechanism. However, this trend may not be sustainable as people cut back on discretionary spending as the recession progresses. In addition, if the recession is severe enough to result in widespread job loss, people may cut back on alcohol consumption simply because they cant afford it and it’s a lower priority than food, shelter etc.

Cosmetic businesses may also see a temporary increase in sales during a recession, as both men and women try to maintain an outward appearance of success to remain competitive in a tough job market. However, this trend is not sustainable, as people will cut back on discretionary spending in the long term. Additionally, cosmetic businesses tend to be more sensitive to changes in fashion trends, and these can be costly to consumers, which may also impact their sales during a recession.

 While the industries we’ve talked about may be more recession-resistant than others, it's important to remember that no business is completely immune to economic shifts. All industries will feel the impact of a recession to some degree.