This short guide outlines how to recession proof business as the world copes with the economic fallout of the post pandemic era.
As the world weighs up the cost of the pandemic and associated lockdowns, economic pundits are predicting a rough few years for the nation’s economy and talking about the need to recession proof business.
Unemployment has already risen, millions of workers are on government funded job retention schemes, and the hiring rate has dropped by over 40%. In fact, according to the IMF the British economy alone will slump by 3% this year, making this the start of the greatest recession since the 1930’s.
For small business owners, enormous resilience, agility and patience will be required to weather the storms yet to come. Research by Goldman Sachs shows:
- ⅔ of British businesses are showing decreased revenue
- 44% of British businesses have had to cut jobs
- 75% accessed the furlough scheme
- 80% say they will need further support to avoid more redundancies
While all this would be challenging enough, the great unknown in all of this is when things might start to return to normal. The pandemic’s course next year will depend greatly on the viability of vaccine, and on how long the human immune system stays protective after vaccination or recovery from infection.
Until then, small business owners will need to use every weapon in their arsenal to recession proof business and keep afloat, because at some point the government will have to stop issuing economic support.
Key factors to recession proof business
Agility is the key to survival
When historians look back to these years, they will likely see COVID as a hastening process on what was already occurring: a cultural shift in the way humans do business.
For many businesses who didn’t yet have a website, this has been the time they’ve made that happen to recession proof business. Others have shifted or expanded their offerings in line with consumer demand. Training providers have adopted digital meeting rooms such as Zoom, gin distilleries are making hand sanitiser, local pubs are offering home deliveries.
The key here is to figure out what skills you have which are marketable despite the governmental restrictions on COVID-19. DO you need to invest in technology or training to make this happen and have a recession proof business?
Luck will play a part in who survives
Of course, not every brand has the ability to reinvent themselves for the digital age and become a recession proof business. High street retail, for example, already struggling for many years, will have a difficult time competing with online giants such as Amazon, if their offerings are the same.
Sectors such as travel, dependent on the free movement of people across borders, will also have a difficult time maintaining cash flow when their core business has all but ceased overnight.
“We are already seeing an uptake in businesses who took bounce back loans in good faith but are finding they are unable to repay them,’ commented Tony Smith of insolvency practitioners Company Debt. “With many sectors already struggling due to Brexit, COVID-19 has added a level of pressure which many small businesses simply cannot weather.”
Conclusion
There are no truly recession proof industries because all companies are hit by an economic downturn. However, there are industries that are less affected and can foster recession proof business. These are the industries that generate largely constant profits even in weak economic phases. This mainly includes the utilities (water, electricity and gas suppliers). Since heat, electricity and water are basic needs, it is difficult for consumers to substitute them or to severely limit consumption.
A recession proof business is the Holy Grail in a bad economy. While none of these great businesses are completely recession-proof, they are more stable than most during difficult times.
1. Medicine
People don’t stop getting sick just because the economy is a step ahead. While it is true that financial constraints prevent them from receiving medical care, many problems remain, such as those that require major surgery that is typically treated by humans.
Even during a recession, individual and family stressors increase so that public health in general may suffer more. No matter how you look at it, nurses, doctors, and physical therapists continue to be in great demand, making this a fairly recession proof business.
2. Psychiatry
Psychologists and other therapists may actually be in greater demand during a recession than when the economy is doing well. This is because people are stressed out about their finances, which can lead to a range of other personal and interpersonal psychological issues.
It is no coincidence that the divorce rate increases during a recession, which is why marriage counselors are in great demand. Crisis transformation professionals – especially those who have insurance coverage – may be more secure during a recession than at other times, making that field a recession proof business.
3. Energy
Energy is just as important to human life as food and shelter. We need energy to drive our cars, to heat or cool our houses, and even to take a shower. The need for energy doesn’t go away during a recession, even though people are more interested in preserving it.
In addition, the world is looking for alternative forms of energy and green energy technologies. For example, the “green” industry continues to grow significantly, although the demand for fossil fuels also remains high.
4. Internet businesses
Businesses must compromise their marketing budget when the economy deteriorates. That means they have to be smarter in how they spend it. One solution is to hire website designers, search engine optimization (SEO) experts, programmers, and social media marketers to promote their businesses.
5. Caregiver businesses
As the baby boomers get older, the level of care they need increases. Nursing homes are looking for staff to support this aging population and regardless of what happens to the economy, older people will continue to need care and the field will be a reasonably recession proof business.
Even if they can’t afford it, there are still programs to pay for care. In fact, as more boomers hit 70, the demand for senior care is expected to increase in the coming years.
6. Pharmacy businesses
As people continue to need medication during a recession and insurance continues to cover (in part) the costs, there is a steady demand for pharmacists and pharmacists. Also, more people are being prescribed antidepressants and other stress relieving drugs to help them cope with difficult times.
7. IT
IT businesses are still in great demand, regardless of what happens to the economy. While many jobs can be outsourced, others must remain on-site. Often times, because businesses need to become more efficient during a recession, they seek IT services that have proven to be one of the best ways to optimize business processes.
8. International business
Many companies are building market share abroad and relocating their work to other countries in order to increase revenues and reduce costs. Brands who know how to do business internationally are in great demand.
