It’s hard to start or operate a business, especially during a recession. That’s why people in an industry with an unpredictable market look for protective measures to weather the storm of economic downturns. Even if you started your business during a strong economy, a recession could quickly turn that successful business into a sweet memory.
Some businesses, on the other hand, are essentially recession-proof. That means they either provide goods and services that people always need (perhaps even more during a recession), or their earnings are always low to moderate, so they always have to take extra precautions with their business strategies.
No matter the current financial health of your business, you never know what’s in store several years from now. In this article, we’re discussing some of the most popular recession-proof businesses and ways that you can learn from them to prepare yourself for the fluctuating economy. At VP Legacies, we believe in the power of communication. By learning how recession-proof businesses communicate effectively to maintain their cash flow and keep employees on board, you can learn how to help your company succeed in even the worst of times. By building personal connections through your communication strategies, you can help keep your business recession-proof.
Is there such a thing as a recession-proof business?
The short answer to that question is yes. During a recession, people turn towards cheaper product alternatives and certain financial services for assistance.
If at one time someone shopped at a luxury boutique for their clothing, they may now turn to an outlet or department store. If they originally went to custom furniture manufacturers, they’d likely turn to retail furniture stores during a recession.
We will always need and want things, but where we get them will change during a recession. The best recession-proof businesses are discount purveyors who offer cheaper items at a lower price in whatever industry.
Examples of recession-proof businesses
As we mentioned, the best recession-proof businesses are the ones that take an expensive offer that someone else has and they present it at a discounted price. That doesn’t necessarily mean that you need to lower your prices during a recession in order to stay afloat.
When audiences transition to a more affordable alternative, they’re likely to choose one they’ve already heard about. That means that the key to staying recession-proof is taking control of communication. Learn more about how recession-proof businesses use internal and external branding to prepare for tough years.
Food and Beverage
People need to eat regardless of what’s happening in the economy, but they don’t have the means to dine out as often. High-end restaurants take a significant hit during a recession because people stop eating out and start cooking at home more often. For that reason, grocery stores are also a solid business model during a recession.
The grocery chain Hannaford owes its success to decentralized leadership. The 1980s recession hit many businesses in New England hard, but the company expanded into New York State and its profits increased to 18%. Its socio-technical model meant that both managers and employees had a say in hiring, pay scales, and rules – making sure that everyone felt heard. Because this fostered strong personal connection, employees were more likely to stay.
We see more and more of these stores pop up all over the country. They are second-hand stores that offer clothing that is either previously worn or improperly designed. When people don’t have a lot of money, they turn to places like these to get their clothes. If you’ve ever heard of the clothing stores Gabes or Marshalls, these are great examples.
TJ Maxx and Ross outperformed the entire retail industry during the Great Recession because they provided significant discounts. This has influenced the retail industry as a whole, causing consumers to expect deals and discounts constantly. When you enter either store, you’re likely to see advertisements reminding customers they’re doing themselves a favor by shopping there. In other words, customers feel valued when they get a bang for their buck.
Other businesses can extrapolate from this business model the principle of rewarding clients and customers. Instead of simply lowering prices, brands can use clear messaging to remind clients or customers why they chose them. By developing a communication strategy that clearly breaks down the services you provide and why they’re valuable, you can remind clients that they’re getting a good deal.
This strategy also applies to employees. You want your employees to feel just as valued as your customers since they’re the ones who keep everything running. Providing ample benefits and offering resources to attend training and conferences are just a couple of ways to do this.
There will never come a time when things don’t break, and your car and home will always need someone to come and fix something. For contractors and mechanics, people are actually more prone to fixing something instead of replacing it during a tough economy. Areas like electronic and appliance repair struggle immensely during a good economy, but they thrive during a bad one.
This factor is also true for automotive repair. The LA Times shared an article about a $36 billion increase in sales at automotive shops between 2010 and 2011.
Places like Jiffy Lube can thrive during a recession because people will still get their oil changed. The company will advertise coupons and discounts to bring people in (meanwhile, their prices are still higher than your local garage).
These businesses prosper because they feel absolutely necessary. In your branding, you should emphasize how your products or services are vital for expansion. By presenting your brand as a necessary tool instead of a nice-to-have perk, you’ll create a sense of urgency. But remember not to be too pushy. Like a good auto technician, you should present yourself with hospitality. Use branding to show the utility of your bottom line and to build personal connections with potential long-term clients.
Related: Crisis Management for Businesses
The impact of a recession on businesses
Economists define a recession as two consecutive quarters of negative economic growth. During a recession, we’ll experience job loss, income decline, reduction of manufacturing, and a reduced amount of spending in the marketplace.
Recessions impact all businesses big and small. For large businesses, stocks and dividends fall. When this happens, the investors who hold that stock may sell it and move their money to another stock that is performing well. This will only hurt the large business even more, which will lower the price of the company stock.
Accounts receivable for both large and small companies will struggle as well. If customers are struggling to make ends meet and stay afloat, they will have a hard time paying bills, which can reduce or slow down revenues. Bankruptcies increase during recessions. From retail advertising and repair industries, we learn how rebranding your products and services in the context of a recession can show relevance. In turn, this helps your accounts payable remain stable.
Employee layoffs are common, and businesses will try to get more work out of each individual. This may lead to burnout and low morale by the employees left behind. Not to mention the employees who are without a job collecting unemployment benefits due to their layoff. As we can see in grocery employee management at Hannaford, communication between employees is vital to retain their trust. Whether to relay bad news or keep them at your company, communicating with true empathy can help you maintain your good name and stay afloat.
Tips for recession-proofing your business
While there is no straightforward answer to recession-proofing your business, there are some things you can do.
- Rebrand to focus on a discounted business model
- Emphasize the ‘necessity’ of your business
- Run with low overhead (people are less prone to judgment during hard economic times)
- Involve employees in crisis conversations and strategic decisions
- Minimize benefit cutbacks for employees
- Do not cut back on internal or external marketing
Is there another recession on the horizon?
As of the publishing of this article, the US economy is doing fine. Consumer confidence is relatively high, people continue spending money, and things are good. Does that mean this will last forever?
Of course not. There are always warning signs, such as the recent international trade tariffs and political disagreement about financial policies.
Do we know if there is another recession coming? No, but using the tips in this article for strategic communication and branding during a recession will help you stay prepared. To consult with our skilled communication strategists, connect with us to find out more.
Related: 9 Reasons Why Your Employees Are Your Most Valuable Asset