BizBen.com
500 New & Refreshed Posts, Postings Daily
Over 8,000 Postings & 2,500 Resources
Assisting Buyers & Sellers Over 25 Years!

Categories

Buying A Business? Top 5 Recession Proof Small Businesses To Consider

The economy has started to repair itself since the recession. While things may never be what they were in the past, the economy and small businesses have started to gain some form of momentum again.  If you are considering buying a small to mid-size business, you should always take into consideration how changes to the economy may impact is success. A recession proof business is typically defined as a business that either thrives or is not impacted by a struggling economy. There is no telling what the future holds for our economy so while I can't say that there is any business that is truly immune to the effects of a recession, there are some that handle the impact better than others.

In this post, I'm going to cover several businesses that I have seen fare well in troubled economic times. Keep in mind that it's not just the type of business you should consider but also how you manage it that will help your company succeed should things get tough again.  So just because you buy a business that is said to be "recession proof" doesn't mean it's untouchable.  You have to manage it well, be prepared for challenges and know how to react when you see things changing.  With that, here's my top 5 list of recession proof businesses.   
   
Laundromats

Even when the economy is struggling, people still need to keep their clothes clean!  In fact, during a recession when consumers have less discretionary income to buy new clothes, they are likely to try and take better care of the clothes they have by washing them regularly so they can keep the same clothing for a while. One of the first services people cut back on when things start to get tight is dry cleaning. They will actually start buying clothing that is washable so they can avoid paying to go to the dry cleaner. On top of that, more and more work places are shifting to casual dress so Laundromats seem to have consistent sales regardless of the economy.

Another great thing about owning a Laundromat is that if your revenue is impacted by a recession, it is likely that you have very little overhead to worry about meeting. Most Laundromats have 1-3 employees at most.  Unless it offers wash and fold services, the employees are typically responsible for collecting money from the machines and for cleaning the facility. If you are functioning as an absentee owner and having someone else do these tasks for you, they are easy and not too timing consuming so you could take them over should you ever need to cut payroll costs.    

Auto Repair Shops

As long as there are cars on the road, there will be a need for auto repair shops to maintain them.  Because of this, I feel that auto repair shops are somewhat recession proof.  Regardless of how good or bad the economy is auto repair is a "need", not a "want." People will always need their cars fixed.  Plus, when the economy is bad, people are more likely to hang on to an old car and repair it then invest in a new one.

Be careful though, the auto repair business is one that really needs to be managed properly in order for it to do well in a recession.  There is a lot of competition in this industry from auto dealers and large franchises.  The key to being successful in any economic condition is to have a good reputation and a base of loyal customers that trust your work.  To create these things, you need skilled workers that know what they are doing and provide high quality services.

Liquor and Candy Stores

This may sound like two businesses that don't belong in the same category, however, they are actually similar when comes to being recession proof.  Both liquor and candy stores are said to be somewhat recession proof because when the economy is down people will still indulge in certain vices as a means of feeling better about what's going on.  When it comes to liquor stores, consumers may change the quality of the product they are drinking but they will still continuing consuming alcohol in some capacity. Also, as consumers cut costs by going out to dinner less, they opt to stay in for dinner and mimic the dining out experience by accompanying their in-home meal with something from the liquor store.

As far as candy stores are concerned, some of the major candy retailers reported record profits following the recession. While some may think that candy consumption would be negatively impacted by a recession the opposite is true. Consumers turn to candy as an inexpensive treat to help them feel better during tough times. It is also an affordable luxury that consumers can give as gifts when higher priced items are unattainable.

Repossession And Collection Companies

This one is a no brainer! During a recession small businesses that specialize on collecting payments owed to lenders, flourish. While some people may see this industry as one that capitalizes on other's misfortune, in my opinion, it's simply the law of supply and demand. When times get tough and people start defaulting on their loans, the lenders need someone to get the money back that they are owed.

Because of the negativity that often comes with a career in this industry, buying a small business that specializes in repossessions or collections may not be for everyone.  For the right entrepreneur it could be a really good fit that turns out to be very profitable. Before buying a business in this industry, you really need to understand what you are getting into and decide if you're cut out for it.

Elder Care Facilities And Funeral Homes

Some people may be taken back by the fact that I'd also mention these two businesses together but the fact is you can't stop the life cycle. No matter what is going on with the economy, the Baby Boomer population is continuing to age and creating a demand for both of these businesses. They are starting to need assistance with day to day tasks and some are to a place where they need regular assistance on a daily basis in the form of an assisted living facility.

Again, as I mentioned before, these two industries are not for everyone. So while both elder care and funeral homes can be lucrative, it takes a very compassionate individual to own and operate both of these types of businesses. To be successful, you have to be passionate about working in these industries and understand that you are dealing with people's loved ones during a very stressful time.

Closing Thoughts

While I've pointed out my top 5 businesses that are typically not as impacted by a recession, there are definitely others that could have appeared on this list such as high end retailers and other services that cater to the higher income population which are often not affected by recessions. Regardless of the economy, people with a lot of money will continue to spend it.

Also, if you are looking for other ideas for recession proof businesses to invest in, think about businesses such as accounting firms, taxes don't stop when we're in a recession. Think about businesses that provide services that a consumer has to have.  Businesses that are impacted the most are those that offer goods or services that are considered to be unnecessary items.

As I said earlier, the businesses I've mentioned here have a better chance of being recession proof verses some others, however, regardless of the industry, no business can be recession proof if you don't manage it well. As a small business owner, there are several things you can do to help recession proof your business no matter what industry you are in. This includes:

Continue to network and implement a marketing plan - When things get tight, don't cut your marketing budget to save a few bucks. Getting your name in front of potential customers is more important during a recession than any other time.

Watch your business closely - Track expenses closely and determine if there are any unnecessary items you can cut. Watch your cash flow and stay on top of money that is owed to you. Start the collections process as soon as it is over 30 days past due.

Try to add value to your products or services before increasing your prices - If things get tough for your company your knee jerk reaction may be to increase your costs to compensate.  Well chances are if you're feeling the pinch of tough economic times, your customers are too.  If you increase their prices, you're likely to push them right out your door and into your lower priced competitor's business, so add value instead of cost and make your business indispensable to customers.

#photo#About: Peter Siegel, MBA is the Founder & Advisor (ProBuy & ProSell Programs) at BizBen.com (established 1994, 8000+ California businesses for sale, 500 new & refreshed postings/posts daily) working with potential business buyers, business sellers, brokers, agents, investors, & advisors). Reach him direct at 925-785-3118 to discuss strategies regarding buying, selling, (or financing a puchase of) a California businesses.

Categories: BizBen Blog Contributor, Buying A Business, How To Buy A Business

Contributor:

Peter Siegel, MBA
Areas Served: Nationwide - All Areas
Phone:  925-785-3118 Cell, 925-785-3118 Text
Peter Siegel, MBA - Founder Of BizBen.com (over 25 years), I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I advise/coach buyers, sellers, and brokers daily about buying & selling small to mid-sized businesses throughout the Nation. I can be reached direct at 925-785-3118.

Comments & Feedback From Pro Intermediaries & Pro Advisors On BizBen:

Posted By: Joe Ranieri, Business Broker: LA, Orange Counties, California    

The salon and beauty industry is another recession proof business, because in hard times for the consumer it is often the last thing they will let go. According to Professional Beauty Association "Not only did the salon and spa industry provide much needed job growth during the sluggish last decade, it is poised to post steady growth well into the future. According to the Bureau of Labor Statistics, the number of personal appearance jobs is projected to increase 15 percent between 2010 and 2020, slightly above the rate of growth of total U.S. employment (14 percent) during the same period." People will always have to get their haircut, it's like having clean clothes, and many people will move their finances around to keep their hair dyed.






Place A Posting To Sell Or Buy A Business, Search All Postings


Sell A Business Fast: Place A For Sale Posting Now To Sell A Small Business - 7 Programs To Select From >
Find A Business To Buy Fast: Place A Wanted To Buy Posting Today - Best Way To Find & Buy A Business >
Search Business For Sale & Wanted To Buy Postings On BizBen - 500 New & Refreshed Postings Daily! >

Other Related Blog Posts, Articles, And Discussions You May Be Interested In

Reason For Not Selling Business What Are Some Possible Reasons My Broker Didn't Sell My Small Business?

What are some reasons a business that was previously on the market with another broker didn't sell? Every broker or agent understands that not every business they list will result in a sale. There can be many reasons small businesses don't sell and many are discussed on this BizBen Discussion post.
Business Buyers Biggest Mistakes What Are Buyers Biggest Mistakes? The Pro's Examine 25 Of The Most Common

A business buyer in our ProBuy Program searching to buy a small business asked me to sum up what I thought the biggest mistakes business buyers make when they search for and bought a small business. I asked ProIntermediaries on BizBen their thoughts on the matter and received a diverse response.
8 Questions To Sellers 8 Questions You Most Likely Will Be Asked When Selling Your Small Business

When selling your small business, you'll be bombarded with questions - from the brilliant to the ridiculous. You need to be prepared. Here are some of the key questions you can expect to be asked. Tim Cunha (SF Bay Area Business Broker) reviews many of these possible questions from potential buyers.
Pocket Listings Pocket Listings: Vast Hidden Market Or Myth With Business Buyers & Sellers?

What percentage of businesses for sale that are advertised and/or sold are pocket listings? What is the best way to find out about pocket listings? Are they advertised? Are they a big part of the businesses sold marketplace? In this Discussion ProIntermediaries and ProAdvisors discuss this topic.
Buying A Health Club Successfully Working Out A Deal: Things To Consider When Buying A Boutique Fitness Gym

First thing you may be asking, what is a boutique gym? Simple, a boutique fitness gym is on average much smaller than your typical large-scale gym, ranging from 800 to 2,500 sq ft. In this BizBen blog post, Joe Ranieri (Southern California Business Broker) discusses this topic for gym buyers.
Disclosures Needed For Business Buyers What Do I Need To Disclose To All Prospective Buyers Of My Small Business?

When selling a small business you always run the risk of a lawsuit. They aren't as common as one may think in this litigious world in which we live in, but whenever there is money exchanging hands & attorneys involved the stage is set for a lawsuit. Various ProIntermediaries share their viewpoints.
Coin Card Laundry Business Valuations What Top Key Factors Contribute To Coin & Card Laundry Business Valuations?

We are finding that many laundry buyers and investors are not being given true light to selected elements of value or there are inconsistencies in the interpretation of these elements of value. This common error needs to be addressed. In this BizBen Discussion we address many of those factors.
Should Buyers Take Control Before Closing? Should A Buyer Be Allowed To Operate A Small Business Before Escrow Closes?

Business buyers, brokers, owner/sellers all ask this question at some point. So I decided to ask some of the top Intermediaries in the California marketplace what they thought of the idea. Most of the ProIntermediaries on BizBen agreed with me on taking early possession before the close of escrow.
Business Brokerage Questionable Practices Sellers: Watch For These Business Broker Questionable Practices

Lee Petsas (Southern California Business Broker) shares his concerns regarding some questionable business practices by some California Business Brokers lately. Other Business Brokers and Advisors weigh in as well on this BizBen Blog post with other "dirty tricks" they have observed and heard about.
Latest Business Broker Survey 6 Successful Traits Of Top California Business Brokers: New BizBen Survey

The latest BizBen.com survey of California Business Brokers and Agents outlined what it takes to be a top ten percent performer in the business brokerage industry. From good communication to utilizing your resources, these traits are something to take note of and put into practice to be successful.