The Best Businesses To Start in a Recession

These businesses keep producing revenue even when the economy has turned

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Starting a successful small business is difficult in any economy. Starting one in an economy verging on a recession can seem close to impossible. The key is finding a type of business that is recession proof.

Learn what makes businesses recession proof and a few ideas for businesses you can start in any economy.

Key Takeaways

  • Look for businesses that have demand no matter what the economy is doing.
  • Keep your overhead low so that you can stay afloat even if revenue falls.
  • Health care, residential housing, and trades such as auto repair and plumbing are examples of industries with inelastic demand.
  • Make sure you only start a business if you’re an expert and are financially stable.

Why Are Some Recession-Proof Businesses?

To figure out what businesses are recession proof, we need to invert.

Note

For businesses to survive a recession, they must provide a product or service that is not cut out of consumer budgets. That means any luxury item or “want” doesn’t qualify.

“I suggest selecting a business that will always have demand no matter the economy,” said Certified Financial Planner Lawrence Pon via an email with The Balance, about starting a business during a recession. According to Pon, who is also a tax advisor, tax planning is one of those businesses.

That said, if you can’t start the perfect type of business, Pon recommended keeping costs down. “A way to make a business recession proof is by keeping expenses low. If you have a low overhead, then you will not need as much revenue,” Pon said. “This also applies to personal expenses; if you have high personal expenses such as a large mortgage, expensive car payments—basically living beyond your means—you will be more vulnerable in a recession.”

Businesses To Start in a Poor Economy

Here are some ideas for businesses that can survive and potentially even thrive in a poor economy.

Rental

The classic way to start a rental business is buying a condo or townhouse and renting it out on an annual, seasonal, or monthly basis to a tenant. This business can be incredibly successful, and if you purchase in the right area, can thrive through a recession as people look to rent when they can’t afford to buy. But it requires a lot of capital to start. The IRS also offers a number of tax benefits to renting a residential property, including depreciation and deducting certain expenses.

There are now more ways than ever to start a rental business. You can rent a room in your home or a vacation house online for periods as short as a day and as long as a year. You can rent your car to people when you’re not using it. You can even buy and rent out other large equipment.

Note

Always do what you can to screen tenants. One bad tenant who steals equipment or wrecks a property can throw years of cash flow down the drain.

You can screen tenants by checking credit scores, background reports, interviewing employers and references, and charging a security deposit.

Professional (Doctor/Lawyer/CPA/Dentist)

Professional services will always have demand. People may stop eating out or cancel cable during a recession, but most won’t stop going to the doctor or paying to get their taxes prepared.

The problem here is barrier to entry. Each of the four types of professional business requires licensing, education, and apprenticeship that takes years to complete. If you are already licensed and have a thriving network, don’t be afraid to set out on your own if your firm cuts back in a recession. However, going back to school to become a doctor, lawyer, or dentist is a big undertaking. You shoud be sure you’re comfortable and willing to spend the time, effort, and money necessary to do so.

CPAs can use a franchise, and doctors and dentists can often join existing practices where they either buy into a partnership or work as a contractor.

Auto Repair/Handyman/Seamstress

Budget constraints often cause people to repair items that they otherwise would have replaced. Button-down shirts that have frayed get mended, appliances that don’t quite work get repaired, and cars end up at the mechanic.

Unlike the professional businesses, you may be able to learn a good repair skill in your spare time online or at a trade school and open up a small business as a form of supplemental income.

Service-Disabled Veteran-Owned/Minority-Owned

Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) and minority-owned businesses can compete for set-aside government contracts. For example, Veterans Affairs hospitals have construction contracts that can only be bid on by SDVOSBs.

Convenience Store

People have to buy food and will likely still buy alcohol and tobacco products in a recession, but for most people, grocery-store barriers to entry (capital to rent or buy the property, capital to fill the shelves, contacts to supply enough food) may make it too hard for a first business.

However, convenience stores such as 7-Eleven can typically be started with far less capital. 

Hairdresser/Barber

Perhaps surprisingly, hair salons and barbershops are also considered a recession-proof business. According to the U.S. Small Business Administration (SBA), hair salons are one of the best businesses to start in a recession. Sixty million Americans get at least four haircuts every six months.

What To Remember Before Starting a New Business

The biggest factor when you start a business shouldn’t be the status of the economy; it should be your own skills, experience, and financial health.

If you have what it takes to start an electrical contractor business or to start a tutoring service, you may be successful even if the economy is in a recession. If you don’t have the skills but start a hair salon or auto repair service just because it’s supposed to do well in a recession, you likely won’t do well.

Frequently Asked Questions (FAQs)

Is it a bad idea to start a business during a recession?

It’s a bad idea to start a business during a recession if you have no prior experience. If it’s the right time for you, you have the competence, and you can line up customers to earn revenue, go for it.

What businesses do well during a recession?

Recession-proof businesses or industries are those which have inelastic demand. Health care, consumer staples, and transportation are all examples of industries whose demand does not change based on the state of the economy.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. “Publication 527 (2020) Residential Rental Property.”

  2. U.S. Small Business Administration. “Veteran Assistance Programs.”

  3. U.S. Small Business Administration. “What Are Recession-Proof Franchises?"

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