Crisis Survival Kit: Recession Proof Businesses

If a rising tide lifts all ships, then our economic low tide should be hurting every business right now. Think again! Some businesses are thriving.

Benjamin Tomkins, Contributor

February 4, 2009

2 Min Read

If a rising tide lifts all ships, then our economic low tide should be hurting every business right now. Think again! Some businesses are thriving.Taken as a whole, times are grim for all businesses and smaller business in particular. According to the ADP Small Business Report out this morning, 175,000 jobs went missing from small businesses in January. That's the third consecutive month of decline in for small businesses. If you expand ADP's measurements to companies with up to 500 employees (the Mid-Market), the job loss leaps to a numbing 430,000 lost last month alone.

Now those numbers are disheartening for business owners faced with laying off valued employees as revenue shrinks and for workers seeking jobs and worried they're about to lose theirs. But the downturn is hardly uniform. There's probably no such thing as a truly recession proof businesses, but some business functions and industries are clearly more immune to the downturn than others.

Scott Shane, a professor of entrepreneurial studies at Case Western Reserve University, posted a statistical analysis over at Small Business Trends that found a number of businesses posting 20% gains on multiple indices including employee head count and payroll. Based on this analysis (click through he's got spreadsheets of data) of the last two recessions, here are the business categories that perform in a recession:

  • Banking-related functions (maybe not in this recession though)

  • Accident and health insurance

  • Health practitioners

  • Business consulting

Shane distills his analysis of why some businesses do well in a recession to these three points:

  1. Even in a recession, some industries grow at a gazelle-like pace across a variety of different dimensions.

  2. Relatively few industries that do well during one recession tend to do well during other recessions.

  3. Insurance, health care, and consulting tend to be recession-resistant industries for people running small businesses.

BusinessWeek's less statistically based analysis concludes that business catering to frugality do well in a recession. That means anything focused on repair or value -- think auto repair, cobblers, and discount stores -- but trade schools and bankruptcy lawyers are also sitting flush.

That some business fare better than others in recession is hardly surprising, but let's look beyond survival to who's making hay in these conditions. Anita Campbell recently posted a profitability couplet at Small Business Trends that rounds up the 30 most profitable small businesses in 2008 and the top 10 most profitable business in a recession (by margin, which rose from 11.5% to nearly 17%). Among the most profitable:

  • Financial Investment

  • Schools and Instruction

  • Ambulatory Health Care Services

  • Professional, Scientific, and Technical Services

  • Personal Care Services

  • Land Subdivision

  • Specialized Design Services

  • Management, Scientific, and Technical Consulting Services

  • Computer Systems Design and Related Services

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