Starting a small business is a risky proposition even in the best of times. If you’re thinking about starting one but are worried about how it will fare during a downturn, you might want to consider an industry that can be described as “recession-proof.”
These industries cater to ongoing demand. If a business provides goods or services fitting this profile, its odds of weathering economic storms are better than those that don’t. This is why medical and diagnostic laboratories saw 8.22 percent gains in 2009, a brutal year in the recession in which many businesses had a hard time staying in the black.
Data provided by the financial information firm Sageworks illustrate which industries have proven themselves recession-proof between 2006 and 2011. Sageworks also provided the insight of analyst Libby Bierman to explain why these industries posted gains in difficult times.
The following industries not only survived the recession, but thrived. They are listed alphabetically.
Accounting, Tax Preparation, Bookkeeping and Payroll Services
2010-11 (Combined average): 5.70%
Best year: 2006 (11.14%)
Worst year: 2009 (3.50%)
Just like death and disease, taxes don’t go away just because the economy is bad. In fact, a bad economy is all the more reason for taxpayers to consult an accountant, particularly one who’s skilled in getting refunds for clients.
“We know taxes are unavoidable even during a recession, and most of us need help from an accountant to submit them correctly,” Bierman said. “Accountants’ revenue growth during the recession may have also stemmed from clients who needed their advice to make do with less.”
Beer, Wine, and Distilled Alcoholic Beverages Merchant Wholesalers
2010-11 (Combined average): 3.22%
Best year: 2007 (6.62%)
Worst year: 2010-11 (3.22%)
A Friday night of bar-hopping can easily cost $50 to $100, depending on where it takes place. This type of expenditure may have become harder to justify during a recession, but that doesn’t mean that anyone actually will cut their drinking habits.
“This industry didn’t see much impact during the recession at all,” Bierman said. “It may have been that, even during the recession, consumers continued to purchase alcohol at roughly the same rate as before.”
2010-11 (Combined average): 6.19%
Best year: 2007 (9.23%)
Worst year: 2009 (3.15%)
When the recession was at its worst, the newly laid-off could console themselves with one small ray of sunshine — they now had more time to spend with their children. However, those who managed to remain employed had to keep sending their little ones to day care, and the industry stayed afloat as a result. “For parents who held onto jobs during 2008 and 2009, child care services were a necessity,” Bierman said.
Computer Systems Design and Related Services
2010-11 (Combined average): 17.58%
Best year: 2006 (20.73%)
Worst year: 2009 (6.03%)
This industry includes companies that design, build, or implement software and hardware. It experienced double-digit gains between 2006 and 2011, with the exception of 2009, a bad year across the board for most. Still, its comparatively poor 2009 gain was much better than many other industries could manage.
“With the push for automation and the internet over the past decade, it’s no wonder this industry had more than double-digit-growth most years and even stayed positive during the recession,” Bierman said.
2010-11 (Combined average): 2.84%
Best year: 2008 (7.10%)
Worst year: 2009 (1.36%)
One of the most famous quotes attributed to Benjamin Franklin is: “Nothing can be said to be certain, except death and taxes.” Any business based on such a certainty is virtually guaranteed to weather a recession, and the death-care industry did well accordingly.
2009 was the worst year for the industry, which Bierman believes came down to simple austerity on the part of the bereaved. “Consumers may have tended towards less expensive funerals during the recession, but there wasn’t a problem with demand for death-care services even in 2009,” she said.
2010-11 (Combined average): 2.98%
Best year: 2007 (6.37%)
Worst year: 2009 (1.60%)
Few people express enthusiasm for visits to the dentist. Nonetheless, dentists’ offices did well during the recession, for the simple reason that gum surgeries, fillings and root canals simply won’t wait for the market to improve.
“In good and bad economies, consumers will get cavities and require dental care,” Bierman said. “A toothache can only be tolerated for so long, even if money is tight.”
2010-11 (Combined average): 4.28%
Best year: 2007 (6.12%)
Worst year: 2010-11 (4.28%)
Nursing-care facilities didn’t see much of a fluctuation in their gains between their lowest point in the 2010-2011 period and their highest point in 2007. This demonstrates that even during hard times, they will always be needed.
“The growth of the nursing-care facilities industry, even during the recession, is most likely the result of our aging U.S. demographic,” Bierman said. “Demand wasn’t and isn’t going down soon.”
Outpatient care centers and the home health-care-services industry also did well. In the 2010-2011 period, they posted gains of 7.54 percent and 12.10 percent, respectively.
Physical, Occupational and Speech Therapists, and Audiologists
2010-11 (Combined average): 6.70%
Best year: 2009 (12.57%)
Worst year: 2010-11 (6.70%)
Every industry on Sageworks’ list was similar in that all of them posted their worst gains in 2009. However, the offices of physical, occupational and speech therapists, and audiologists were an exception, and 2009 was the best year for this industry.
“Revenues for this industry are very dependent upon health insurance payouts,” Bierman explained. “These offices wouldn’t have felt the effects of the recession as severely or as quickly as industries with more elastic demand.”
2010-11 (Combined average): 4.65%
Best year: 2007 (7.71%)
Worst year: 2010-11 (4.65%)
Physicians’ offices are similar to dentists’ offices and nursing-care facilities in that they provide an essential service that won’t wait for the economy to improve. “Similar to the other healthcare industries on the list, offices of physicians stayed in the black during 2009 because healthcare isn’t a purchase that consumers can easily delay or reject,” Bierman said. “Sickness doesn’t disappear during recessions.”
Specialty Food Stores
2010-11 (Combined average): 4.92%
Best year: 2007 (7.44%)
Worst year: 2009 (1.32%)
Specialty food stores focus on one type of food, and include meat markets, fruit and vegetable markets and even higher-end organic businesses. One would expect this to be exactly the type of enterprise that would suffer during a recession, but surprisingly, this wasn’t the case.
“This one is a bit of an anomaly,” Bierman said. “You would expect that specialty food stores are more expensive than general grocers and, therefore, less attractive to consumers during a recession. But our data shows that sales for specialty food stores continued to grow during 2009 albeit slower than in 2008 or 2010. Some habits — including some food habits — may have just been too difficult to break.”
“Recession-Proof Industries” was provided by CNBC.com.