The economic shutdowns and overall uncertainty of the last year and a half has left us all taking stock of our financial situations, compelling many to look for ways totake back control oftheir financial destinies. There has been a substantial increase in web searches for recession proof and pandemic proof business opportunities.
Unfortunately, the truth of the matter is there is really no such thing as either recession proof or pandemic proof. Many industries that previously thought they were recession proof found that not to be the case when the world changed around them last March. While no business was left unaffected by the global economic shift, some businesses proved to be resistant in the face of economic crisis, benefiting from constant demand and generating steady revenue despite shutdowns and lower customer spending.
Here are a few questions to ask to help you determine if the business opportunity you are evaluating is both recession resistant and pandemic resistant.
How to identify a recession resistant businesses opportunity:
- Is the service offered a necessary or discretionary expense?
When times get tough, discretionary expenses are usually the first things households cut. Trendy business concepts like frozen yogurt shops and fitness studios are often the first to feel the impact of a recession as those expenses are easily trimmed from the budget. Some restaurants fare recessions better than others, but in times of severe economic distress many will decide to eat at home rather than incur the expense of eating out.
Other expenses are necessary and while it may be possible to delay the expense for a short period of time the expense will ultimately have to be incurred. Electricalor plumbing services are good examples of a necessary expenses that typically can’t be put off for long periods of time.
- Is there a recurring need for the service?
To really improve a business’s ability to weather a recession, you should also be looking for recurring revenue. Using the examples above, the challenge with electrical or plumbing services is that once the job is taken care of, there is little need for the customer to use your service until the next time they have a problem. This means the business needs to constantly find new customers in order to maintain revenues.
On the other hand, businesses with recurring need are able to maintain revenues through client retention which, when done well, is far less costly than acquiring new customers. Two good examples of services that are both necessary and recurring are haircuts and lawn maintenance. Both hair and grass continue to grow no matter the economic condition and therefore need to be maintained on a consistent basis.
- Is the service easy to self-perform?
Digging deeper into the lawn maintenance example, residential lawn customers may opt to maintain their own lawns to save money in a recession.Commercial customerswould find it very difficult to do the same and generally continue to contractthat service out to ensure their landscaping gives them a competitive advantage. Similarly, haircuts are rarely self-performed and typically fare well in times of economic uncertainty.
How to identify a pandemic resistant business opportunity:
- Does the service require close physical interaction?
While haircare franchises checked all of the boxes above, this is where they began to struggle last year.In nearly all states, businesses that require close physical interaction with theirs customers were required to shut down for a period, some much longer than others. Even after being allowed to reopen they found that many customers had grown used to longer hair and were more comfortable stretching times in between haircuts.
Commercial landscaping on the other hand, was deemed to be an essential service by the governments of 49 out of 50 states. When business properties are not maintained it presents a public safety issue and due to the nature of the service it can be performed while following social distancing guidelines.
- Can elements of the service be performed outdoors?
Businesses of all types pivoted last year to make their offerings more attractive to customers who were cautious about entering enclosed spaces. Al fresco dining reached new heights in popularity, yoga and fitness classes began to pop up in open public spaces and even services like haircuts were performed in parking lots outside of their retail establishments.
Still, businesses that offer services that are designed to be performed outdoors offer long term advantages in a future of uncertain customer sentiments.
- Can elements of the service be performed virtually?
Even in businesses like commercial landscaping where services are typically performed outdoors there are elements, like sales calls, that are typically performed in a face-to-face environment. The data tells us that consumer attitudes will drive change here. A recent Harvard Business School article suggests that up to 70% of B2B decision makers now prefer virtual human interactions over face-to-face interactions.
With that in mind, companies in B2B service industries who are able to develop an effective virtual sales program stand to benefit. Remote prospecting, virtual sales presentations and using tools like Google Earth to measure and bid properties will all lend to future success in the commercial landscaping industry.
Threats of recessions have always loomed and many industries have shown resilience in the face of economic challenges, but the pandemic has turned conventional logic on its ear. Industries that previously seemed recession proof turned struggled as consumer habits adjusted to the reality of the pandemic. Recession and pandemic resistant businesses not only provide services that customers both want and needbut also show that they are able to adjust operating procedures that allow them to continue servicing customers during a public health crisis.