One of the most common questions that come up is whether I should buy a business if I think a recession is coming. It is a valid concern, but it may not be as important as you think it is.
If you think about it, there is always something to worry about that can keep you from buying a business. It could be a recession, the upcoming election, the housing market, unemployment, or a plague of locusts.
I was watching one of the business news channels the other day and half the people said we were in a recession and the other half said we would not have one. Take it from me, if you are always focused on what is the worst that can happen, you will never buy a business.
Which businesses do well in a recession
There are a few businesses that I can think of that do relatively well during an economic slowdown. The way you should think about it is to look for things that people have to do no matter their situation.
People will always eat, drink, seek shelter, and other necessities. For example, laundromats do well consistently because it is a need, not a want. People also still consume alcohol, so liquor stores do well.
Another way to look at it is companies that provide a good product and good service can survive and you may be able to buy them at a discount in a slowdown. You should always look for companies that get the basics right. People do not stop spending completely during a slowdown, they shift where they spend their money.
In the consumption of liquor example, people eat out and drink less at restaurants, but tend to buy more from liquor stores to consume at home. Instead of going to expensive restaurants, they eat at lower-priced places.
Here is a partial list of businesses that do well during a slowdown:
- Healthcare – You need this to live, so I would say it is pretty important!
- Groceries – You can’t just live on doughnuts.
- Beer/Liquor – This is self-explanatory
- Candy – Need a quick treat
- Things for kids – most parents will do without to help their kids
- Discount stores – dollar stores do well
- Pet items – People treat their pets like kids
- Repairs – People repair instead of buying new
- Auto parts – same as above
So these are a few areas that will do well during a downturn. This is not a complete list but it should give you an idea of what works. Focus on needs, good products/services and pleasing your customers.
Go deeper
If you find yourself owning a business during a recession you may want to consider working on your marketing plan. A recession is a great time to take market share from weaker competitors.
We like the book The 1-Page Marketing Plan and its ideas on using marketing to drive profitable business growth. It is worth the read.
Click on the book image to learn more.
The bottom line on buying a business during a recession
Don’t let fear of the future get in the way of controlling your future. Think about it this way, you could get laid off from your “good” job tomorrow despite being a great employee. There is always going to be some sort of disaster right around the corner if you watch the news or browse the internet.
Sometimes you just have to take a leap and have faith that you can work hard to make it happen.
Now, go out there and kick the economy in the butt.
