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3 Recession Proof Biz Models
Starting now? Launch one of these...
860 Words | 3 Min 38 Sec Read
Today we’ll be discussing which online business models work best during economic recessions.
Let’s dive in.
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Want to launch a business that won't crumble during a recession?
If so, you'll want to pay attention to today's issue.
To be clear, the United States economy is not in a 'technical recession' yet.
If you're unsure what that means, technical recessions are defined as two consecutive quarters of negative GDP growth.
With that said, the financial picture is getting more and more dire each week.
From cratering job openings (which appear to have just hit a three year low), to near record low demand for homes, the US economy is slowing.
And if things continue the way they're going, it's possible we slide into a recession in Q4 and/or early 2025.
As you likely know, some businesses perform better than others during economic downturns. Mainly because of Supply and Demand dynamics, much of which are influenced by pricing and affordability.
Given this, if you're not neck deep in a business already, you may want to consider starting something that has a higher likelihood of succeeding if the economy goes south.
So in today's issue, we'll cover some of the models that - historically speaking - are more resistant to the strains of recession.
#1 - Freelancing
If you're a long-time reader here, you know we're not big fans of freelancing.
Mainly because freelancing doesn't build equity, and involves trading dollars for hours (similar to a 9-5 job).
With that said, freelancers are by far the most cost-effective way of outsourcing labor / hiring staff. And because of that, freelancers / contractors are a great alternative to full-time employees during tough economic times.
As a warning, however, be cautious about having 100% of your income coming from one client. Because if something goes wrong, your income can drop to $0 per month overnight.
Instead, shoot to have three to four clients so that if one of them cuts ties, it won't destroy your entire income stream.
#2 - Low Ticket eCom
eCom is a difficult and capital intensive business to start.
But if you're selling low cost goods, there's no better time than a recession to launch. Why?
First, it should be obvious the fact people are crimping down on their budgets will make your products more attractive.
But not only that, historically speaking, advertising and marketing are the first expense most businesses cut during recessions.
Meaning, rather than having to launch and run ads during an economic boom, launching during a recession means you'll face less competition. And in theory, less advertisers means lower ad costs.
#3 - Services for Rich People
While it's true that recessions hit everyone, they affect some demographics much more dramatically than others.
Mainly because during a recession, not everyone loses their jobs. And not every business slows down or has to close its doors.
Instead, the way recessions affect people typically looks like this:
The spending habits of extremely wealthy individuals (UHNWIs) are not affected at all or minimally
Wealthy individuals (HNWIs) cut out extravagant spending, but maintain their overall lifestyle
The upper middle class buckles down and eliminates things like boat purchases, vacations to Fiji, etc.
The middle class (which is increasingly shrinking) eliminates luxuries and tries to buy lower cost versions of most everything
The bottom / poor class isn't really affected (unless they lose their jobs) because they exist in a perpetual state of living paycheck to paycheck
As you can see here, providing services to the upper and general middle class exposes you to being fired as part of a budget cut. But if you service the ultra wealthy or (not super rich but still rich) "wealthy," you're less likely to be let go.
Sure, breaking into these circles can take some maneuvering if you're an outsider. At the same time, you don't need to be a country club member to get hired to clean yachts.
In fact, in May I saw an article that discussed how house cleaners in South Florida are pulling in $150,000 per year right now.
So, while it might not be your dream business - and you probably won't be able to run it online - there is serious, recession proof money to be made providing services to the wealthy.
💡 Takeaway: As the economic picture in the US continues to deteriorate, it's to your benefit to consider a) how recession proof your business is, and b) launching something that's more likely to survive if we face a more dramatic downturn.
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