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Economic downturns are no joke. Recession throws a massive cog in the proverbial wheels of several established entrepreneurs as well as new startup owners. A recent study by Startup Genome found that a staggering 74% of startups saw their revenues plummet since the pandemic. Even more grim is how many of these (16%) were forced to lay off 80% of their workforce.
No wonder, then, that companies are afraid to raise capital, or even start a business at all. Experts are warning about an impending global recession, so companies are apprehensive about scaling, hiring new talent and retaining the ones they have.
However, not all startups struggle in times of recession and economic downturns. Some startups may, in fact, thrive during economic crises. As someone who has been in the VC industry for over a decade, sold several companies and launched an accelerator that helped over 200 entrepreneurs, I have learned that there is a crucial difference between startups that survive and succeed in a recession and those that struggle and fail. That difference is in the business model itself.
As the CEO of Builderall, an all-in-one solution supporting over 20,000 small businesses worldwide, I have a bird’s eye view of the best-performing business models. Where other startups flounder, startups in our ecosystem continue to pull in more customers. In fact, we do not experience an economic downturn at all.
If you are wondering whether to start your business, scale your startup or cut back operations, read on for the five recession-proof businesses I recommend during turbulent times:
1. Service-based businesses
Any time you provide a skilled service to your customers, whether online or offline, it’s a service-based business. For instance, a bookkeeping/accounting service or a digital marketing agency both provide services that require special knowledge and expertise. These companies are really crushing it today — and for more than one reason:
Their startup costs are low. Entrepreneurs can get started with a lower initial investment and fewer subsequent capital infusions.
They can operate with a minimal workforce. Companies can go fully remote with the advantage of tapping into low-cost talent markets, or they can go hybrid.
Faster turnover and revenue generation. Receiving payments from new clients and generating cash flow happen much more quickly.
Recurring payments keep the money flowing in. Service-based companies can benefit from employing subscription or retainer models. This guarantees two things: repeat customers and a continuous revenue stream in exchange for ongoing services.
Customers are effectively fronting the cost, which reduces the necessity for venture capital or working capital. Then, three years later, they have built up a solid customer base of recurring revenue customers who simply keep paying on a monthly basis, and the money from those payments becomes your operating expenses.
2. Influencer marketing
You really can’t go wrong with being an influencer. It won’t be a stretch to say that influencers are ruling the digital world right now. Look at what Khaby Lame, Zach King, Addison Rae and Charli D’Amelio have achieved. During my years in business, I have closely followed the rise of several popular influencers, and I have found two common threads among all of them:
One, all successful influencers work in a particular space or in a specific niche in which they are experts and know what they are talking about. And two, they are pure content creators, and their content resonates with their audiences, helping them attract more followers.
Once you amass a substantial following on social media platforms such as Instagram, YouTube or TikTok — that’s when the magic begins. You leverage your online presence to engage with your audience and promote products or services, effectively becoming brand advocates for the companies you work with.
3. Brand ambassadorship
Being a brand ambassador is a close off-shoot of the influencer business. A brand ambassador has always been a cornerstone of successful marketing for several companies. Back in the day, when social media wasn’t a thing, only A-list celebrities or professional athletes and musicians would get top dollar for their endorsements.
Like influencers, brand ambassadors also excel in specific niches. They position themselves as thought leaders or experts, and the association with them brings credibility to the brands they are endorsing. While influencer relationships are typically one-off arrangements, brand ambassadors generally work with the same brand for years and provide a deeper level of exposure and education for their audiences.
4. Online educators
With upskilling and side hustling turning into major buzzwords, I have seen so many people asking, “What else I could do?” on social media platforms like Reddit and Twitter. Those who get laid off want to increase their skill set and willingly pay hundreds or even thousands for continuing specialized education rather than returning to college or seeking an advanced university degree. This is the major reason why online educators are making a killing by selling their courses online.
People are learning all sorts of skills on e-learning platforms today. For example:
How to turn sketches into finished digital artwork
How to compose music
How to create effective marketing funnels
How to write screenplays
Online educators are just normal people who are good at what they do. Becoming an online educator requires just taking the knowledge that they have, putting it into a course and selling it. They craft an exhaustive course structure and deliver courses that cover an extensive range of subjects, from practical skills to creative arts and everything in between. Platforms with user-friendly e-learning tools are making this easier than ever.
Marketing, business, entrepreneurship, creative arts, coding and personal development are always popular with learners.
5. Unique products
Selling a unique product can be a tough nut to crack. But when a company achieves this feat, it can consider itself practically recession-proof. There are startups in the market that are selling a one-of-a-kind product to a narrow, but interesting, subset of consumers. It could be T-shirts, stickers, plush toys or anything else.
And with the online platforms available today, it is so simple to launch an online shop, spread awareness and begin building a customer base. Paid ads are something that big companies use as they scale. But when you’re a small company, you can get creative and use Instagram reels and TikToks to drive audiences to your product. Try to create a niche product as opposed to trying to sell basic T-shirts to everybody, which is very difficult. Do something that’s very targeted to a specific niche. For instance, you can come out with a whole line of T-shirts for people who love unicorns.
At Builderall, we have not seen businesses negatively affected by the recession; if anything, it has been a positive catalyst for entrepreneurs. According to this recent survey by Gusto, 56% of individuals launched a business due to concern over inflation. The World Economic Forum reports that women entrepreneurs increased to 47% in 2022 up from 27% in 2019.
So, while it may seem scary to try to launch or scale a company in today’s economy, with the right business model, now is the perfect time — and the future is bright.