Learn more about what recession-proof means in business.
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You may not anticipate planning for a recession when you’re a new business owner simply trying to understand liability and taxes. However, our business experts know that planning and pivoting are essential for any small business to survive an economic downturn.
This page will explain the definition of recession-proof and answer what the qualities are of being recession-proof.
A business can meet the recession-proof definition when it uses sustainable practices to make a profit regardless of economic downturn. Forbes defines a recession as an extended period of negative gross domestic product (GDP), high unemployment, fewer retail sales, and decreased income and manufacturing. The recession-proof business owner understands that a recession is a normal and unavoidable stage of economic growth. Making your business recession-proof means being flexible and leveraging your resources to ensure your business survives a recession.
During a recession, smart investors realize the advantages of having recession-proof stocks (also called “defensive stocks,”) like healthcare or utilities, to sustain their portfolio. The same is true for a business hoping to sustain its operations and capital. Choosing strong suppliers can help you bolster your inventory and continue operating regardless of high prices and low employment. Including recession-proof inputs into your business plan can improve your chances of securing new capital investments.
A small business owner can plan for and expect the effects of an oncoming recession. However, one of the disadvantages of being recession-proof is that putting your plan into practice can be stressful. You might find yourself trying to manufacture a product or deliver a service with limited inputs. At the same time, as you are trying to find new revenues, other businesses fail all around you. You’ll need to work harder, find new revenue streams, and reinvest yourself. Further, a rescission means fewer competitors, so you also need to prepare for when the economy starts an upturn and others enter the market.
The recession-proof business definition can best be explained with an example:
A successful small business is naturally recession-proof, meaning its owners must always respond quickly and be flexible. Small businesses often have to adapt to economic challenges, whether a recession or other event.
The recession-proof definition includes a business, market, or asset that can maintain its value during an economic downturn. Planning and adapting quickly are essential to make your business recession-proof.
We’re ready to help you understand how to be recession-proof. Our business experts will support you through all parts of running a limited liability company or corporation. With our Worry-Free Compliance Service, we’ll help you stay organized and remind you of compliance deadlines. Plus, form your legal entity using our Business Formation Services, and we’ll continue helping you meet your goals through times of growth or recession.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.