3 Recession Proof Biz Models

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 US economy hasn't officially entered a 'technical recession' at this point.

If you're unsure what that means, a technical recession occurs when we see two straight quarters of declining GDP.

With that said, the economic outlook grows more concerning with each passing week.

Between plummeting job postings (seemingly at their lowest point in three years) and home purchase demand reaching near-historic lows, the American economy is clearly decelerating.

Should current trends persist, we might find ourselves in recession territory by the fourth quarter or in early 2025.

You probably already understand that certain business models outperform others when the economy contracts. This largely comes from supply and demand forces, heavily influenced by cost considerations and what consumers can afford.

Given this, if you're not already committed to an existing venture, it might be wise to explore opportunities with better odds of succeeding during an economic downturn.

So in today’s issue, we'll examine business models that - historically speaking - have shown greater resilience when facing recessionary pressures.

#1 - Freelancing

Regular readers know we typically aren’t big fans of freelancing.

Our main concern is that freelancing fails to create lasting value and essentially replicates the time-for-money exchange of traditional employment.

With that said, freelancers represent the most budget-friendly option for companies needing to outsource work / hire staff. This makes freelancers / independent contractors an appealing substitute for permanent staff when budgets tighten.

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.

Better to maintain relationships with three or four clients, ensuring that losing one won't devastate your entire revenue stream.

#2 - Low Ticket eCommerce

eCommerce ventures are typically challenging and require significant upfront investment.

But if you're selling low cost goods, a recession might actually be the ideal launch time. Why?

First, it should be obvious the fact people are crimping down on their budgets will make your products more attractive.

Additionally, history shows that marketing and advertising budgets are usually the first casualties when companies face economic pressure.

This means instead of launching ads during prosperous times with heavy competition, a recession launch faces fewer competitors. Theoretically, reduced advertiser competition should translate to more affordable advertising rates.

#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, recession impacts typically follow this pattern:

• Ultra-high-net-worth individuals experience little to no change in their purchasing behavior

• High-net-worth individuals reduce luxury spending while preserving their core lifestyle

• Upper-middle-class consumers tighten budgets significantly, eliminating major purchases like boats or exotic vacations

• The shrinking middle class cuts out non-essentials and seeks cheaper alternatives for most purchases

• Lower-income groups see minimal change (barring job loss) since they already live with tight financial constraints

This breakdown shows that serving upper and middle-class clients puts you at risk of being cut during budget reductions. However, catering to the ultra-wealthy or genuinely affluent clients offers more stability.

Breaking into wealthy circles may require strategic positioning if you're starting from the outside. That said, you don't need country club membership to secure contracts cleaning luxury vessels.

I recently came across a report highlighting house cleaning professionals in South Florida earning $150,000 annually.

While this might not align with your entrepreneurial vision - and likely can't be operated remotely - serious, recession-proof income exists in serving wealthy clientele.

💡 Takeaway: With the US economic outlook continuing to worsen, you should evaluate a) your current business's resilience during economic hardship, and b) starting a venture with better survival odds should we experience a severe economic decline.