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Economic downturns are no joke. The recession is throwing a huge wrench into the proverbial wheels of several established entrepreneurs as well as new start-up owners. A recent study by Startup Genome found that a staggering 74% of startups have seen a drop in revenue since the pandemic. Even worse, many of them (16%) were forced to lay off 80% of their workforce.
It’s no wonder that companies are afraid to raise capital or even start a business. With experts warning of a looming global recession, companies are concerned about scaling, hiring new talent and retaining existing talent.
However, not all startups struggle during recessions and economic downturns. Some startups can actually thrive during economic crises. As someone who has been in the VC industry for over a decade, selling multiple companies and starting an accelerator that has helped over 200 entrepreneurs, I have learned that there is a key difference between startups that survive in a recession and succeed, and those who have difficulties fail. This difference lies in the business model itself.
As CEO of Builderall, an all-in-one solution that supports over 20,000 small businesses worldwide, I have a bird’s eye view of the top performing business models. Where other startups fail, startups in our ecosystem continue to attract more customers. In fact, we are not experiencing an economic downturn at all.
If you’re wondering whether to start your business, grow it, or scale back operations, read on to learn about the five recession-proof companies I recommend during turbulent times:
Related Topics: 10 New Businesses That Can Handle Any Economic Cycle
1. Service-based companies
Any time you provide expert service to your customers, whether online or offline, it is a service-based business. For example, both an accounting/bookkeeping service provider and a digital marketing agency offer services that require specific knowledge and expertise. These companies are having a really tough time today – and for more than one reason:
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Your startup costs are low. Entrepreneurs can start with a lower initial investment and fewer subsequent capital injections.
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You can operate with a minimal amount of staff. Companies can operate fully remotely, tapping into cost-effective talent markets, or they can operate in a hybrid manner.
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Faster sales and faster revenue generation. Receiving payments from new customers and generating cash flow occurs much faster.
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Recurring payments keep the money flowing. Service-oriented companies can benefit from subscription or retainer models. This guarantees two things: repeat customers and a continuous source of income in exchange for ongoing services.
Customers effectively bear the costs, reducing the need for venture capital or working capital. Then, three years later, they’ve built a solid customer base of recurring revenue customers who simply continue to pay monthly, and the money from those payments becomes your operating expense.
2. Influencer marketing
You really can’t go wrong as an influencer. It’s no exaggeration to say that influencers are currently ruling the digital world. Check out what Khaby Lame, Zach King, Addison Rae and Charli D’Amelio have achieved. During my professional years, I have closely followed the rise of several popular influencers and noticed two things in common with all of them:
First, all successful influencers work in a specific field or niche where they are experts and know what they are talking about. And secondly, they are pure content creators and their content resonates with their audience and helps them gain more followers.
Once you build a large following on social media platforms like Instagram, YouTube or TikTok, the magic begins. You use your online presence to engage with your audience and promote products or services, effectively becoming brand ambassadors for the companies you work with.
3. Brand Ambassador
Being a brand ambassador is a close offshoot of the influencer business. For many companies, a brand ambassador has always been a cornerstone of successful marketing. Back when social media didn’t play a role, only celebrities or professional athletes and musicians received top prizes for their advertising.
Like influencers, brand ambassadors also shine in certain niches. They position themselves as thought leaders or experts, and associating with them lends credibility to the brands they support. While influencer relationships are typically one-time arrangements, brand ambassadors typically work with the same brand for years, providing a deeper level of exposure and education to their audience.
Related: Fear of a Recession? Follow these 5 tips for a recession-proof business
4. Online teachers
As training and side hustles become major buzzwords, I’ve seen so many people asking, “What else could I do?” on social media platforms like Reddit and Twitter. Those who are laid off want to improve their skills and are willing to pay hundreds or even thousands for professional training rather than return to college or pursue advanced degrees. This is the main reason why online teachers make a fortune selling their courses online.
Nowadays, people learn all sorts of skills on e-learning platforms. For example:
How to turn sketches into finished digital works of art
How to compose music
How to Create Effective Marketing Funnels
How do I write scripts?
Online teachers are just normal people who are good at what they do. To become an online teacher, you simply have to take the knowledge you have, incorporate it into a course, and sell it. They design a comprehensive course structure and offer courses that cover a wide range of topics, from practical skills to the creative arts and everything in between. Platforms with easy-to-use eLearning tools make this easier than ever.
Marketing, business, entrepreneurship, creative arts, coding and personal development are always popular among 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 virtually recession-proof. There are startups on the market that sell a unique product to a small but interesting subset of consumers. These could be t-shirts, stickers, stuffed animals, or anything else.
And with the online platforms available today, it’s easy to open an online store, get noticed, and start building a customer base. Paid ads are used by large companies as they scale. But if you’re a small business, you can get creative and use Instagram Reels and TikToks to make audiences aware of your product. Try to create a niche product instead of trying to sell basic t-shirts to everyone, which is very difficult. Do something that is very niche focused. For example, you can release a whole line of t-shirts for people who love unicorns.
Related: 3 Key Strategies That Helped My Business Grow During a Recession
At Builderall, we didn’t see any companies negatively impacted by the recession; If anything, it was a positive catalyst for entrepreneurs. According to this recent survey by Gusto, 56% of individuals started a business out of fear of inflation. The World Economic Forum reports that the proportion of women entrepreneurs increased from 27% in 2019 to 47% in 2022.
While it may seem daunting to start or scale a business with the right business model in today’s economy, now is the perfect time – and the future is bright.
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