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Good businesses for bad times

Good businesses for bad timesNot every business fares poorly during economic slowdowns or recessions. Some industries and niches thrive during bad times. For companies that are on a roll when the economy stops dead, the motto "Let the Bad Times Roll" may well apply.

Here's a list of what experts think will be "hot" in these cool economic climes:

Debt-collection agencies
As bad debt goes up, so do the efforts of companies to get what they're owed. So bill collectors can profit handsomely from an economic downturn.

Anything outsourced
When companies begin laying off employees, they still need to perform. That often means finding outsourcers to fill the gap between limited inside resources and what the company needs to have done, says Al Napier, professor of management at the Jones Graduate School of Management, Rice University, Houston. Everything from accounting services to outplacement to debt collection can be outsourced, the professor notes. "It's the first thing that comes to mind when you ask what are good businesses to be in during bad economic times."

Temporary staffing
Just like outsourcing, temp agencies do well in downturns as companies seek outsiders to help get work done. Even after the economy has begun to recover, businesses hesitate to hire. "A temp agency has two markets: the companies that have undergone layoffs and need temp help, and the workers who have been laid off and need work," Napier says. Companies save money on temps because they can be deployed according to demand. You can call them in one day and not the next, depending on workload. Temps also don't receive benefits -- another cost saving.

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Leasing companies
Companies that lease capital equipment are in demand during lean times when businesses can't afford to buy what they need outright or don't want the long-term commitment, according to Marcia Layton Turner, author of The Unofficial Guide to Starting a Small Business. "These days you can lease just about anything, from cars to copiers," Layton Turner says.

Do-it-yourself concerns
It's not just businesses that try to save money in bad times. Consumers also cut back. Many will elect to take on projects themselves instead of hiring someone to do it. "That's because instead of hiring others to do the household chores, such as painting or minor repairs, consumers choose to try and do it themselves and save a little money. Just look at how well places like Home Depot have done," Layton Turner says.

The repo man cometh
Just like debt-collection agencies, companies that specialize in repossession boom during economic downturns, Layton Turner says.

Barter networks
"They also do well during times when cash is tight," says Layton Turner. "These companies arrange for their members to swap goods and services in exchange for barter dollars, rather than cash."

Even if you don't want to start a barter network, your company may want to tap into one for its own purposes. "When companies have idle manufacturing equipment or workers who aren't totally busy, barter is a way to convert that time into credits to be spent on other needed equipment or suppliers," she says.

And what if you're already in business? The key to surviving an economic downturn is not necessarily to be the lowest-priced producer, but the company that offers the best value, Napier says. That means demonstrating to your clients why they should do business with your concern and how they're better off paying a little more because of the service you provide or for some other reason that they value.

However, being a lower-cost alternative can be beneficial and can be a constructive way to position your small business and its services or its products. For example, companies that want to trim employee travel costs might be more interested in distance learning (classes taught via videoconference or online) than in traditional seminars that involve expensive travel. Make that point and you'll earn their business.

Finally, diversifying your current business into some of these good businesses for bad times can make a lot of sense. An accounting firm may want to move into debt collection or vice versa. Or, a human resources consultant may want to branch into outsourcing, where it would take on some HR duties -- such as outplacement -- for clients

Bad times can actually be an OK time to be in business -- if you position your business strategically.

Jenny C. McCune is a contributing editor based in Montana

-- Updated: July 31, 2002

 

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See Also
How to prepare for, and deal with, an economic downturn
Getting banks to say 'yes'
Got a beef? Don't litigate -- mediate!

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