Good businesses for bad times
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:
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.
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
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.
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
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.
"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