Weathering recession through business cycles

Times of economic uncertainty can make it difficult to begin new business cycles. But if you're considering a start-up, you can maximise your chance of success by looking at recession-proof industries.

So what industries are more likely to weather the storm? And how can you steer your business to smooth waters?

Surviving the economic downturn

Some products and services are naturally more buoyant during tough times. Recession-proof industries are usually those that deal with essential services, such as the medical and legal professions, education, food and beverages.

Other recession-proof industries are as diverse as training and self-help, pharmaceuticals, funeral services, 'adult' retailing and breweries.

"Businesses that sell what people need, as opposed to what they want, are more likely to survive the economic crunch," says Deann Bramble, Principal of Beans Accounting, Business and Financial Solutions.

"So most professional services will fare better than the 'extras' such as hospitality and travel."

The 'lipstick index' and your business

The much-talked-about 'cocooning effect' during times of recession may mean that people spend on little luxuries to make their homes more comfortable, while avoiding big-ticket items such as cars and overseas holidays.

The lipstick index is a term coined to describe the increased sales of cosmetics during a downturn - a phenomenon attributed to the fact that people like the cheering effect of simple, inexpensive items in times of recession. It is sometimes also referred to as the beer index.

Set yourself apart from the others

If you make a point of difference in the way your business delivers goods or services, you'll find new  clients and survive or even thrive through times of recession, no matter what your line of work.

A helping hand

In times of economic downturn it's more important than ever to get financial advice to ensure your business will survive.

"Having an independent party looking at business finances is very important," says Deann. "Tough decisions need to be made and business owners are usually too busy working to consider the changes needed to ensure future viability."

Starting up during the storm

If you're considering starting up a business during tough financial times, it's important to do your homework and make decisions with your head (not just your heart).

"Don't rush into anything, don't over-capitalise and make sure you meet with a qualified and experienced accountant," says Deann.

An economic downturn can be a difficult time for many businesses. But with the right advice and a bit of ingenuity, you can beat the odds and create a solid foundation for success.

So for advice on choosing a recession-proof industry, or how to ensure your existing business weathers the storm, call a financial planner today.