Time and time again at the Merchant blog, we’ve pressed the idea that accounting for seasonality should be one of the most important elements in any small business’ financial plan. What is your business’ strategy to overcome periods of low activity, whether in your industry or in the wider economy in times of slowdown or recession? If you can’t answer this question, your day-to-day operations and cash flow management may be under serious threat in the event of unexpected lulls.
And yet, the idea of a “recession-proof” business lingers in the minds of many entrepreneurs and business owners, especially those starting new businesses or taking over the operation of those in industries or markets that they believe possess the ability to remain stable and profitable no matter the changing tides of the economy at large. Does such an industry exist? Can any business be said to be truly recession-proof?
Research has shown that one of the industries most often labelled “recession-proof” is the business of pet-related goods and services. As I write this, my own cat is comfortably couched in one of his favourite spots, and I cannot deny the consistency with which my attention has led me to go in search of items to meet his needs. Statistics back this assertion up: in a 2011 report, marketing agency Mintel found that people’s pet-related altruism can be a major economic decision-driver.
“Despite the difficult economy, 50% of pet owners make unplanned toy and treat purchases for their pets and another 16% say they have cut back on extra household expenses in order to afford pet-related care…showing the true commitment of pet-parents.”
In fact, from 2008 to 2011, the pet industry in the USA increased its yearly revenue by $10 billion. It is an industry with a significant population of large-scale chain retailers, but also one in which specialty products and luxury-oriented services driven by small businesses have emerged and maintained profitability.
Having made note of this rather remarkable example, we must consider the ways in which other businesses may insulate themselves against economic downturn or seasonal decline in customer traffic. The maintenance of supplier, customer, tenant-landlord and other relationships must be maintained throughout these periods, and businesses should not have to stretch their spending into excessive credit to cover the slow portion of the year. Owners should be cognizant of the periods in which their cash management needs to be prioritized. Alternative financing models truly show their value in this regard, having developed methods that can help businesses of all kinds retain access to working capital without negative consequences during off-peak times of year or when faced with adverse economic trends.