8 Businesses You Should Avoid During Recession in 2023

Businesses you should avoid during recession
Businesses you should avoid during recession


List of 8 Businesses you should avoid during recession in 2023

Here is the list of 8 businesses everyone should avoid during recession in 2023

Starting a new business during a recession can be risky. Understanding which industries do the worst during a downturn can help increase your new venture’s chances of success.

Related: 10 Best Recession Proof Businesses to Start During Recession

While some industries thrive regardless of the economic climate, others have a particularly hard time during a recession. Here are five types of businesses to avoid opening during a recession.

1. High-end retail Businesses You Should Avoid During Recession

Retailers that sell luxury goods or services are not a good choice to start during a recession as people cut back on spending and focus on paying for the basics.

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Chuck Catania, director of communications at architectural firm Modulus, discourages “starting businesses that offer merchandise and lifestyle brands that target the high-end market in an inflation-driven recession.”

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“At the broadest level, the worst kind of business to start during a recession is a luxury product (defined as a ‘want’ not a ‘need’) introduced by an independent/unrecognized brand. Introducing a high priced item when people are worried about their finances is a high risk. In addition, you will have to spend more on marketing and advertising because as an unknown brand it will take time for SEO to take off on your website,” says Catania.

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2. Luxury restaurants and bars Businesses You Should Avoid During Recession

For the same reason that it is risky to establish high-end retail stores during an economic downturn, high-end restaurants and bars are also considered unwise.

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Forrest McCall, founder of telecommuting website Making Money and Traveling, agrees that a restaurant is one of the worst new businesses to start during a recession. According to McCall, growing a restaurant in a recessionary environment can be extremely difficult due to lower consumer spending. Businesses You Should Avoid During Recession. During a recession, when unemployment rises, consumers have less disposable income to spend, making it more difficult to run a restaurant (and a retail store).

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The restaurant has a historically high failure rate, and a recession will further reduce your chances of success.

3. Manufaturing and Production Businesses You Should Avoid During Recession

A manufacturing operation requires a large capital investment to be operational.

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Not only is it more difficult to get financing for a capital-intensive business, but if you don’t have customer contracts waiting to be signed, it shouldn’t be a good idea to enter a manufacturing business during a recession.

4. Construction and Real State Companies Businesses You Should Avoid During Recession

The construction industry fared poorly both during the Great Recession, with the collapse of the housing market, and during the early months of the COVID-19 pandemic. It is also currently experiencing a higher rate of layoffs and discharges than most other industries.

5. Home services Businesses You Should Avoid During Recession

One of the first ways consumers cut back on spending during an economic downturn is to cut back on non-essential services around the house, such as lawn care and house cleaning. “While it’s not a big ticket item for the homeowner, [picking up dog poop] is also not that big of a job,” says Stacey Marmolejo, founder of Franchise Prep Academy.

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Consumers in the initial wave are unlikely to cut it out of their budget if they are personally affected by the recession, it’s an easy budget cut.”

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One thing is for sure: Recessions are hard to predict, and consumer reactions to them even more so.

For these reasons, businesses that provide must-haves such as affordable food, transportation, and communication services are a much better bet than products and services that cater to a small segment of the market, such as high-end goods and services.

6. Tour and Travels Businesses You Should Avoid During Recession

In April 2019, more than 2 million passengers passed through US airports each day. A year later, air travel was down more than 95 percent, with fewer than 100,000 passengers traveling by air on some days across the country. It’s hard to say when those numbers might return. A recent survey by Longwoods International, a travel market research firm, found that 82 percent of Americans have changed their travel plans for the next six months because of the coronavirus.

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And travel plans even further into the future may be disrupted or delayed if the coronavirus is still widespread and a treatment and vaccine has not been found. Airlines in particular will bear the brunt of social distancing protocols, as consumers are likely to continue to be wary of flying with strangers.

7. Leisure and hospitality Businesses You Should Avoid During Recession

While these sectors have been hit particularly hard today, they typically do not fare well in any recession. Adding to this misery are the cancellations of industry events and conferences, as well as social events like weddings and graduation parties, which make it hard to see these industries rebounding anytime soon. Cinemas, casinos and other places that often attract large crowds also suffer.

8. Service Tellers Businesses You Should Avoid During Recession

From hairdressers to personal trainers, many service providers are currently laid off or out of work. While pent-up demand could cause an initial large-scale recovery, spending could fall as consumers reassess their disposable income if their income has fallen or disappeared during a downturn.

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