Markets that are Making It

By Trisha Gallagher Boisvert

We’ve recently been officially informed that our nation came out of the longest recession since WWII a year ago, June.  Although, it would seem that many of us--including the economists who measure these things--were presumably too much in a tail spin to know it at the time.

No matter. Recessions come and go and we keep moving. But, now that we’ve come to learn that we’ve been in a post-recession economy for over a year already, what did we learn from living through it? One of the most interesting take-aways is noting which types of companies in various markets get a passing grade in the latest recession.

Marv Damon, writing for Investopedia1 recently, had some useful insights on the types of companies that do well in recessions. He was writing from a prospective investors perspective, but still, the criteria translates into what makes sense for your prospecting investment as well.

1) Look for companies that provide critical repair and maintenance services or sell essentials. I grew up across the street from a family whose business was selling truck parts to large semi trucks that passed through my hometown of Omaha on I – 80. It didn’t take long for this family to make their first million with such an urgently needed product line and the accompanying 24/7/365 road-side services.

2) Companies that serve a customer base that is insulated from industries who have faced economic meltdowns are good targets. For example, energy commodity companies, transportation companies and even storage companies tend to do well because people need them in every economic climate.

3) Companies that receive government contracts or are mandated by government regulation tend to fair well in a recession. A company that would fit this category could be a privately-owned business that is authorized to investigate exports and imports coming into a port, or perhaps, a company that provides a food or landscaping services to a military base, for example.

4) Companies that provide highly unique products or those with a proprietary patent tend to be able to defend their market position well in a down turn. Companies that would fit in this category would be certain software packages, health care companies and pharmaceutical-related businesses as well as some manufacturers.

It’s one thing to look at types of companies that make the grade but it’s also interesting to assess types of markets that may or may not be faring well in your marketplace. From a 50,000 feet level we can think of broad market sectors as economic, geographic, lifestyle-based or enterprise level and then we can narrow our prospecting opportunities from there.

The first sector--economic--is one most of us have studied pretty closely. Interestingly, the recession has not been very democratic (small “d”) in terms of whom it has hit. In most sectors, money still continues to move fluidly in the upscale markets that we’ve been trained to target but lower income and middle class markets have been hard hit in many regions. If we have products and services and the right access to the more affluent markets, we probably aren’t feeling much of a pinch at all. For those companies that have positioned themselves well to serve the middle and lower income markets, they too should have a larger audience than ever before to target. The danger lies in those companies or professionals who have not studied their market lately—in this post-recessionary phase--and aligned their products, services and approaches accordingly to mirror the shifting pressures and priorities of their lower to middle class prospects.

The next sector, geographic, has gotten a lot of press recently. We all know that the states that struggled the most—in large part due to the hemorrhaging of the mortgage industry--in the last few years have been Nevada, Florida, Georgia. Michigan, Ohio and California. In contrast, states that are energy rich 2 have done quite well like Texas and Alaska, New Mexico, Iowa and Kentucky. And then there is a huge field of states that have had their ups and downs but have generally held their own like North Carolina, Minnesota, Colorado and Maine.

If your business is based on selling to professionals and business owners in any state however, you need to know where to find people who are making money know matter what is happening at the larger state level. With this in mind, and after considering Marv Damon’s criteria above, I believe there are some great marketing opportunities out there in any market; recession or no recession. Below is a starter list.

Franchises  - in recessions this market category grows faster than in generally better economic times, primarily because people who have endured layoffs decide they’d rather be their own boss rather than run the risk of a uncertainty with a new company but they also want to build on the confidence that comes with a well-known brand. Right now, franchises make up 11 percent of the U.S. private sector economy and take in a remarkable 41 percent of every dollar spent! 3 Look to meet owners of franchises that have staying power in any economic climate. For example, cell phone stores, senior-care services, pet care, fitness or yoga centers and energy-efficient products and services tend to make money. Of course, if you’re fortunate enough to meet a franchisor who has multiple fast-food stores, even his/her softer income years will still be quite significant.

Earth-friendly businesses – Waste management, recycling and organic farms are all getting more attention. Waste management companies have the crucial tasks of removing billions of tons of waste daily not matter what’s happening in the economy but they haven’t sat on their (smelly) laurels. Indeed, “…cost control and reduction have been a good strategy to improve earnings and margins throughout the economic turmoil. This industry has a sound and healthy competition, and it has been able to keep its head above water during the recession, and we see 2010 as a good year for growth." Says Jack Benassi, a spokesperson for the industry. 4 What’s more, a company at the top of the heap, Waste Management, Inc. has used the benefits of cost control to help them expand in China and Europe. In a related field, America now recycles approximately 1/3 of its household waste. 5 Recycling businesses, from computers to books to toxics to gold appraisers, have bubbled up all over the marketplace and their businesses are thriving in a recessionary climate.
More obvious markets that would tend to do well in a recession or post-recessionary period are debt collectors, liquor stores, dollar stores and second hand stores. A few examples are below:

• Debt Free Associates, out of Oklahoma City, grew over 12,376 percent in three years, and is one of a few companies that has benefited from the downturn. 6
• Business continues to be fluid in the liquor store industry. Most liquor store owners have observed that consumers have opted to buy less pricey brands, but they’re still buying. 7
• The Family Dollar chain which operates more than 6,600 discount retail outlets in 44 states is up more than 129% since January, 2008. 8
• Nationwide, there are roughly 30,000 resale and secondhand stores, a number that is growing at a rate of 7 percent annually as new secondhand stores open up, officials with NARTS: The Association of Resale Professionals said Thursday. For the fourth quarter of 2009, 71.4 percent of resale store owners reported year-over-year sales growth averaging 35 percent, according to a NART survey of 650 stores. 9

Other solid markets are 1) the transportation industry where trucking analysts predict that total freight tonnage will grow by 25% and total freight transportation revenue will grow by 69% between now and 2021 10 and, 2) any business that supports the medical industry. According to figures from The Freedonia Group Inc. (Cleveland, OH), the value of the U.S. medical market will post 8% average annual growth through 2016. Demand for medical products will rise to $575 billion in 2011 from $412 billion in 2006, and to $800 billion in 2016. 11

We’ve looked at the recession from both sides now. When one understands what’s happening economically, geographically, from a lifestyle-perspective and at an enterprise level, and then drills down to identify the best targets and approach, one finds a multitude of recession-proof businesses that have a need and a desire to purchase our products and services. After all, the basis of our business is providing protection and potential growth which is exactly what these business owners are looking for in good and not-so-good times.

To provide your insights on what markets are making it in your community, please visit our blog at http://www.thegallaghergroup.net/blog/.

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Trisha Gallagher Boisvert is principal of The Gallagher Group, a consulting firm based in the Boston area that specializes in leadership in intelligent marketing and recruiting strategies for financial services companies. Trisha can be reached at trisha@thegallaghergroup.net or through LinkedIn.com.