Which Businesses will Survive the Economic Collapse

An economic collapse is coming, sooner or much sooner. Perhaps the approaching economic collapse will be partial, not total. In that case, money will still have value. Some businesses will survive or even thrive. But other businesses are sure to fail. Which businesses will survive and why? That is the subject of this post.

The Numbers

According to Census.gov, there are about 5.726 million businesses (“firms”) in the U.S. (2012 data). Most businesses have less than 20 employees (89.6%) and almost all (99.7%) have less than 500 employees. That’s the number of businesses.

What about the number of employees? Only 0.03% of businesses have over 5,000 employees — but they employ 33.53% of the total employees. And that 99.7% of businesses under 500 employees only employs about 48.4% of the total employees.

What percentage of the total U.S. population is gainfully employed at one of these 5.726 million firms? Only about 116 million persons, out of a population of about 322 million — only 36% of the population is employed. The rest are children, teens, twenty-something slackers, unemployed adults, sick or injured persons, and the retired or at least unemployed elderly.

Interestingly — OK, it’s only actually interesting to me — the U.S. Census bureau tracks businesses like people: Establishment Births and Establishment Deaths. Definition: “Establishment – A single physical location where business is conducted or where services or industrial operations are performed.” Some businesses die, and new businesses are born. It’s the circle of life, or at least economic life.

Vulnerabilities

So now let’s makes some sense of the above numbers.

Very large firms (5000+ employees) represent a very small percentage of businesses. But those 1,900 large businesses are crucial to our economy. If too many of them fail, it spells economic disaster. And it is not so hard for a large business to fail. You might think that, being large, they have great resources to draw upon. The problem is that they tend to succeed by having one business model applied at many identical locations: think Starbucks or McDonald’s. If the economic situation changes suddenly and drastically, they can’t adapt fast enough. Starbucks has over 7,000 U.S. locations. McDonald’s has over twice that many. And if one large business fails, very many persons will be out of work.

By comparison, the vast number of medium to small businesses (having less than 500 employees) are less likely to experience catastrophic failure because there are so many of them: 5.7 million (out of a total of 5.726 million). They have different business models, different approaches to running a store or restaurant, and if change is needed to survive, the threatened businesses will collectively apply many different solutions, at least some of which are likely to succeed. If some small businesses fail, it is relatively easy for a successful small business to expand to fill the gap, or for a new business to rise up.

So I suggest that during the next great Depression or the next severe long-lasting Recession, many large businesses will fail.

Food

For example, Starbucks provides nothing essential to survival: an expensive cup of fancy coffee and some desserts/snacks. If a severe disruption occurs in the food economy, people will need to budget more money to cover skyrocketing food prices. They will omit their fancy coffee drink, and perhaps eat at home more than in restaurants. Maybe coffee commodity prices will rise sharply, with falling supply. The Starbucks business model might no longer be workable.

I worry that a food crisis in the U.S. might hit all restaurants hard. Food shortages will limit menu choices. If prices for food skyrocket, restaurant prices might need to be so high to cover costs as to drive away most customers. How many jobs do restaurants provide? According to Census.gov, there are 7.6 million workers as food service managers, food preparation and serving (includes cooks, wait staff, etc.). If only a percentage of restaurants close, that’s a lot of workers falling into unemployment.

On the other hand, alcohol is likely to remain widely available, no matter how bad the food shortages get. It is relatively easy to make alcohol out of any food carbohydrate source. So bars might thrive, while restaurants close in droves.

I suppose that farmers and other food producers will stay in business. You always need food. You don’t need to get that food from a restaurant, but food production is essential. Supermarkets are absolutely necessary, no matter how bad the economy gets. So certain food-related jobs are safe.

Other Economic Sectors

Which other industries will be sharply affected by an economic partial collapse? Any industry selling non-essential products is likely to see a sharp fall in sales, and a loss of jobs. You need transportation to get to work, to shop, to travel for all kinds of purposes. But you don’t need that new car; most persons can make do with their current mode of transportation. You don’t want to be a car salesperson during an economic depression.

People will always need utilities, though. So working for the power company, or the companies that provide water, sewer, home heating oil, natural gas, etc. is probably a recession-proof job choice. People need power, even when the economy is in severe decline or partial collapse.

The clothing industry will be in the same boat as the transportation industry. You need clothing and transportation, but you probably don’t need new clothes in the short term, nor the most expensive clothes, and the same goes for cars. These are necessary items, but unlike food, they are not necessary on a daily or weekly basis, since most people can already meet those needs with their current resources.

Is there any non-essential industry that will thrive during an economic collapse? I would say the most likely candidate would be entertainment. When people experience difficult times, they have a psychological need to be entertained. It relieves stress, and makes them forget about their problems for a while. So even though entertainment is not, strictly speaking, essential for survival, the industry will likely thrive during times of severe economic distress.

Self-sufficiency

No particular job, though, is absolutely safe during an economic collapse. Severe problems in the economy result in additional stressors on every business, causing some businesses to fail. So prepping and self-sufficiency are important preparations to make.

Most preppers cannot achieve total self-sufficiency. Growing all your own food is basically a full-time job. If you have a job, you can’t quit and spend all your time growing food. Money is still necessary to survive in modern society. And even if you could grow your own food, you need water, power, and many other goods and services.

So I think that partial self-sufficiency is the best goal. A gradual increase in resources and knowledge, so as to become ever more self-sufficient is prudent and reasonable.

And on the subject of employment, it’s good to have a back-up profession that is likely to remain in demand if the economy partially collapses.

– Thoreau

5 Responses to Which Businesses will Survive the Economic Collapse

  1. I think small service-based business (small one-man or a family size) are likely to do well if SHTF comes. These business can adapt on the fly, are able to barter and being a service business don’t rely on constant influx of parts that may not flow come SHTF. Service-based businesses generally involve labor (ability to fix things or solve the problem without a lot of material goods) and not too much consumer goods.

    Service-based businesses almost always have lower start-up cost just because they don’t need a large inventory of parts or supplies to do the job. And many times parts that are needed can be scavenged from other items to do the job.

    I have a handyman / home repair business, It’s a one-man business and my most important thing for success is my ability to fix things that are broke. I do this well and many times it takes few consumer goods to do my job. I can get things fixed or repaired with just tools and the ability to use them.

    A service business does need lots of parts and supplies to do it’s work, but it’s easy for me to stock screws, electrical, plumbing and other parts I need to do my job so I have a lot of stock put up to cover shortfalls in the delivery chain or even a drastic hike in prices. I also have solar panels that allow me to charge cordless tools.

    The one problem area for almost every business is the need for gasoline and diesel to get things delivered and to be able to get to the job site. I don’t see much of any business going on if the fuel stops flowing.

    It’s worth developing a service-ased business as they will likely survive SHTF fairly well.

    If SHTF does come I am sure I will still be able to make a living as just because the world has gone down the tube things will still break and people will need things repaired.

  2. Businesses that have no debt and supply tangible goods will survive. I would think in a bad situation my own business would survive. We sell vegetable, fruit and herb seeds and we carry no debt. Sure our sales will go down, but I think we can do well by setting seed libraries in areas where people can’t afford to buy them and things of that nature.

    • You are right about no debt being important. I started my home repair business with a van full of tools. Both the van and tools were paid for long before I ever went into business, This is why a service-based business is good as it’s start up cost is low.

      At times it was very slow and debt would have killed me. But I easily survived the slow times just because I didn’t have to service debt.

  3. People who can fix things, period.

  4. The hospitality industry may suffer badly. Hotels, motels, and an assortment of inns are vulnerable, especially should there be a freeze on mortgages and/or the establishment of rent controls. During the depression, my dad was manager of a beach hotel resort. We had it pretty much to ourselves. It wasn’t pretty!