2008 Archives

Some companies actually thrive on tough times

From bankruptcy attorneys to discount retailers, a variety of businesses do better in a downturn


The following is from the Sept. 29, 2008, edition of MSNBC. Professor Michael Davis, who teaches economics and finance in SMU's Cox School of Business, provided expertise for this story.

September 28, 2008

By Jeff Bounds

On its face, Barry Nalls’ business doesn’t have much sex appeal. But if times turn tough, it may have a lot of luster for harried CEOs.

Nalls runs Frisco's Vybranz, which helps companies slash expenses on everything from their phone bills to electricity costs. Nalls’ privately held firm gets paid based on a percentage of the savings it achieves.

"It wasn’t designed to be countercyclical," Nalls says. "It was a benefit of the business model."

Vybranz is one of a relatively small group of businesses that can do better than survive during an economic downturn. In recessions past, these select few businesses have shown they actually gain customers during tough times. There’s no telling how many of Vybranz’ ilk may be out there, because they cut across industries.

From legal services to fast food, a range of industries have hidden pockets of prosperity in poor economies. . .

Michael Davis, who teaches economics and finance at Southern Methodist University's Cox School of Business, says, "Recessions are not equal opportunity monsters. In any recession, you've got parts of the country and sectors of the economy which are more seriously impacted than others. Whatever we're in right now, in the early going, it appears the energy sector won't be hit as hard as others. In the health care sector, growth (of jobs) and demand will be strong. Regionally, we're in a pretty good place."

Davis says certain businesses are "naturally insulated" from recessions because what they do is countercylical. He cites as an example milk producers, because milk is a product parents will buy for their children regardless of whether the economy is up or down.

"Recessions tend to reward good management and punish bad management," Davis adds. "The kinds of firms that survive are more effectively managed."

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