How to survive the economy

In addition to death and taxes, inflation is another phenomenon that we can expect with near certainty over a period of time.

The U.S. has actually gone through many brief periods of deflation, but in general, economic progress is accompanied by inflationary pressures.   Inflation may occur when there is too much money in the system, which leads to an escalation in the price of goods. Of course, if a household’s two primary sources of wealth creation—asset and income appreciation—rise at a rate equal to or greater than inflation, the negative effects of inflation are neutralized.

Yet, as we’ve seen time and again, that usually is not the case. While the minimum wage has increased, the overall price of goods has outpaced the average salary increases of recent years.  

The Worst Tax

Inflation is often referred to as the “worst tax” because its effects go unnoticed by most people. Hypothetically, earning 4% in a savings account while inflation grows at 7% makes many feel 4% richer. In fact, they are 3% poorer.

That’s why it’s important for households and investors alike to understand the causes and effects of inflation, and how to plan so as to ensure that their assets maintain their purchasing power.

Here are three investment approaches everyone should consider as ways of protecting their hard-earned wealth from the ravages of inflation.

Although inflation may be less dramatic than a stock market crash, it can be more devastating to your portfolio.

Invest in Stocks

Despite the lack of confidence most people express about stocks, owning some equities can be a very good way to combat inflation. Think of your household as a business. If a company cannot properly invest its money in projects that will deliver a return above its costs, then it, too, will fall victim to inflation. The basic premise of business success is that corporations will sell their goods at increasing prices, which will lead to elevated revenues, earnings, and inevitably, stock prices.

Some of the best stocks to own during inflation would be in companies that can increase their prices naturally during inflationary periods. Commodity resource companies are one example. Products like oil, grains, and metals enjoy pricing power during periods of inflation. The prices of these items tend to go up as opposed to, for example, the price of a computer, which is subject to manufacturer and distributor price adjustments.

Still, price increases aren’t enough to protect against inflation. If a company experiences rising expenses, price increases alone are not enough to maintain equity appreciation. That’s why grocery stores, which may benefit from an increase in food prices, may also suffer from an increase in their cost of goods sold.

Look to invest in businesses such as commodity firms or healthcare companies that possess the strongest profit margins and, generally, the lowest cost of production. Finally, never underestimate the value of dividends during periods of inflation. Dividends increase the total return of a portfolio.

Invest in a Home

When done for the right reasons, like buying a home to live in, real estate is always a good investment. Problems occur when a buyer’s goal is to flip the property they just bought at a profit. Although experienced real estate investors are able to find hidden values in properties, the average person should focus on purchasing a home with the intent of holding it, even if only for a few years. Real estate investments do not typically generate a return within several months or weeks; they require an extensive waiting period in order for values to increase.

As a home buyer, unless you’re paying cash, you’re likely to put some money down and take out a loan, known as a mortgage, for the remainder of the purchase price. There are different types of mortgages—fixed-rate and adjustable are the most common—but the underlying principle is the same. You pay off a little of the principal each month until you’re left with ownership of a debt-free asset that should continue to appreciate over time.

If you get a fixed-rate mortgage, you end up paying off future debt with cheaper currency if rates increase. But if rates decrease, you’re still responsible for the fixed amount. Various factors should be taken into account in order to determine your best mortgage option.

Like land, home prices tend to increase in value on an average year-over-year basis. It is true that real estate bubbles are usually followed by correctional periods, sometimes causing homes to lose over half of their value. Still, on average, housing prices tend to increase over time, counteracting the effects of inflation.

Invest in Yourself

By far the best investment you can make to be prepared for an uncertain financial future is an investment in yourself. One that will increase your future earning power.

This investment begins with quality education and continues with keeping skills up-to-date and learning new skills that will match those most needed in the not-too-distant future. Being able to stay on top of a business’s changing needs may not only help to inflation-proof your salary, but also recession-proof your career.

How to survive the economy

When economies fall apart — and this happens more than you might think — many business owners find themselves in a position of desperation. As business owners, many of us are all in, meaning our livelihoods and the ability to provide for our families rests upon the success of our businesses. When circumstances around us change that are outside of our control, stress, fear and anxiety can build quickly.

During the last major economic crash in 2008, I was a new business owner with a company that was only about two years old. To make matters worse, I sold luxury services, which, at the time, were at the bottom of people’s lists of things to buy. I was faced with the decision to call it quits or fight for my company and make it work despite the economic situation we faced.

I made the decision to fight for my company and innovate to accommodate the new economic environment. The strategies I learned at that time proved most valuable because my company not only survived the downturn, but grew tremendously. This catapulted my career as an entrepreneur for many years thereafter.

Focus on the positives.

Value is often found in going against the flow. That means having a positive outlook even when things seem bleak. It’s not that you should ignore reality; rather, approach circumstances with a positive attitude. For example, if unemployment is at 20%, focus on the 80% of people who have jobs and money to spend. Find or adjust products and services to target those people.

Adjust your rates.

If you need money, raise your rates. During the 2008 downturn, I adjusted our services from an $89 one-hour session to a $75 forty-minute session, which raised our per-minute rate. However, the cost of a session from a customer’s viewpoint dropped.

This clever adjustment gave the perception to customers that we had lowered rates, but in reality, our rates had increased. The lower perceived cost of services undercut our competitors and allowed our luxury services to be available to a larger audience. Additionally, the shorter session time allowed us to handle more sessions per day, which further increased revenue and improved efficiency. Our customers didn’t mind paying less for a session with the trade-off being that it was 15 minutes shorter, and our die-hard customers just bought more sessions.

Whatever your industry, be creative and find ways to adjust rates (not lower rates). Consider offering additional value without giving things away for free or at a discount.

Remember, branding equals credibility.

There is a fair amount of evidence indicating that branding is one of the top reasons people choose a company. Many people choose a familiar brand, even if that brand has shortcomings, over a less familiar brand that may offer better quality. It’s human nature to go with a sure bet.

Given this concept, I believe it is crucial for businesses to spend a good amount of energy on branding. A solid brand gives your company an impactful first impression with new prospects. In a slow economy, people are more cautious with their spending and their choices, so make sure your brand comes across as highly credible.

Improve and update your logo and branding elements, as well as the fonts, themes and color palettes that represent your company. Build attractive sales presentations and establish clear marketing messages that convey your offerings in three seconds or less. It’s about credibility.

Double your marketing budget.

In a down economy, most business owners look for ways to cut expenses. Cutting some expenses may be helpful; cutting others may be fatal. In my experience, cutting marketing is almost always fatal.

In the economic downturn of 2008, I doubled my marketing budget while most of my competitors cut their marketing budgets or eliminated them entirely. It was very tight financially for us to do this, but it paid off because the marketing landscape was much less busy. Fewer competitors gave me a higher ROI on my advertising dollars.

Consider finding new methods of advertising as well. Economic changes often bring changes in societal behavior. Things that once worked may not work as well anymore; things that haven’t worked may be good ideas now.

Do more to survive.

In 2008, a colleague of mine gave me some great business advice. His company operated large-scale entertainment events, and he experienced a sudden drop in attendance. To survive the downturn, he had to add 20% more events to his calendar just to make the same amount of money he was making in a strong economy.

While he had to work harder to make the same amount of money, it was only for a season, and his business survived the downturn as a result. Once the economy got back on track, his business boomed due to his expansion. Sometimes expansion is for growth; sometimes expansion is for survival. Either way, you’re growing and not shrinking.

Get loans for expansion.

In a down economy, the government often lowers interest rates on loans to encourage business expansion. The government also earmarks money specifically to aid small businesses. Take advantage of this as an amazing opportunity to get cheaper money to grow your business. In a strong economy, interest rates are often so high that it is extremely expensive for businesses to finance anything.

In the last down economy, I was able to get an SBA loan to purchase real estate for expansion. This opportunity allowed us to purchase discounted real estate in a down market with a low interest rate. By the time the economy recovered, we owned several commercial properties and no longer needed to pay landlords rent. Plus, our mortgage payments were far lower than rent and did not go up annually as is the case with most leases.

Whatever storm you are facing will pass. Hopefully, these tips will help you discover your own creative solutions that will allow you to survive and thrive.

How to survive the economy

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A Bad economy can have a detrimental effect on a lot of people. When the inflation rate does not go as planned we

How To Survive The Bad Economy

tend to have a bit of a problem. In this post I am going to discuss the causes of a bad economy and also how to survive the bad economy when it happens.

What are the causes of a bad economy?

  • It gets harder every day to get a loan from the bank. The money that you have to pay upfront gets bigger and your down payments each month also increases. This is not good news if you are planning to buy a new house. If you know a little bit about economy, then you will know about the supply and demand concept. If the number of house buyer’s drop, then the prices of homes will increase and it will be more difficult.
  • High unemployment rate. If a person does not have an income, then they will only buy that which is necessary. This is where we need to know the difference between luxury and necessity. Restaurants, Motor dealers and a lot of companies that promote luxury will suffer because of this.
  • Bad inflation rate. Depending on the country or let me rather say the currency there will be times when prices of certain commodities will increase. Especially gas, food and things that are mostly imported from other countries will get more expensive.
  • The financial state of a country. It is not a good sign if a country is in major dept and if it will have to face bankruptcy. This has a major influence on the livelihood of that country’s citizens. Crime rate will increase because of the lack of service from the police (Remember that the police is working for the state and if the state is bankrupt, then they will have to cut down on expenses) and also because of unemployment.

What can you do to survive?

1. You can start your own online business.

The good thing of online marketing is that you are not depended on your country to make an income. Your business will reach the far end of the world and this means flexibility. If the currency of your country is weak, then you will get more in return from your money.

The only problem with internet marketing is that everyone thinks it will be profitable overnight because it is the internet, but it takes time just as an “offline” business. You do not need a lot of money to start.

2. Save money where you can.

If the bad economy has struck your wallet, you cannot afford to live in luxury. Your buying habits must change and you should learn how to budget. This is done by measuring your expenses against your income. You will also need to determine your income after tax.

3. Why not prepare beforehand against a bad economy.

This is one of the hardest things to do. There will be times where the economy will be nice to you and where you have a little extra to spend. Maybe you got a raise from your job or you got your bonus at the end of the year. Instead of spending it on useless things that you do not need, you can rather spend it on things that can bring you more income.

Make your money work for you in the case of investments, shares and bonds. It is also much better to make a loan to start your own business rather than buying a new car.

4. Take online surveys for extra cash.

Taking online surveys are becoming a very popular method of earning extra money in the comfort of your own home. Doing surveys will not really replace your job, but it can really help to fill the gaps where needed.

5. Consult a financial adviser.

There are a lot of things that these guys can teach you and help you with. My financial adviser helped me with tax and I actually saved a lot of money. They can help you to plan for the future where a retirement plan plays a huge role. They can also give you advice on how to get a loan from the bank and how to save money from your down payments.

Conclusion

There are a lot of ways to counter the bad economy and also how to prepare for one. Thanks you for reading my blog and if you have an extra tip that you want to share, you can leave it in my comment box below.

Before you forget you might want to take a look at the training provided here at Survey Royal if you are interested in participating in online surveys . There you will get loads of survey’s for free and I will also help you through the process.

There is much uncertainty in the world—2020 has proven that to us beyond imagination with major disruptions in our lives and the economy due to the COVID-19 pandemic . We have come to witness events that have been previously unseen all together: lockdowns of entire cities, panic in the financial markets, empty shelves, lack of hospital beds and an ensuing economic crisis. Along with that, a drastic change in consumption patterns is happening; Consumers are rethinking the utility of every good or service they use. They are also forgoing anything that appears superfluous. Will it be possible to continue business as usual in a post-coronavirus world?

Many organizations have survived the crisis and have even grown in 2020. They have done so by adapting to the changing circumstances. Most educational institutions have gone completely online, restaurants have become take-out-only and major IT companies are providing work from home for almost all of their employees. Microsoft even announced that it would allow some employees to permanently work from home. Here’s how your company can also adapt and thrive moving into the post-coronavirus world.

Take Appropriate Measures

While there are many unknown things, there are still measures every company can take to thrive in a post-coronavirus world. First and foremost, you need to get a hold of data and artificial intelligence , you need to do a proper analysis of what your resources are, to what extent sales are impacted and the impact on your financial position. Without such an analysis, it could be considerably difficult for you to make the right decisions.

Focus on What Is Important

Let’s assume you’ve got all the data and analysis in front of you, now what? Your business needs to focus on what’s important and have a strategic plan to move ahead. While planning will be different in each case, invariably delivering the best value to consumers has to be part of the plan. Most consumers are facing at least some financial pain; if you cannot deliver value to them, they will simply not buy your product or service.

Explore New Markets

You should also look at exploring new markets. There are only so many consumers domestically, perhaps you could do well in foreign markets. Even if you have no idea how to go about it, you can enter into foreign markets by using a professional employer organization (PEO), such as Global PEO . These organizations can help you set up your business in foreign markets. They can help in renting offices, hiring employees and managing payrolls, among other things. They have expertise in various foreign markets and can save you the trouble of doing everything by yourself. Moreover, using PEOs can substantially reduce the cost of entering foreign markets.

Don’t Rely on a Single Revenue Stream

COVID-19 has taught many businesses that they cannot rely on a single revenue stream. Depending on the product or service, consumers may vanish overnight due to lockdown or personal safety. You need to have multiple revenue streams, so if revenue dries up from one source, you are not left in a lurch. There are many ways to build multiple revenue streams; you could venture into foreign markets, have multiple products or change the way you cater to customers. Needless to say, you also need to build strong customer relationships and experiences. Otherwise, you risk losing even the most loyal of your consumers.

Focus on Cost Reduction

Further, cost reduction is key. You need to make sure that you are saving every penny you can. This could be one of the ways of providing value to customers, as you can pass on some of the savings. Review your processes and supply chains and see what improvements you can make. You could also talk to your suppliers and ask for a reduction in costs due to changed circumstances. In line with the first suggestion, you should try to collect data and gather insights into where you are spending the most and cut costs there.

Even in these unprecedented times, there are always ways and means you can employ to survive and thrive in your business. The virus has changed the expectations of employees, customers and business partners around the world—you need to keep up with that. Apart from the great risks, the crisis has come with an opportunity to quickly transition into newly emerging business models. Your business should be ahead of the curve to adapt to these emerging circumstances.

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An indispensable guide to finance, investing and entrepreneurship.

First, take a deep breath. Then another. Now you can look at those share prices and your shrinking 401(k) and start thinking about what all the bad economic news is doing to your best-laid plans.

To summarize: major investment bank Bear Stearns collapsed, with the feds bailing out its creditors but not its investors. Oil hit $112 a barrel, an all-time high. The job market has contracted with every report, the housing market is glutted, and, oh yeah, everyone’s lost a bundle in the market. Big-name financial stocks like Citibank have given up a third of their value in three months. Credit is weirdly cheap but tight, and President Bush recently huddled with Fed chairman Ben Bernanke, Treasury Secretary Henry Paulson and other financial advisers, trying to decide what to do about the current crisis in confidence.

So perhaps one more deep, calming breath is in order before you start taking action, along with some repetitions of a “this too shall pass” mantra. Feeling better? Now take these steps to make some money while there’s blood in the street. And protect yourself so that it doesn’t turn out to be your blood.

Leave your retirement account alone. Chances are you’re already in diversified mutual funds that will moderate your losses. “Don’t sell into this market,” says Jane King of Fairfield Financial Advisors in Wellesley, Mass. Rather, keep buying into the market by continuing your regular weekly and monthly contributions. You might even ramp them up a bit, especially if you’re a decade or more away from spending that money. Today’s share prices might not represent the nadir, but they’re likely to look very good by 2018 or 2025.

Jigger your other investments. If you own stocks and bonds outside of your tax-deferred retirement accounts, it’s a good time to sell some shares on bad days and lock in losses. If you don’t want to be out of the market, reinvest the money in other stocks, bonds and funds. Don’t buy the same shares back for at least 31 days, to avoid running afoul of tax rules. What about the bank stocks? It’s too late to sell early, and some might recover very quickly once all of Washington’s confidence-building measures take hold. Investment banks like Bear Stearns remain risky, says Morningstar analyst Matt Warren, but it’s a good time to buy smaller, regional banks. They’re supported by deposits that aren’t going away, and they have access to all of the Fed’s emergency lending if they need it.

Pay down costly debts. Get very aggressive about paying down high-cost debt. That includes credit cards, variable home-equity lines of credit and most car loans. “That’s one of the best investments you can make,” says Atlanta-based financial adviser David Hultstrom. Look at it this way: paying off a 7 percent loan is a sure-fire, tax-free 7 percent return. That’s impossible to beat in this market.

Stretch out cheap debts. Don’t make extra payments on your mortgage if it’s a fixed-rate loan under 6 percent. That’s a handy loan to have; instead, use your extra cash to build up that emergency fund.

Stash your cash safely. In tough times like this, that emergency cash should go into an FDIC-backed bank money market account. For yield, you can look to the online banks like zionsbank.com and ingdirect.com. Or simply keep it at your neighborhood bank.

Avoid the urge to get more adventuresome with your investments as a way to make back losses. Foreign stocks have boomed, but they’re still moving down with the U.S. markets. And now that the dollar is at an all-time low against the euro and sinking in Asia, too, you’re paying a lot for those foreign shares. The time-tested safe haven during market turmoil, gold, has already come close to doubling in two years. It costs money to own, trade and store, and gold earnings are usually taxed more heavily than earnings on stocks and bonds. All the hype about making money by buying foreclosures, derivatives, tax liens, commodity futures and options? Eh, definitely not as easy as it sounds, and best not tried at home.

Hunt for bargains. If you thought you were a couple of years away from buying a house, you might start looking now, says Hultstrom, because loans are cheap and it’s a buyers market. Study stocks to see whether there are some good companies getting beaten down along with the troubled ones.

Put that 401(k) statement away. Just because you can watch your retirement fund in real time doesn’t mean you should. Individual investors usually do themselves more harm than good by reacting to each hour’s economic news. Just do what you’re supposed to in a recession: tighten the belt, pay down the bills, salt away cash and keep investing for the next upturn of the economic cycle. And don’t waste time worrying. Leave that up to the Bernankes and Paulsons. It’s what you pay them for.

2 Minute Read | October 29, 2019

I know that the recent media coverage about the economy scares investors. The smartest thing you can do right now is hold on to your investments. Do not cash them out.

That’s what I’m doing. I have a lot of money invested in the American economy through growth stock mutual funds. But you know what? I’m not touching those funds. I’m riding this market roller coaster to the very end.

Well, people who make money in the stock market are the ones who think long-term and don’t jump in and out based on the market fluctuations. Market timing is trying to predict when to add or withdraw your money in the market; historically, it doesn’t work. After all, the only way to get hurt on a roller coaster is to jump off!

However, staying invested ensures that my investments won’t miss those best-performing days. And guess what: if you missed just 10 of the stock market’s best-performing days over the past 20 years, you would have lost tens of thousands of dollars!

I honestly believe that 10 years from today, you’ll look like a genius if you hold on to your current mutual funds!

But Dave, I’m almost old enough to retire. Should I cash out?

Nope. I understand you’re scared, but think this through. If you’re under 59 and a half years old and cash out your 401(k), you’re going to face penalties and pay Uncle Sam a lot of tax!

Be confident about your retirement. Find an investing pro in your area today.

When it’s all said and done, you’ll take a bigger hit on your money by cashing out than any drop in the stock market cause. So, even if you want to retire, you’re better off leaving your 401(k) or IRA alone.

Keep thinking long term. That’s what I’m doing. I’m not cashing out. I believe the market and my mutual funds will be okay.

And 10 years from now, it will have been a great decision.

How to survive the economy

About the author

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

There’s a difference between crisis and collapse

How to survive the economy

The U.S. economy’s size makes it resilient. It is highly unlikely that even the most dire events would lead to a collapse. If the U.S. economy were to collapse, it would happen quickly, because the surprise factor is a one of the likely causes of a potential collapse. The signs of imminent failure are difficult for most people to see.

Most recently, the U.S. economy almost collapsed on September 16, 2008. That’s the day the Reserve Primary Fund “broke the buck”—the value of the fund’s holdings dropped below $1 per share.   Panicked investors withdrew billions from money market accounts where businesses keep cash to fund day-to-day operations.   If withdrawals had gone on for even a week, and if the Fed and the U.S. government had not stepped in to shore up the financial sector, the entire economy would likely have ground to a halt. Trucks would have stopped rolling, grocery stores would have run out of food, and businesses would have been forced to shut down. That’s how close the U.S. economy came to a real collapse—and how vulnerable it is to another one.

Will the U.S Economy Collapse?

A U.S. economy collapse is unlikely. When necessary, the government can act quickly to avoid a total collapse.

For example, the Federal Reserve can use its contractionary monetary tools to tame hyperinflation, or it can work with the Treasury to provide liquidity, as during the 2008 financial crisis. The Federal Deposit Insurance Corporation insures banks, so there is little chance of a banking collapse similar to that in the 1930s.

The president can release Strategic Oil Reserves to offset an oil embargo. Homeland Security can address a cyber threat. The U.S. military can respond to a terrorist attack, transportation stoppage, or rioting and civic unrest. In other words, the federal government has many tools and resources to prevent an economic collapse.

These strategies may not protect against the widespread and pervasive crises that may be caused by climate change. One study estimates that a global average temperature increase of 4 degrees celsius would cost the U.S. economy 2% of GDP annually by 2080. (For reference, 5% of GDP is about $1 trillion.) The more the temperature rises, the higher the costs climb.

What Would Happen If the U.S. Economy Collapses?

If the U.S. economy collapses, you would likely lose access to credit. Banks would close. Demand would outstrip supply of food, gas, and other necessities. If the collapse affected local governments and utilities, then water and electricity might no longer be available.

A U.S. economic collapse would create global panic. Demand for the dollar and U.S. Treasurys would plummet. Interest rates would skyrocket. Investors would rush to other currencies, such as the yuan, euro, or even gold. It would create not just inflation, but hyperinflation, as the dollar lost value to other currencies.

If you want to understand what life is like during a collapse, think back to the Great Depression. The stock market crashed on Black Thursday.   By the following Tuesday, it was down 25%. Many investors lost their life savings that weekend.

By 1932, one out of four people was unemployed.   Wages for those who still had jobs fell precipitously—manufacturing wages dropped 32% from 1929 to 1932.   U.S. gross domestic product was cut nearly in half. Thousands of farmers and other unemployed workers moved to California and elsewhere in search of work. Two-and-a-half million people left the Midwestern Dust Bowl states.   The Dow Jones Industrial Average didn’t rebound to its pre-Crash level until 1954.

Collapse Versus Crisis

An economic crisis is not the same as an economic collapse. As painful as it was, the 2008 financial crisis was not a collapse. Millions of people lost jobs and homes, but basic services were still provided.

Other past financial crises seemed like a collapse at the time, but are barely remembered now.

1970s Stagflation

The OPEC oil embargo and President Richard Nixon’s abolishment of the gold standard triggered double-digit inflation. The government responded to this economic downturn by freezing wages and labor rates to curb inflation.   The result was a high unemployment rate. Businesses, hampered by low prices, could not afford to keep workers at unprofitable wage rates.  

1981 Recession

The Fed raised interest rates in a bid to end double-digit inflation.   That created the worst recession since the Great Depression. President Ronald Reagan cut taxes and increased government spending to end it.  

1989 Savings and Loan Crisis

One thousand banks closed after improper real estate investments turned sour. Charles Keating and other Savings & Loan bankers had mis-used bank depositor’s funds.   The consequent recession triggered an unemployment rate as high as 7.5%.   The government was forced to bail out some banks to the tune of $124 billion.  

Post-9/11 Recession

The terrorist attacks on September 11, 2001 sowed nationwide apprehension and prolonged the 2001 recession—and unemployment of greater than 10%—through 2003.   The United States’ response, the War on Terror, has cost the nation $6.4 trillion, and counting.  

2008 Financial Crisis

The early warning signs of the 2008 Financial Crisis were rapidly falling housing prices and increasing mortgage defaults in 2006.   Left untended, the resulting subprime mortgage crisis, which panicked investors and led to massive bank withdrawals, spread like wildfire across the financial community.   The U.S. government had no choice but to bail out “too big to fail” banks and insurance companies, like Bear Stearns and AIG, or face both national and global financial catastrophes.  

2020 Recession

It is too soon to tally up the total costs of the 2020 global health crisisCoronavirus pandemic—the crisis is still ongoing. Already we have seen worldwide supply-chain interruptions, heightened volatility and steep losses in financial markets, and sharp slowdowns in the travel and hospitality industries.

How much economic cost should we expect? According to the United Nations’ Conference on Trade and Development, the global economic hit could reduce global growth rates to 0.5% and cost the global economy as much as $2 trillion for 2020.  

How to survive the economy

When economies fall apart — and this happens more than you might think — many business owners find themselves in a position of desperation. As business owners, many of us are all in, meaning our livelihoods and the ability to provide for our families rests upon the success of our businesses. When circumstances around us change that are outside of our control, stress, fear and anxiety can build quickly.

During the last major economic crash in 2008, I was a new business owner with a company that was only about two years old. To make matters worse, I sold luxury services, which, at the time, were at the bottom of people’s lists of things to buy. I was faced with the decision to call it quits or fight for my company and make it work despite the economic situation we faced.

I made the decision to fight for my company and innovate to accommodate the new economic environment. The strategies I learned at that time proved most valuable because my company not only survived the downturn, but grew tremendously. This catapulted my career as an entrepreneur for many years thereafter.

Focus on the positives.

Value is often found in going against the flow. That means having a positive outlook even when things seem bleak. It’s not that you should ignore reality; rather, approach circumstances with a positive attitude. For example, if unemployment is at 20%, focus on the 80% of people who have jobs and money to spend. Find or adjust products and services to target those people.

Adjust your rates.

If you need money, raise your rates. During the 2008 downturn, I adjusted our services from an $89 one-hour session to a $75 forty-minute session, which raised our per-minute rate. However, the cost of a session from a customer’s viewpoint dropped.

This clever adjustment gave the perception to customers that we had lowered rates, but in reality, our rates had increased. The lower perceived cost of services undercut our competitors and allowed our luxury services to be available to a larger audience. Additionally, the shorter session time allowed us to handle more sessions per day, which further increased revenue and improved efficiency. Our customers didn’t mind paying less for a session with the trade-off being that it was 15 minutes shorter, and our die-hard customers just bought more sessions.

Whatever your industry, be creative and find ways to adjust rates (not lower rates). Consider offering additional value without giving things away for free or at a discount.

Remember, branding equals credibility.

There is a fair amount of evidence indicating that branding is one of the top reasons people choose a company. Many people choose a familiar brand, even if that brand has shortcomings, over a less familiar brand that may offer better quality. It’s human nature to go with a sure bet.

Given this concept, I believe it is crucial for businesses to spend a good amount of energy on branding. A solid brand gives your company an impactful first impression with new prospects. In a slow economy, people are more cautious with their spending and their choices, so make sure your brand comes across as highly credible.

Improve and update your logo and branding elements, as well as the fonts, themes and color palettes that represent your company. Build attractive sales presentations and establish clear marketing messages that convey your offerings in three seconds or less. It’s about credibility.

Double your marketing budget.

In a down economy, most business owners look for ways to cut expenses. Cutting some expenses may be helpful; cutting others may be fatal. In my experience, cutting marketing is almost always fatal.

In the economic downturn of 2008, I doubled my marketing budget while most of my competitors cut their marketing budgets or eliminated them entirely. It was very tight financially for us to do this, but it paid off because the marketing landscape was much less busy. Fewer competitors gave me a higher ROI on my advertising dollars.

Consider finding new methods of advertising as well. Economic changes often bring changes in societal behavior. Things that once worked may not work as well anymore; things that haven’t worked may be good ideas now.

Do more to survive.

In 2008, a colleague of mine gave me some great business advice. His company operated large-scale entertainment events, and he experienced a sudden drop in attendance. To survive the downturn, he had to add 20% more events to his calendar just to make the same amount of money he was making in a strong economy.

While he had to work harder to make the same amount of money, it was only for a season, and his business survived the downturn as a result. Once the economy got back on track, his business boomed due to his expansion. Sometimes expansion is for growth; sometimes expansion is for survival. Either way, you’re growing and not shrinking.

Get loans for expansion.

In a down economy, the government often lowers interest rates on loans to encourage business expansion. The government also earmarks money specifically to aid small businesses. Take advantage of this as an amazing opportunity to get cheaper money to grow your business. In a strong economy, interest rates are often so high that it is extremely expensive for businesses to finance anything.

In the last down economy, I was able to get an SBA loan to purchase real estate for expansion. This opportunity allowed us to purchase discounted real estate in a down market with a low interest rate. By the time the economy recovered, we owned several commercial properties and no longer needed to pay landlords rent. Plus, our mortgage payments were far lower than rent and did not go up annually as is the case with most leases.

Whatever storm you are facing will pass. Hopefully, these tips will help you discover your own creative solutions that will allow you to survive and thrive.

How to survive the economy

Young Entrepreneur Council (YEC) is an invitation-only, fee-based organization comprised of the world’s most successful entrepreneurs 45 and younger. YEC members…