Maintaining Income During Hard Times

Government typically moves in one direction - getting bigger. The ever resource-hungry beast demands more and more resources every year. With economies starting to slow down, debt through the roof, they are turning to desperate measures to maintain what they have.

Mass immigration, increased taxation, increased working years, austerity and capital controls are all looming on the horizon.

So what can we do when investing, when running a businesses or working for income to ensure that we maintain or increase income during approaching hard times?

Choosing a Customer

For those operating businesses, you really have two options for who to sell to - B2B (Business To Business) or B2C (Business To Customer). You have a choice of what you sell and who you sell to.

Business really operates like a ladder, those at the top sell to the next rung down and so on until it hits the end consumer. Each step of that ladder has their own margin percentage and distinct business model. A layered supply chain.

Take for example a simple lead pencil.

You have graphite mining, processing, clay extraction (mix with the graphite), metal extraction (for the band), rubber sourcing, harvesting lumber, lumber processing, chemical paint manufacture, paint application products, production machinery, maintenance of production machinery, marketing, advertising, sales, transportation, mechanics supporting the transportation, office admin, it support, warehouse and warehouse operatives.

All of these layers are involved with producing a simple item. They each take a cut and are necessary for the end product.

However the final consumer, the bottom of the ladder gets to pay all of the people above them for the privilege of the product or service.

Any increases in costs or taxation are passed onto the person below them on the ladder. Or said another way the full brunt of any increase in each layer of supply chain hits the end consumer head on.

From an impact point of view the end consumer is the most impacted and sensitive to all of these future price increases. They may stop buying or not have the resources to buy. The rungs above the consumer will eventually be impacted but they have more of a buffer of time and resources.

Therefore it stands to reason that being a B2C Business or working for a B2C Business could be seen as risky in comparison to the B2B option going forward.

B2B Business can offload rising costs, but eventually economic pain will find them too.

A good value creator or business should always be ready to pivot. Yes change is hard, but that is why so few people get rich.

Swimming With The Current

There are things that you want and then there is reality. Reality is that Governments trend towards growing their budgets every year and squeezing the people.

Even if you don’t agree with it you have to accept reality and swim with the current - rather than against it.

Consider working for government contracts as times get harder. They have effectively infinite resources - they just magic money when they need it. The Private sector in the meantime can wither, wilt and die.

The game continues as long as the music keeps playing.