One Way to Survive an Economic Crash

January 21, 2021

Imagine you were back in February 2020, but this time you know what is about to happen. You understand that the world as we knew it was going to change for a long time. You know that the economy will grind to a halt in many sectors. What do you do? What do you do now while we are still living through this?

I have always been a big proponent of investing when things are tough. Retreating is not going to help. Spending less on marketing is not going to mean survival.

Dollar-cost averaging is one of my favorite investing strategies. The basic concept is this – buy shares on a schedule, whether they go up or down. If you are a math nerd, you know what happens. Your price per share gets averaged over time. If the market dips, you buy when it is down. If it is rising, you buy on the way up. The effect over years of investing is moderating the risk of market fluctuation. Most research shows that dollar-cost averaging beats lump sum buying methods, including trying to buy the dip. We aren’t that good at timing, and DCA takes the emotion out of the equation.

Dollar-cost averaging works in business too! We work with so many companies that have no consistent marketing budget. They spend the minimum they feel they can to achieve their goals. Please don’t do it!

Set an amount and set that aside for marketing costs. Keep putting that aside and spending it when the market dips. A great rule of thumb is 5% minimum of your gross revenue.

You will be ahead as most other businesses will reactively pull back. You can take money from that fund and capture more market share. You are dollar-cost averaging your investment in your business by taking the emotion out of it. You continue to grow and invest in your company while things are going exceptionally well and when they are difficult. Best of all, you set yourself up for growth when hard seasons come to an end. And they always will!

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