"There will be times when your income is zero and you just might as well plan for that right now."

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That statement wasn't uttered by a survivalist or someone who believes you should hoard gold in preparation for the collapse of the international monetary system. 

Rather, it was spoken by Becky McCray, resident of Hopeton, Oklahoma (population 30), cattle rancher, liquor store owner, and co-author (along with Barry J. Moltz) of Small Town Rules, a book which, among other things, introduced me to the concept of "planning for zero."

What If Your Wheat Crop Were Hailed Out?

Becky's book focuses on the lessons that business owners the world round could learn from small town entrepreneurs—farmers, ranchers and anyone who lives in and serves a rural community. One such lesson she explained to me during this week's episode of the Marketing Smarts podcast involved taking into account a year with zero income.

If you grow wheat, for example, you have to accept—given the unpredictability of Mother Nature—that you might lose your entire crop. Likewise, if you raise cattle, you need to be prepared for years of drought or disease that decimate your entire herd. If such things come to pass, and you didn't plan for it, you're out of business.

So how exactly do you plan for such calamities?

Think Long-Term, and Diversify

First of all, you have to think beyond the coming year and adopt a long-term view, saying to yourself, "I have to plan for five years of really variable income. What can I do now to make that better?"

One thing you can do, according to Becky, is to diversify your sources of revenue, which means taking a looking at your business and asking, "What would be another line of income that would be compatible here that would help even out some of the volatility that I know we'll face?"

In Becky's case, for example, she hopes that if the cattle business is slow, the liquor business will take up the slack.

In the case of the wheat farmer, she says, "If you know that your entire wheat crop may fail, then you may also either plant milo [sorghum] or soybeans, or you may take in livestock and raise cattle to even that out."

If you put all your eggs in one basket, and zero hits, you're sunk. If, on the other hand, you plan for zero and cultivate reliable alternatives, you can stay afloat even when the bottom falls out. 

Operationalize Frugality

Plain old frugality is another way that farmers and other small town dwellers "plan for zero."

Small town business owners will, Becky says, "spend creative brainpower before spending money." When this approach gets baked into your way of doing business, Becky calls that "operationalizing frugality."

As an illustration, Becky tells of a time when her mother ran the liquor store that she currently runs and they began to carry more wine. To store the wine properly, of course, they needed racks. But, as Becky says, "my mom was not about to spend money" on something like that.

Instead of spending money on expensive wine shelves, Becky's mother took some old bookcases and the cardboard inserts from wine cases and built storage space that Becky and her husband use to this day. 

Which is not of course to say that farmers don't spend money. In fact, as Becky points out, they can easily spend a quarter of a million dollars on a high-tech harvester. The key thing is that they will figure out every way imaginable to save money in other areas to afford spending it in that one.

Are You Planning for Zero?

As I told Becky, my family has been off the farm for several generations now; and, if you're like me, living near a major urban center and working a white collar job, the idea that a hail storm could wipe out your income for the coming year seems like a fairly remote possibility (though, for those still recovering from Sandy's wrath, it won't seem like an impossibility).

At the same time, if you have spent time freelancing, as I have, or if you work in an industry that has been drastically affected by ongoing global or technological changes, then the concept of "income volatility" won't seem that alien. In fact, it can seem all too familiar.

Which then raises the question, "How are you planning for zero?"

If you would like to hear my entire conversation with Becky, you may listen above or download the mp3 and listen at your leisure. You can also subscribe to the Marketing Smarts podcast in iTunes or via RSS and never miss an episode!

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Published on November 7, 2012