...For seasons of low income, do you... hold more in cash? award a higher allocation to bonds? hold direct real estate? purchase an annuity? work a part time $10/hr side job? chase dividend yields? sell all of your furniture on ebay? Quit and get an office job? These are all options I've considered. The idea of simply escaping on holiday until the next cycle arrives is my ultimate FIRE goal, but I'm not quite there yet.
If anyone else out there has owned a business and experienced long periods without income, please share your story.
HOL,
I don't have personal experience with this, but have acquaintances who faced the same challenges in the Great Recession (e.g. income volatility and lengthy business cycles in their industry/specialty). The answer to your questions....I think is "yes", many or all of these are possibilities.
More commonly, though, the best answer- if your industry is prone to long business cycles (and longer multi-year "seasonal" effects)- is to look in the various specialties/related industries and consider expanding/redeploying your company's operations/resources to focus more attention on those industry segments that are better in the current state of the economy. It carries some startup risk, but since you're already successful in your industry, some of the risk may be mitigated by your experience, business network, and strong funded position in what is, for the moment, an otherwise cash strapped industry.
For example, a real estate developer friend of mine and his partner closed his business entirely in 2007, sold all their company real estate holdings, laid off 20+ staff, canceled their office lease, and he took ~6-12 months off. (He intended to take 3-5 years off - with a plan similar to your "ultimate FIRE" plan, but he's a workaholic and couldn't sit still.) He used his share of the company profits to live off of initially; but within 6-12 months, he was looking into new business opportunities. Ultimately, with all the foreclosures he saw all around him, and seeing how many people would become "new" renters, he determined the best strategy was to stay in "Real Estate" but look at where the opportunities were. He started a new operation buying, fixing, and renting entry level residential real estate (buying well into the major initial recessionary decline)).
While he and his partner suffered some stranded asset losses (mostly expired options and abandoned no-longer-viable joint ventures), when they closed shop initially, the profits/resources from the company at its end were significant enough to make the transition to his new business emphasis (albeit still in the real estate field). He largely preserved his capital, developed a secondary operation that was successful, and when the market recovered some, he not only had the ability to start up/ramp up the development side of the business later; but as a result of the secondary operation, he had both reduced the "spend/draw down" of his post closure resources, and invested a good portion of them in assets that appreciated greatly during the recovery, giving him access to cash/large amounts of equity to restart the development business well capitalized when the cycle appeared to turn and well priced opportunities for development resurfaced.
Note: Starting a new company in real estate wasn't his initial thought. Before deciding to start a new company, he purged his house (sold stuff on Ebay), attempted to wholesale some foreign manufactured household products, deleveraged some of his personal rental properties (he's not a stock/mutual fund investor, he prefers direct real estate holdings and owned 10-20 rental homes in the area already - outside of his development business). Deleveraging gave him a useful income "floor".
He knew it would require a "startup" like time commitment to make the new business a success. He learned to speak spanish (as many potential and it turned out actual renters, and many rental maintenance workers were/are Spanish speaking immigrants), and he didn't hire out maintenance or property management services until his rental holdings were something like 40-50 properties (he did pretty much everything himself: finding, negotiating, buying the new properties, rental marketing, showing, lease management, and property repairs and maintenance).
In the end, he emerged from the recovery financially stronger, more knowledgable, and better able to re-establish the development business than he would have sitting on the sideline, and now his business is a diversified real estate business, with development services, residential rentals, options/joint ventures, and a limited amount of construction activities. And while he will face business cycle recessions again, he'll be better able to weather those times, because he now effectively has counter-cyclical operations that can expand and contract as needed over the years.
So, yes, consider all the alternatives you mentioned in your post, and also look at whether there's an opportunity to diversify, to take advantage of the cycle's highs and lows.
Ultimately, if your opportunity to earn income with your current business is temporarily lost/reduced for a longer business cycle "season", then you can sit it out, restructure your AA to get you through it, or get to work on something new and more productive, especially if doing so better positions your business for long-term resilience.
NL
