Times are very tough. The great majority of colleges are looking at 2009 and 2010 and beyond, in anticipation of the deepest budget cuts in more than a generation. But as bad as the financial situation may be, colleges can survive if they take swift and strong emergency action. It is time for some straight talk, starting with the realization that organizations that can't or won't adapt will fail. The first message for higher-education institutions has to be that competition is going to become fierce. For college leaders to believe that their main worries are the inwardly focused challenges and politics of maneuvering campus groups through an unpleasant budget realignment would be a major mistake. The institutions that will survive will be those that have built collaborations among internal groups in order to compete externally for students, faculty talent, and financial resources. The second message is that higher education is part of the larger economic system. There will be casualties, just as commercial businesses will fail and other worthy nonprofit organizations will go broke. If a state's tax revenues fall by large percentages, given that the priorities of the states are usually public safety, unemployment support, transportation, basic services, and a balanced budget, then something will have to go. Often that something will be support for higher education. In this article, the author presents some first principles for approaching budgeting in tough times. He also offers a few examples of the best ways to generate revenue, increase productivity, and cut expenditures. Some of these may be familiar while others may run counter to practices, cultural assumptions, policies, bylaws, or labor contracts. In the end, natural selection and market competition being the forces they are, some institutions will not survive financially, no matter what they do. But others can thrive, if they make all the right moves. In life, adaptation is everything.