As an entrepreneur, it's guaranteed that there will be times when you walk into your office to start your usual work day, and suddenly everything changes. You are in the midst of a big crisis. Your biggest client cancelled their orders, you have to pay your creditors by the end of the week, and you discover that one of your partners is making arrangements to take over the company behind your back.
As your company grows, there will be many times when you face potentially disastrous situations like this, and how you respond to them usually makes the difference between failure and the survival of your business.
This was the theme of a very informative and entertaining seminar at VentureLAB, yesterday - "What to do When the 'Bleep' Hits the Fan: Defeating Business Ruin" where several entrepreneurs and professionals shared their stories and gave practical advice on how to recover from your worst business nightmares.
Here are some insights that may change the way you deal with crises and help you get back on your feet faster:
Rule No 1: Don't panic.
It's easy to lose your cool when you face an unexpected bad situation. But the more you panic, the more mistakes you make. "Call your advisors" says Robin MacKnight, partner at Wilson Vukelin LLP, a law firm that advises clients from startups to multinational public companies. No matter how bad your situation is, "...chances are that they saw it before and can come up with a life-saving idea". Andrew Coates, Co-founder of Better Motion Group, a start-up that manufactures a revolutionary portable stepper for seniors, also says to rely on your mentors and advisors in a crisis. Don't go into business all alone. "If you don't have a mentor network, create one" he says.
Be proactive and open
In business, as in life, many crises can be anticipated. You can't think about everything that could go wrong with your company, but taking action when things start going south, and having the right people that could help when it happens, will make a big difference. Frank Haynes, president at Stanley Software Finance shares a recurring problem with many businesses who get into trouble. "The biggest problem we see with entrepreneurs is inaction in the face of mounting losses" he says.
So many times, tight cash flow is blamed for financial disasters in a running company. "This is almost never the issue. It's often just the straw that breaks the camel's back" notes Frank Haynes, adding that entrepreneurs need to get a better understanding of what is the real root cause and look for problems in other areas of their business like marketing, sales and product development.
Another way to be proactive is to create a relationship with your suppliers. "Share your business vision and be transparent. Your suppliers can be the first line of defence and will help you a lot more than your bank when you face financial issues" says Terry Graham, a seasoned entrepreneur and chairman of Pond Biofuels.
Don't go to the bank with your problems
For most entrepreneurs, the first instinct in a financial crisis is to show their problems to their bank, hoping that the bank will help them find a solution. That is almost never a good idea for a small business. Traditional banks will be the first to call their loans or tighten your credit just to minimize their loss. "Don't go the the bank with your problems" says Frank Haynes, "...go to the bank with your problems and your solution", adding that having a workable plan will considerably increase your chances to get help.
It's all in your attitude
Having a positive attitude in life is a powerful tool that comes in handy, especially when you hit some bumps in your road to success, and accepting failure as part of life makes those bumps appear smaller. Terry Graham advises entrepreneurs to never be afraid to dream big and expect hardships in their journey. "If you dream small, the disappointments hurt less. Going into business you are guaranteed that, eventually, bad things will happen. How you deal with bad situations, lays only in your attitude. If you are not willing to handle the pain, get a job with a pension".
Although a good dose of self confidence is a very helpful ingredient in life, having a big ego often interferes with our capacity to make good business decisions. "You need to dissociate your ego from running your business, because when your business hits the bottom, your self confidence goes with it" Terry Graham also says. He adds that swallowing their ego, will help entrepreneurs turn 80% of crises into opportunities.
Listening to the stories and the great advice shared by everybody in the room, the movie Apollo 13 came to mind. "Huston, we have a problem" is a phrase that we use in our office almost every time we hit a roadblock. If you haven't seen the movie, I urge you to buy it and keep it at hand in your video library. It's a great story of how to adapt to worst circumstances to survive a disaster, and somehow it summarizes the stories shared yesterday. As Terry Graham notes, "Failure is nothing more than postponing your success". You may not land on the moon today, but by managing your crisis, you just gave yourself another chance at succeeding.
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