Entrepreneurship can be a scary thing. To be successful, you have to learn to love chaos, be able to pivot, and think on your feet.
In the spirit of Halloween, I’ve compiled a list of my top worst-case scenarios. Some come from my own experience, while others come from fellow entrepreneurs I’ve worked with. Just thinking about them is enough to increase my heartrate.
In any case, here are my top tips for recovering:
1. You lose a major source of revenue.
Maybe your top customer stops buying from you. Or you lose a major reselling partnership. Wherever that money was coming from, it has stopped.
Like investments, your top priority in growing your business should be to diversify your sources of revenue. Every month, imagine yourself losing your top customer, and ask yourself: How would I recover if I lost this business? What can I do to reduce my dependence on it?
For us, that’s been a combination of diversifying customer industries, locations, and partnerships. For example, to support our website product, we have partnerships with many of the major players in the small business website space. If one were to pull out, our business would still move along because we could rely on others.
2. Your best employee quits.
Perhaps it’s an engineer, a product owner, or a top marketer. They could be leaving for an offer from a bigger company, the opportunity to work with more resources, or for better benefits. Or, at least, that’s what they’re telling you.
Dig deeper. Try to understand — without putting them on the defensive — what’s really taking them elsewhere.
Remember the age-old adage, don’t put all your eggs in one basket. Make sure that other team members know what’s going on so they can pick up the slack when someone leaves. Think of it as a “hit by a bus” rule: Have a backup plan so you can continue if someone unexpectedly doesn’t return to work.
3. Your costs suddenly go up and you hemorrhage money.
When you’re hemorrhaging money in a small business, you might as well be losing blood. In my current company, during a new product launch, we significantly overspent our marketing dollars. It hurt our finances so badly, we had a round of layoffs to get us back on track. I could have lost my whole business.
Mistakes happen. And when you run your own business, they’re inevitable. The one thing that saved me was reacting quickly and pivoting our strategy. Don’t panic.
The most important part of correcting a mistake is to stay calm and stop the flow of money loss. For us, it was better to stop our marketing spend for this product line before trying a new strategy.
4. A cringe-worthy leadership moment in public.
Imagine you’re invited to speak on a panel with other entrepreneurs. Another speaker or a question from the audience baits you into saying something you shouldn’t have. Maybe you trash talk a competitor or break a PR story too soon.
Whatever it is, it’s a major foot-in-mouth moment. Just thinking about this makes me cringe.
The only way you can save face is through authenticity and transparency. Apologize and own up to your mistake.
Depending on the faux pas, this could be in the form of a press release, a personal email, or a sympathetic tweet. Be human, recognize you were wrong, ask forgiveness, and then move on.
5. A natural disaster hits and impacts your business.
Hurricanes, earthquakes, wildfires — 2017 has been riddled with natural disasters. These situations are tricky.
You can have a backup plan, but there’s really no way of knowing exactly what will go wrong. Flooding? Power outages? Major revenue loss? Beyond having a comprehensive insurance policy, do what you can to have a backup fund.
For events or damages that aren’t covered by insurance — or things that can’t wait for claims to be processed, like payroll — try to keep a cash advance as an option. Or, at least, have a credit card with a high balance threshold and a great reward system. In tough months for my business, our credit card and rewards have kept us afloat.
Overall, these are nightmares you can’t predict. But in the wise words of Winston Churchill, “Success if not final, failure is not fatal: it is the courage to continue that counts.”