Most entrepreneurs who have been in business for any length of time have experienced a heart-stopping phone call or email that changes their mood from easy-going confidence to sheer panic and desperation.
If the moment came with a soundtrack, it would yell SCREEEEEEEEEEEECH!
And despite the fact that you know that you should always be prepared for a turbulent market or unstable client, it always catches you by surprise.
I know that I have always been shocked when what I perceive was a “sure thing” dries up before my eyes. Like when:
- I invested about $15,000 worth of time designing a training program for a longtime and stable client. The night before I was to get on the plane to deliver the 2-day workshop, I got an email: “The training is canceled. We just learned today that we are being acquired by Computer Associates and have stopped all programs in process.”
- My husband’s formerly supportive client (who had promised “years of work” on a big construction project) declared bankruptcy after having him work one month straight of overtime, on a job site 95 miles from our home. A year and a $26,000 outstanding invoice later, we are still wrestling with the developer for payment.
The only good thing about these moments are that they give you lots of experience and character. I would even venture that how you react defines your success as an entrepreneur.
So how do you recover in the moment?
- Don’t panic – surrender. This sounds wildly naive and simplistic, but I am a changed woman since I adopted this philosophy. After yet another unanticipated stop to one of my husband’s projects, I decided that I was not going to worry or stress about the loss of income. Because, really, it would just cause me to feel uncomfortable and worried, which I would transmit to the little baby in my belly. So instead, I smiled, and honestly said to my husband “Honey — everything is going to work out! I know we can make it happen, so go out there and shake some trees.” And guess what? It worked out, and his business has doubled each year for the past 3 years, all in a tight and rapidly changing construction market.
- Work your network of trusted allies and supporters. As soon as you can, get on the phone to your trusted cohorts and see if they know of available work. You don’t need to beg or appear desperate. Just let them know specifically what you are looking for, and see if they know of anyone who needs help. And it doesn’t hurt to outline your strengths or services in an email, since sometimes those who know you well don’t realize all the skills you have or all the services you offer.
- Ask yourself “of all the things I could do, what is the quickest path to money?” It is logical to want to run in five directions when you are desperate to bring in some income. But this will only serve to frazzle and fragment your efforts. Instead, do what my friend Andrea Lee preaches which is to look for the “quickest path to money.” If you are a coach or consultant, how could you quickly make a couple of thousand dollars? Could you create and promote a hot teleclass? Finish a long-languishing product and launch it? Propose an all-day workshop? Pitch a paid presentation? Often, you have financial opportunities right under your nose that you don’t take advantage of.
Given the nature of disasters, the best antidote is prevention. So before a nail-biting situation occurs like I described above, how can you plan for unanticipated calamity?
- Be extremely generous with your time, resources and referrals to your professional network. This will ensure that when the time comes that you need a favor, people will reach out and help you without hesitation. So as much as you can, offer guidance and mentoring, pass on interesting articles or posts, refer clients, act as a reference to help people get jobs, share work opportunities freely, and act as “matchmaker” with symbiotic contacts in your network. Mind you, you should only have trusted, kick-butt people in your “inner circle” network so that you feel good referring them and they can really help you when you need it.
- Secure financing and lines of credit before you need it. Banks or credit unions are much more likely to extend favorable terms and sums of credit while your business is flush with cash. Secure a couple of good backup sources of cash, just in case you need it, so if you hit a rough patch, you will still be able to pay your bills and employees.
- Never get in a rut in your business. Always be working on the next phase of your development which can include new products, programs, services or markets. That way if one opportunity dries up and you have a window of time to give birth to a new product, you can take advantage of it.
- Diversify your client base. I had a rule in my old consulting business that I had to have a minimum of three different clients at one time in order to feel secure. Most were large corporations with high dollar projects, but I still wanted to make sure that I was not reliant on one client for all my cash flow.
- Keep your fixed expenses to a minimum. When times are good, it can be tempting to hire a whole bunch of people to help, buy a more expensive vehicle or upgrade your home. While there is nothing wrong with wanting a better life for you and your family, make sure you don’t upgrade your lifestyle quicker than is sustainable.
- Keep your eyes wide open about your market. When I worked in Silicon Valley as a consultant where everyone was “smoking web crack,” as I heard one speaker say, I knew it was only a matter of time before the market would shift and my goldmine of rich technology companies would run into trouble. So I cultivated new relationships in the financial services and insurance industries, and when the inevitable technology crash occurred, my business fared well. Study your industry and make sure that you are aware of the risks and have a backup plan if disaster strikes them.
- Save for a rainy day. Your financial adviser and grandpa were right … you should have a healthy cushion of savings set aside in case of emergencies. This is the hardest advice for me to follow, but it is very, very wise. Set up an automatic monthly deposit to an account that is NOT tied to your regular personal or business checking account. I heard someone suggest that it be a bank or financial institution that is inconvenient to get to and has few ATMs.
- Cultivate a mindset of “disaster = opportunity.” It really is true that great things can come from really difficult situations. When disaster hits, ask yourself questions like “How might this motivate me to do something I have been avoiding?” or “How can I take a radically new direction in my business that will be more energizing than what I am currently doing?” or “What can I learn from this experience that will benefit me and others in the future?” Questions like these will radically shift your emotional reactions, and could turn a slasher scream movie into an action adventure.
Chris, the exclusivity clause might be worth it if you’re adequately compensated and protected. Such as when the contract is lucrative, and they guarantee some kind of paid time off when the contract ends. Or if stability of the client’s finances is a concern, you might negotiate a large up-front deposit that you get to keep if they cut you off suddenly.
There are lots of ways to structure a contract, is all I’m saying.
It’s been three years to the day that a business agreement went sour. However, while it’s been a slow uphill battle things work out and life moves on. At times the steps out of a disastrous situation can be very small, but how you react and the attitude you maintain are key factors.
You hit the consulting nail right on the head! As a 15+ years consultant I can vouch for the validity of your post…the life twists and the suggestions! I also agree with the comments made by people who work for THE MAN. I spent 2 years traveling from New York to Alaska helping people being replaced, some only 5 years from retirement, by outsourcing. Job “security” might be a dinosaur these days. Anyone who works benefits from having a consulting mindset. Develop your own resources for health benefits, retirement, investments…that belong to you…not through your employer. Thanks for writing these excellent post.
Andrea, you seem to have quite a yogic vibe to you. I’ve often thought of doing “Yoga for CEOs” to introduce the kind of mentality and practice you talk about in your first point of this post. I have minimal exposure to the biz world, though, and am not sure it would be received. In your experience with the corporate culture, do you think a kind of “Yoga for CEOs” workshop or weekly sessions would be seen as relevant for big biz people? Is there a niche market that’s particularly receptive to the idea of ‘zenning’ at work – that can also afford it? Where could I find information on how seminars/workshops/sessions like this are usually priced? I know no one personally who’s doing this sort of thing. Thanks for your help!
#4 is very important – The worst mistake I ever made in business was agreeing to an “exclusive” work contract meaning I could not take on any paid outside activities. Of course the inevitable happened with the client leaving me with very few options
Great article. Thanks for writing.
Excellent advice. I’ve been stiffed by a client, had one go bankrupt before paying me and have had several projects get canceled at the last minute.
I can’t think of anything to add to these comments, but just wanted to say that this rings true me, an independent consultant for the past four years.
Thank you for the wonderful blog, we sat around reading a few of your posts today at compliancenews.com
Thanks for the article – relevant and timely. In my case, I’ve had some motivation problems (primarily health-related), so working existing contracts and not putting anything else into the “pipeline” has been my mode, sadly.
These are excellent ideas even for those of us who are working for The Man rather than ourselves — I’ve known a lot of people whose “secure” jobs went south just as fast as the contracts/projects you describe. Building goodwill and gratitude, staying flexible and informed, keeping expenses down and savings up, having the right attitude–this is invaluable for anyone. Good post!
Thank you VERY much for this post. I recently started my own consulting business, and this very thing happened to me last night!
Luckily, there’s still a good chance to salvage the project, and I protected myself by doing a lot of what you recommended. But thank you very much for this post; it was exactly what I needed to hear at the perfect time.
Good stuff. It’s hard not to have at least a couple of these. Life has it’s way. One year ago I had a flood almost wipe my business out. We’re still here!
Any advice on not getting into dire straits in the first place?
This is how I avoid nasty surprises as a web design consultant:
* Always have a contract describing the deliverables and payment for ALL projects. It helps protect both parties to the transaction.
* For new clients I insist on 25-33% of the estimated project cost up front. This weeds out tight fisted, unfocused, or insolvent clients right off. Remember, there’s no job or deal that you can’t walk away from.
* Never get behind on your invoicing. That way if you do get stiffed you won’t be too far up a creek. I invoice net 30 at the end of every month, or when a project is complete, OR if there is a ton of work in a short time (like 10K in two weeks) I’ll invoice for pieces of the project.
Great advice Nathan … I totally agree with you.
In the construction industry, you have to make sure to file all the appropriate paperwork so that you are legally entitled to recoup your money. If you file too late … you are out of luck!
I am fanatic about invoicing myself … I never wait. 🙂
All the best,