I lost six figures last week: How to make your business disaster-resilient

Fucking hell, 2020, do you think you could manage to squeeze any more bad news into the first six weeks?

You get the call from your business partner. You can tell it’s bad news just from the vocal tone when they say: “Hi”. There’s a tightness in your stomach as you think: ‘Alright, what is it?’

“Network World* just got canned. Corona. Nothing we can do.”

It was a big deal. The Network World conference is one of the largest things we do all year. The client is the nicest ever. They had no choice.

We added it to the towering stack of 2020’s short-notice event cancellations. It started with international conferences cancelled a week out because they didn’t want their delegates choking on bushfire smoke.

Then coronavirus, putting the fear into every organisation that does public gatherings and strangling supply chains in ways that will play out for a long time yet.

Our cost structure and seasonal demand mean every revenue dollar lost now comes straight off the bottom line. These aren’t the profit maximising months, they’re all about minimising your losses.

For me, personally, that’s a six-figure loss so far.

It’s not like share value plunges, which are a bit abstract because you weren’t going to sell them now anyway. This is actual money I had expected to make, sales we had purchase orders for. That won’t bounce back when the market recovers because that cash is as gone as Myspace.

Particularly bothersome given our 2019 ended with solid activity already booked for this year, unusual in our game.

Not gonna lie, having the business grind back down to first gear is pretty annoying.

Is it the end of the world?

No. Because you should not start a business if you expect all plain sailing and no nasty surprises. That’s not how it works.

Getting angry at bad news ain’t going to change anything. One of the essential arts of business is keeping pretty Dalai Lama about things you can’t change. And moving quickly to deal with the things you can.

Downturns pass but staff will remember

Last year, we got the staff together in some of the offices and pointed out we’re heading into sketchy economic times. Not certainly, but enough of a risk to bunker down a bit. We asked for their help, to keep costs down and use fewer freelancers. Not brutal cost-cutting but just being… careful.

They lifted to the occasion, so now we’re better positioned to deal with this new menace.

We have 60-or-so full-time people who have all gone above and beyond for us, and we’re doing everything we can to make sure everyone keeps their jobs. In five years’ time, they will remember that time we had their backs rather than just doing a convenient round of layoffs to protect our profits.

That said, if you’ve got someone who everyone knows to be hopeless and is just being shuffled around into non-contributing positions like HR or content curation, now is an ideal chance to vote them off your island if you follow my drift.

Don’t infer from that that I’ve watched the entire last 20 years of Survivor, taking constant mental notes about business strategy.

I’ll leave that to my business partner who has done exactly that.

When it’s bad news time, gather your staff and tell them in person, before the rumour-mill takes hold. Don’t send a fucking memo like some detached management lizard. Lead, that’s your job.

Great teams are forged in the hard times.

Bad news happens, so expect it

We didn’t know coronavirus was going to happen. But we know something is going to happen at least once a decade, and that thing isn’t going to happen at the time of your choosing.

It’s good to stay downturn-fit.

Signs your business has low downturn-fitness.

1. Your business has weak margins from saying yes to garbage clients, in the hope that one day they’ll change. Spoiler alert: they will never change.
2. You’ve pulled all the profits out of the business like it’s your personal ATM.
3. You give people credit because they seem nice.
4. You have leases on everything, both in your business and your personal life.

We’re in a capex-heavy field. A lot of companies in our field have grown entirely on leased assets. We’ve mostly bought ours out of earnings, so we know we can afford them.

When the famine comes, our only major costs are rent and wages.

It’s much safer inside that balance-sheet bunker. But we can still hear the screams as desperate lease-burdened competitors fight it out on the revenue-less badlands.

Could you survive a couple of months with zero revenue? Ask yourself that, because it happens. What’s your plan?

Risk management is weirdly polarised depending on business size. Big business can’t get enough, a sea of code red flags around every corner, so they also don’t get much done. Small businesses never seem to think about threats, they’re all just business as usual until they go: ‘Hey, what’s that large single headlight heading toward us?’

The modest spenders will inherit the Earth

So much business inspo is embarrassing dicks flaunting sports cars.

Sorry for the self-quote, but from this story: “If you keep your living costs low, you can just make decisions without fear because your prestige car repayments or school fees aren’t threatened. Paradoxically you make a lot more money if you’re not scared about losing it.”

Modest living costs are like some amazing forcefield as you head out onto the business battlefield:  the bullets and explosions just bounce off while you wander around in a relaxed state of mind.

If you’re looking at business — or your career — as a means to buy prestigious things, you’re making yourself weak.

Look at, say, Roxy Jacenko, influencer and famous owner of many prestige things, as featured in the Life & Luxury section of AFR Weekend.

“In an industry where perception equals money, spending a five-figure sum on curtains is an investment, says publicist Roxy Jacenko.

“Did I need $75,000 curtains?” she asks AFR Weekend, pointing to the grey curtains adorning the meeting room in her two-storey office in Sydney’s eastern suburb of Paddington.”

“No, I didn’t. But guess what, you walk in this door as a prospective client, you think: ‘F—, this girl must be good at her job. She owns a building, it looks good. She can talk the talk’.”

Here’s when $75,000 curtains are an investment: when you’re selling $75,000 curtains to people who believe in curtain-based prestige.

Dropping Warren Buffett in your business advice is a massive cliche, but forget his investment strategy and look at this spending. The guy has lived in the same modest house in a non-prestige city since 1958. He pays himself a $100,000 salary. He likes his work.

Your essential Buffett quote of the week is: “Your standard of living is not equal to your cost of living.”

How much fear does a downturn hold for Buffett? He’s loving it. It’s his version of Black Friday Sales where he can pick up sweet deals on distressed businesses.

Businesses that overspent on curtains in the good times.

*Not its real name. A bunch of major conferences have been spiked in the last few weeks.

This article was first published on Motivation for Sceptics.

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