You can do everything right in a start up and still struggle and even fail. Maybe you encounter a "perfect storm" of negative events that is impossible to predict and difficult to overcome. As they say on bumper stickers, "Sh#t happens".
A perfect storm occurs when external events or series of events (completely beyond your control and not of your making) combine dramatically and negatively impacts your business.
capable entrepreneur I know describes this effect as being OBE: Overcome By Events. Sometimes, in spite of flawless execution,
great planning, and outstanding management, you can still be Overcome By
Events, or at least, initially overcome.
So, is this a fatalistic post? No, quite the contrary. Yes, one can do everything right and get hammered by things beyond one's control. But, in the final analysis, overcoming seemingly
impossible challenges and leading your company back from the brink after
suffering a potentially fatal blow is one of the most satisfying aspects of
running a business. The satisfaction
may be personal and private; typically only you know the extent of the
challenge your business faced and can truly appreciate the creativity,
determination, and perseverance you brought to overcoming that challenge. So while you might not want another one to occur, you have some sense of confidence that perfect storms can be overcome.
So can one get better at handling a perfect storm? Yes, absolutely, one can improve their skills at this even if every perfect storm is unique. Which is the point of the post, you can't predict perfect storms but you can prepare for them. Let's discuss how.
First, though, let's delineate the perfect storm idea. Perfect storms are comprised of minor and major things that go wrong like a customer in a simultaneous fashion. Like a your top 3 customers failing to pay for an extended period when all had been historically reliable. Or a major order getting canceled after a salesperson had failed to document a deal correctly combined with a critical shipment going out late enough to prompt a return.
Perfect storms can also be created by three or four events that are not mutually exclusive. For example, say you run a business with reasonably stable monthly cash flow, except for in January, when your cash balance is typically at its lowest point. Then say your largest customer, who pays with like clockwork, unexpectedly calls in early January and apologizes for not being able to send a check for several weeks. You now deal with the most severe cash crisis you can imagine.
All of which changed my point of view from not spending intellectual cycles on assessing the probabilities to spending my energy on potential responses to all manner of setbacks. I no longer model in mind what will go wrong as much as I consider what my response will be to a broader list of potential setbacks. I don't necessarily spend time on the probability of any scenario, because simply, it is too hard to really know. What you can know is that things will go wrong and sometimes go wrong in combination that create unique challenges.
My perspective became that the key to surmounting the perfect storms that will inevitably appear is to shift from anticipating what will go wrong to what you will do when things do go wrong. That is that the priority is upon responding to what does go wrong -- better. Another way to say this is that one should re-direct energy from worry to planning.
Stop trying to guess what will go wrong per se', and instead, develop response plans to a broad spectrum of issues. The likelihood of anything, including a natural disaster, Icelandic volcano or an uncontrolled Gulf of Mexico oil spill, is nearly impossible to assess. But you can have a response to the loss of air traffic to Europe for two weeks. Or, the absence of Florida orders for a month. Or, the dramatic decline of Gulf Coast orders to your business. Being right about why isn't going to financially rewarding whereas be ready for what goes wrong will be financially worthwhile.
Here’s a challenge I consistently give
CEOs. I’ll say, “Take some time and
think about this. What headline could
you read in tomorrow’s paper that would be the best possible news for your
company, and what headline would be the worst possible news?”
The next day they come back and tell me the
best and worst news they could imagine.
My goal isn’t to create a sense of optimism or pessimism; my goal is to get
their wheels turning. If you ask
yourself, “What is the worst news I could see in tomorrow’s paper?” you’ll
naturally start to think about what you would do if that actually occurred. Thinking about what you would do in a moment
of crisis is terribly important because your response and response time are critical. Your company is like an organic entity; if it
sustains injury, applying first aid as soon as possible could be the difference
between company life and death.
Responding quickly – and with a good or great response – is
paramount. The sooner the better. Which is why planning responses will always benefit in a way that worrying about causes will not.
I suggest you model “impossibly” negative situations and develop a Plan A, a Plan B, and a Plan C in the event the impossible does in fact occur. Someday, somehow, the impossible will happen as it frequently does actually happen.
Over the last twenty-five years I’ve found perfect storms occur more often than I once would have thought. The frequency of perfect storms is the bad news; the good news is you can do a good job overcoming a perfect storm with anticipation and planning.
And sometimes that’s enough.
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What if you wake up tomorrow and your
computers have crashed? What if your
largest customer is bankrupt? What if
your industry – or the industry you serve – disappears? Focus on short-term planning, not long-term