Crises are always hard to deal with. Read on to learn several foolproof strategies to lead your business out of a crisis.
As a small business owner, you know how hard crises are. Your company suddenly stops bringing in revenue. Rules, methods, and routines that you have relied on for so long don’t work anymore. And you, a smart and brave entrepreneur, are desperate. You are on the brink of losing your company but have no idea what to do.
Don’t be afraid. There are many strategies to help you and your company through these hard times, and today I want to share them with you. In this article, I explain how to manage a crisis before it destroys your business with five simple tips.
A terrible mistake
When I moved from Europe to the United States in 2012, my aspirations were high. I was a successful entrepreneur who had managed to grow a one-person digital marketing agency, Singree.com, into a mid-sized company. I had plans and a strong mission. What I didn’t have was a clear understanding of what my agency and employees were capable of without me, which was a mistake. Let me explain.
I started Singree.com in the midst of the 2008-09 economic crisis. At launch, it employed a single person — me — but I was passionate and deliberate in my actions. Good things come to those who wait. I not only waited; I also worked hard, 24/7. Time ticked by, and Singree.com grew to employ 18 digital marketing and development experts. I was proud. Moving to the U.S. to cement the agency’s position seemed to be the natural thing to do. Little did I know that doing so would ruin everything I had.
The thing is, I am good at multitasking. For years, I had been helping my employees do their job, but they got used to me solving all of their problems. So, it was inevitable: when I moved to the U.S., the agency slowly started falling to pieces.
As with many small business owners, I had trouble delegating authority. I wasn’t afraid of it, I was actually too interested in everything the company was doing. And it hit me hard. I was in NYC but couldn’t do anything to save my agency — Singree.com just didn’t work without me. I had to deal with the crisis and quickly. So, here’s what I did:
How to deal with a crisis
1. Admit you have a problem
You can’t deal with a crisis until you can admit that your company has been hit by one. You may have all the stats, showing that the situation is critical, but still choose to do nothing. Why? Because the power of denial is immense. You get tricked by your own brain, not to mention the problem.
It’s so easy (and comforting) to linger in the past where your company was a huge success, but will it help you move forward? The answer is no, of course. Therefore, focus on now — neither past nor future will help you manage a crisis.
Only when you realize that you are responsible for navigating your business out of a crisis, can you make actual steps forward.
Remember: Denying a crisis never works. Never mentioning a problem won’t solve it, only taking action helps.
2. Optimize your workforce
By this I mean, fire every employee who doesn’t bring value to your company. Hard times are all about hard choices, and you will have to exercise authority to cleanse your company of workers who are not as effective as they should be.
Small companies spend about 20 percent of their revenue on employee wages and when in crisis, you’re pressed to cut spending to survive. And yet, the main reason why you should fire non-productive workers is not about the money but, rather, the efficiency of your operations.
Let’s imagine that you have a developer who can’t finish a project on time. Should you give him one more chance? Well, if you have the funds, you may, but when your business is on a shoestring, don’t wait — shut down the project and get rid of this developer. You have already spent tons of resources. Don't make the mistake of spending, even more, money and ruin hope for the whole company.
You can always be merciful to your workers, but are you so sure that they will pay you back? The answer is usually no. Don’t try to be a nice guy. In several months you will have a riot on your hands, so you’re better off firing non-efficient employees now, rather than losing the ones who perform later.
Nobody should work for free. Your employees have families to provide for, and the best thing you can do is, to be honest with them. Cut and optimize until your budget is balanced. After all, that’s what other companies do.
3. Cut your expenses
Have your ever heard of the Pareto principle? It demonstrates that 80 percent of the effect is always a result of 20 percent of the causes. This principle can be applied to your company as well. That said, 20 percent of your projects bring in 80 percent of your revenue; 20 percent of employees do 80 percent of the work, etc.
When your company suffers from a crisis, cut projects that don’t produce any profit or are not well-paid. Basically, focus all of your "cutting" on the non-efficient 80 percent. You will also have to cut projects that are potentially profitable but suck money out of your budget.
Cut these projects without mercy because they have the potential to place a tombstone on your company’s grave. Even huge and wealthy companies (like Google) cut expenses to meet their goals. They shut down billion-dollar projects to save dozens of billions. More waiting always means more spending — don’t forget about it!
4. Prioritize projects that generate revenue
After you have cut off unnecessary projects and employees, it’s time for you to optimize what you still have at your disposal. These should be the most important projects and the most professional workers.
Increase your company’s efficiency by investing all of your resources into projects that generate revenue — not potentially, not in several years, but now. These projects (or even a project) keep your business afloat. Pay special attention to them and delegate your best experts to work on them.
Not so sure? Consider the success story of Steve Jobs. When he returned to Apple, the company was stagnating, producing products that didn’t bring any revenue or value whatsoever. Jobs cut it all, prioritizing iPod development. This was a foundation that turned Apple into the company it is now.
Remember: Learn to cut things that don’t matter and prioritize projects that do.
5. Cope with problems and be ready to learn
Winston Churchill once said, “Never let a good crisis go to waste.” He was right. Any crisis or any problem is your best opportunity to amplify your skills, come up with new solutions and move forward.
You can cope with problems (huge expenses, unprofitable projects, non-productive employees), but, first of all, you need to learn to break out of your comfort zone. The better entrepreneur you become (which happens in times of crisis), the higher chance your company has to reach its full potential.
First, learn to control yourself. An easy-on-the-trigger boss who yells at his team when everything falls apart is not a pleasant sight. You will have to become a bigger, wiser person — there’s no other way. Pacify your anger and direct your emotions into problem-solving, not destruction.
Second, you will have to learn to think strategically and proactively. Stop fidgeting and focus on eliminating reactive thinking from your business management. This will not only help you pay attention to what actually matters, but also turn you into a true leader who controls circumstances, not yields under pressure.
Third, learn to be flexible and adaptable. You can never know what life has in store for you. So, when unexpected things happen, rethink your plan and move forward. Don’t stick to strategies that no longer work.
Managing crisis is all about learning new things. Use these new skills to make the difference for your business.
Dealing with a crisis is never easy, especially when you are pressed for resources. However, if you know how to take the wheel and are committed to solving problems, any crisis can become an opportunity to improve your business management skills, become a smarter person and take your company to the next level.
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