Resilience and drive come from being beaten

In a good market you don’t have to try hard to win and keep business.

As soon as the market goes down, the tide goes out for all of us and suddenly work is cancelled with little notice and your competitors come in and undercut you on price taking your customers and your revenue. This is quite a painful experience.

It’s what you take from the experience of losing badly that counts. You will lick your wounds for a while, but when you have overheads to pay, staff to pay and a large mortgage you don’t have time for self-pity – it will only bankrupt you.

When you take a beating, you are forced to look at the market and your customer base with no illusions. It gives you a clear focus on what you need to do to win and retain work, and it gives you the drive to go for it.

There are no one-size-fits-all solutions to building more resilience, however, there are some generalisations – none of which are new – which can be applied.

Don’t put all your eggs in one basket  - If most of your revenues are coming from one or two clients, do everything you can to find other customers. Sure long term contracts are great steady sources of income, but that can all come to an end with only a day or two’s notice. If you aren’t making money elsewhere you are going to become a smaller company very quickly.

Pride cometh before the fall – it’s when you think everything is going well that you need to be most worried. I have experienced this many times, and see many others go through the same thing all the time. A contract isn’t won until it is signed. Payment isn’t received until it is received. Take nothing and no one for granted – you need to have a mild dose of paranoia at all times because, yes, your competitors are out to get you.

Life isn’t fair – and bad luck doesn’t just come in threes – it can come in non-stop waves. I know of a small business owner who was on the receiving end of an unfair dismissal lawsuit, a tax audit, death of his parents in a car crash, discovery of large scale employee theft, his partner leaving him taking the kids, and he had to find a new house – all in the space of 9 weeks. Do you think he had time to productively work or win new business in that time? One or two of those matters would reduce the average person to a gibbering mess, and he had all of them. That’s an extreme example, but you can have bad luck, personal tragedy and good outcomes all at the same time.

Keep on swinging – a good boxing analogy – keep throwing punches as you might just connect. It doesn’t matter what is happening, you need to stick to core business and keep doing it. Yeah, sure you are great at this aren’t you - resilience is your middle name after all. Your real test is getting knocked down a few times a year, every year for a decade. This tends to sort out those who can keep on going and those who can’t take it anymore.

There’s a silver lining to every cloud – there are always but always opportunities. You need to free your mind up to look for them, and encourage others around you to offer them too.

Lead by example – if you aren’t doing the right thing in terms of selling your business, how can you expect your people to. They will pick up on your cues and if you don’t show you care about the future, then they won’t either.

You discover a lot about yourself in times of adversity and hopefully it is good. Keep on swinging!

Stop being passionate – be successful instead

Regular readers will know that I have real problems with how much the term ‘passion’ is being misused right now. A number of you have been in touch with me and have asked for clarification on what I think are the right words to use.

If you want to know what I mean just watch the auditions episodes next time American Idol is on. Almost anyone who mentioned how passionate about singing they are couldn’t sing, and most of the talented were just nervous.

Saying you are passionate about something has come to mean you have a passing interest in something.  This is kind of like the difference between lust and love with the former being an ephemeral but real emotion and the second being lasting. The term passion as used in popular culture and the media is at the lust end of things.

When interviewing job candidates I have come to interpret the use of ‘passion’ as meaning ‘I wasn’t aware of this before, but I actually spent 5 minutes of my time on Google working out what it is.’

If I tried to unpack the traits that we think we are talking about when we say ‘passion’  when talking about starting a company I come up with the following.

Technical mastery

You need to actually be good at something. Some people learn slowly over time and others spend every spare minute of their time thinking about and learning about it. This second category is obsessive and this is fantastic for a startup, as long as it can be channelled. This level of obsession is often what is meant by the term ‘passion’.

When your company gets a little bigger you won’t be able to find as many obsessives so you’ll have to hire less obsessive people. Plus, let’s face it, if everyone in your company is obsessive you are in for a legendary level of conflict.

Ability to deal with uncertainty

The startup experience is stressful. We all read about and cheer on the success stories. However, the cold hard reality for 99% of startups is that they don’t get funded as much or as quickly as they like.

Product takes too long to develop and customers don’t like your first product release or are nervous to be the first buyers. Potential investors want to see you struggle with adversity and come out on top before they invest.

So, you will spend months if not years trying to work out how you are going to pay wages the next month.

This is a trait that can be learned. Ten years ago I was admitted to hospital with a full blown anxiety attack that had symptoms just like a heart attack. Today I think I could be on the receiving end of a Donald Trump style rant and just smirk.

If you have no problems dealing with uncertainty it probably means you are a sociopath – there is a reason there are more of them at senior management levels than in the general population. If you are sociopathic make sure you can find someone with empathy you can trust to translate your intent for normal humans with insecurities and anxieties.

  

Thinking outside the square

Very few people are good at this, and even for those who are good maybe only one in ten or one in 100 ideas are any good.

To serve an existing market you need a depth of experience to understand you and your client’s needs.

Also critical to innovation are constraints such as dropping prices, increased competition, lack of money, customer base or people are what drive innovation.

The Facebooks and Googles of this world are terrible examples of innovation for the majority of us. Statistically they are the extreme outliers. You need to look to your competitors and comparable industries to see what is really happening.

Follow through

Having a good idea isn’t enough – you need to follow through.

While you are doing your MBA this all sounds like white-board nirvana, come up with a plan, allocate resources, meet milestones and become billionaires. Unfortunately it isn’t like that for 99.999999999999999999% of us.

The main problem is you need to have the time to do it – which I can almost guarantee you don’ts.

So you are left with two options – chip away at it slowly over time or hire some people to progress it. The second option not only needs funding but you still need to give a lot of time to it to bring people up to speed.

And, don’t forget not every effort pays off. You need to have a portfolio manager mentality and put small bets on a number of initiatives at the same time.

Resilience

Resilience is an amalgam of all the above. It means that you don’t fall to pieces when you face uncertainty. It means you can keep going, and follow through until you have delivered product and given sufficient time to marketing for a sales cycle to work.

I met a company startup chairman last week who told me he literally wore out a pair of shoes early this year looking for investors in an IPO. He is very well known and respected in industry, however the market for raising equity right now is absolutely awful so he failed. However, he relentlessly followed up every lead, and the week before I met him he finally signed up a major international investor as a private investor. Not bad for someone past the mandatory retirement age of 65.

As a keen observer of startups I have come to realise it is very hard to guess who is most resilient. The stereotype would be the ideas man falling to pieces when the business doesn’t work as planned and the level headed technical type continuing on.  However, all that changes when you have to pay your mortgage as well as your staff who also have to pay mortgages and send their kids to school.

I have seen flakes who never give up and level headed people who run at the first sign of personal hardship.

Your startup may go through several phases or pinch points where your very survival is in doubt. You may survive a couple, but a third may do your head in. Can you keep the faith in your fellow company founders?  It is people problems that make it all go horribly wrong.

Flexibility

Here’s a fact for you – your business plan is complete bullshit.

Sure it made your investors and bankers happy, but ultimately it reflected your wish as to how the world works, not how it actually works.

When you try to invent a new market, unless it takes off quickly your company is dead.

When you try to innovate in an existing market you will find your first efforts miss the mark. People either don’t care or you aren’t big enough with a long enough trading history for them to trust you.

This is all neatly encapsulated in the current fail fast movement, the guiding principle of which is to empirically test your business model as soon as possible and then pivot or change your model for the better.

Another way to look at flexibility is the ability to think of your next move.  You are never cornered, there is always a next move, you just mightn’t have figured it out yet. 

When you have creditors screaming at you for payment, customers screaming at you for late product or defects, no money left in the bank and wages to pay it is very hard to do anything but melt down or panic. This is the time that flexibility is important.

Who can you pay later? What can you sell now? Who can pay you now? Can you pre-sell, giving a discount if they pay now? Can you offer options in lieu of cash to staff? Can you renegotiate payment terms?

Commercially minded

Primarily this means knowing what your company is worth and your own ability to deliver.

You need to make income/revenue as soon as you can. Without it you’ll never grow.

You can raise money from investors, but if you sell too soon you may be driven to providing a sub-optimal or cheap product.

You need to understand the fundamentals of contract law, the tax system, banking, employment law and other regulatory systems and how you can work within those frameworks.

You need to know how to sell and negotiate. It is only too easy to talk back a sale.

Very rarely will all of those skills be present in one person, so you need to recognise your deficits and seek help from within a group or advisors as soon as you can.

Anyway, those are some further thoughts on ‘passion’ from me. Please share your experiences.