Learn How to Use the “Crash and Burn Strategy”
I have an approach to dealing with business failure I like to call the “Crash & Burn Strategy.” It’s a strategic concept that requires the recognition that the current business isn’t going to make it, and thus, the approach shifts from “saving the business” to “preparing for the afterlife.” Most successful entrepreneurs fail several times before they find success, and thus, the approach is that the “failing” business becomes a stepping stone to future greatness. It requires that a quick analysis needs to be done to identify the elements of the business that can be “salvaged” and re-used in the next venture. Examples of such elements include customer lists, the phone number, the email, the website, key fixed assets, and key personnel. Effectively you build a life raft to transport the valuables from the old business to the next business.
The Client’s Who Listened and the One’s That Didn’t
I’ve brought this “strategy” to two clients over the years, but found no “takers.” One was a business that although it had several meaningful products & services, it suffered from the syndrome I call “doing several things badly instead of one thing really good.” Recognizing his own limitations, the owner embraced the timely arrival of his son from the service and saw this addition as the solution to his business problems. As the “accountant active in the business,” my sense was that his arrival brought no noticeable effect on the bottom line. Cash was short, and the company seemed to be running out of options.
The client – Mom, Pop & the son, politely listened to my delivery without argument. When I was finished, they let me know that the business wasn’t going to fail. 15 years later, they continue to struggle without complaint. I believe I’m still their favorite accountant, and I never stop being amazed by their determination.
The second client was a government contractor who was constantly having its contracts “renegotiated” by the government agencies it serviced. Nonetheless, over the years, it had developed several innovative concepts that it was actively marketing with significant encouragement in the marketplace. Like the above client, with or without encouragement, the business was “going the wrong way” through the government agencies’ constant “renegotiating” the profit out of their contracts. They had a significant operation, thus the volume of activity allowed some of the cash flow “games” to hide it, but the company seemed to be heading for a cliff.
This client too listened politely to my delivery, and during the conversation, the wife expressed a moment of despair, and from that point forward, the husband moved heaven and earth – liquidating virtually every asset he had to save his wife from the disappointment I suggested they acknowledge. That company didn’t make it. Uniquely, 15 years later, I still count them as active clients – in a successor business. An evaluation of the successor business might suggest they took my advice, but if my advice was sensible, it was sensibility they already had.
I Am a “Certified Failure!”
Today, I think of myself as an entrepreneur. I started a business from scratch, with all of the trappings that should have produced failure. I did fail but never acknowledged it. I simply kept on doing it – similar to the later client above. Regardless, by failing to acknowledge my own failure, I failed to communicate with my clients’ failure.
Today, I am a “certified failure!”
I didn’t go out of business, I simply faced tremendous adversity. Two clients representing 90% of my business terminated my services. The impact wasn’t all at once. It was a slow death. Thus, necessary adjustments were made slower than hindsight would have suggested. The staff was eliminated. The office was vacated. Networking (my original path to success) was pursued with unending vigor, at times seemingly to be of no avail. But, there were still the expenses of the house, and living, conservative though they were, painfully beyond the income of the business. The equity in the house was carrying the business, but eventually, I was starting to calculate the number of months – at the current “bleed rate” – before there would be no equity. Thus, there I stood in the same place as my clients 10 years earlier.
Uniquely, there was no “Crash & Burn Strategy.” Being an employee (for anyone) was not an option. The current business had to be the avenue. In the early days, I lived on less and less until the business started to bear fruit. Ultimately, the business model worked then, and it would work now. An improved economy would be a great help. Thus, expenses were cut to the bone. Maintenance was deferred until the business could make such expenditures – or they had to be addressed
It would be all about making the best decision at each decision point to advance the best interest of the business every minute of every hour of every day, every week, every month, every year – as long as necessary to bring the business back to “where it was” or “where it should be…”
Simplistic though it may be; that “intelligent” approach helped to maintain my sanity. None of us have all of the answers, but whether hindsight confirms our actions or not, if we can honestly recognize the correctness of each decision (based on the then available information), we cannot blame ourselves for our failure. The final analysis will always ask: “Did you do your best?” “Did you give it everything you had?” If you can answer yes to both of those questions, there can be no shame in failure. Disappointment? Yes. No one takes comfort in not achieving their goals. But, no one achieves every goal. If you do, you suffer from low expectations.
It Was All About the Economy
Fortunately enough, I found my way. In hindsight, it was all about the economy. I like to say: “If people aren’t making money, they aren’t buying accountants.” Thus, whatever I did in 2012 & 2013 wouldn’t produce “rain” until the economy came back. There was no immediate solution. I had to just keep on believing I was making those good decisions to keep the business going as long as I could. But, in 2014, the economy did come back…and the rest is history.
So today, as I like to say “I’m back!” In the words of Barry Manilow: “I made it through the rain and found myself respected by the others who got rained on too…”
I believe I have plenty to offer as an accountant, but more importantly, I have a more complete understanding of failure and adversity. I also have a better grasp of the determination of the entrepreneur and the next time around, instead of calling for the lifeboats, I’ll be bailing the water.