The thing about a financial crisis (which comes from out of nowhere) is it can be physiologically and emotionally devastating. Imagine you are cruising down a country road with the windows down and radio up then BAM! A deer jumps out in front of you; everything changes in an instant. That’s how a financial crisis can feel.
Every business faces a financial challenge at some point; if your business hasn’t - give it some time. 🤨 but it seems like a true crisis is almost a right of passage in every wild success story.
Navigating a team through a crisis and ending up with a profitable outcome takes leadership, skill, and a little luck. Over the past 23 years, I have learned to navigate through 10 major financial crises which should have ended the company(s) and bankrupted me;
And I use the same 5 Techniques every time:
Technique #1: Center Yourself
How it works:
- Take a day to yourself
- Accept where you are
- Ask yourself if you are willing to fight
This simple Technique allows you to achieve clarity of purpose.
👉 Take off a day or 2 or 3; be wholly unavailable to EVERYONE. No text, emails, slack, teams, or social media. During this time, get it all out: feel sad, scared, guilty, angry - whatever it takes to get out the emotions because you are going to need a lot of strength for the days ahead.
👉 Now is not the time to bury your head in the sand or just hope it will all work out; accept where you are and that it’s up to you as the leader to guide the team.
👉 At the end of your time in the wilderness, ask your 1 simple question: Am I willing to fight for this business? If you can confidently say yes, then continue reading.
Technique #2: Get Really Clear on Your Numbers
How it works:
- Analyze your Cash Flow Forecast
- Complete a detailed review of your business expenses
- Establish decision triggers
Quick note: Don't start cutting all business expenses. That's a mistake. These steps work better, and that will come later.
👉 First, a cash flow forecast works like a crystal ball that can see around the corner on the financial road of business. Second, a cash flow forecast takes away the fear of the unknown and helps you not make a rash decision that could have a very negative long-term financial impact. Third, a cash flow forecast brings clarity to decision-making for the next 2 steps.
👉 Over time, wasteful expenses start to creep in. This subscription or that unnecessary expense will show up. As business owners, sometimes we're lazy, have a lack of concern, don’t have the time, or have unclear goals to really watch all the little gremlins that invade our expenses. Every Time I have performed a detailed review of expenses, I have found thousands of dollars of savings due to excess.
👉 Now that you are clear on the numbers, set your if / then triggers. For example, if cash falls to this level, then we do this. You should have 2-3 three of these triggers set depending on the severity of the situation.
Technique #3: Seek Outside Advisors
How it works:
- Avoid asking advice from your friends or family (unless they run a successful business); it’s useless
- Seek the counsel of someone with no vested interest in your success instead
- If you avoid useless advice and get advice from a neutral advisor, you'll unlock leadership insights.
Easy, right?
👉 I'm sure your mom, brother, or best friends are really great people who love you, but they are not the best advisors when it comes to business (especially during a crisis). You see, they don’t want to experience pain and will generally and unknowingly guide you toward failure. This “advice” will be expressed as something like "I never understood why you started that business anyway” or “You’re smart; you can just get a good job”. Or even worse, you may get some actual business advice from someone who has never run a business - avoid it.
👉 Talk to a few people who have faced and overcome challenges in their business; you need an outside perspective from people with no skin in the game who will just be honest.
Technique #4: Be honest with your team
How it works:
- Give your team the facts; don’t sugarcoat it
- Go through scenario planning
- Ask for the solutions
Do these 3 things, and you'll build trust and loyalty.
👉 Guess what, you are not fooling anyone by pretending that it’s not a big deal. I would go so far as to say it’s arrogant and irresponsible. Put your ego in check; your team doesn’t need a false profit; they need a leader. The longer you try and pretend the ship isn’t sinking, the worse it gets; try this instead … the ship is sinking, grab a bucket now!
👉 Now let’s play it out; ask these three questions: What is the worst-case scenario, what is the best-case scenario, and what is most likely to happen? The fact is we don’t know what the outcome will be, and this exercise helps us plan for the worst but allows us to focus on the best.
👉 Next, ask these questions: What will it take for the best-case scenario to become reality? What are the solutions? How can we pivot or change? What, who, and by when are these actions going to happen? What reward will we have waiting for us on the other side of this adversity? THIS CONVERSATION IS YOUR GOLDEN TICKET. Just like that, you and your team will start to forge the path to success, be motivated to move forward, and most likely achieve higher long-term profits as a result. - Now it’s time to lead them.
Technique #5: Be the leader you would follow
👉 Through all 10 of the major financial crisis I’ve experienced, I’ve never had a person jump ship because of the crisis. Most people are amazingly loyal and willing to fight right alongside you when you show true leadership.
How it works:
- Make a decision - speak with confidence
- Set the vision - a clear path to success
- Take action - assign deliverables to the team
- Monitor continuously - daily if needed but no less than weekly
- Modify the decisions as needed
That’s it!
If you want to be prepared and turn a crisis into only a challenge - Click the orange "Hire a CFO" button on the top of my website ☝️, and let's have a conversation.
Bonus Tip: Don’t be afraid to negotiate terms with vendors or clients in a cash flow crunch; you’ll discover who your true partners are in business