Something every entrepreneur has to deal with at some point in their careers are crises that they most likely didn’t cause, and unfortunately, it’s often a more frequent occurrence than most people who aren’t in your position would expect.
While a business needs to be run based on its budget, we don’t operate in a vacuum, so unexpected changes in circumstances outside our control can sometimes derail that budget.
The sales department may fail to hit their goals. That huge marketing campaign may flop. Hell, the entire economy may even be shut down over a pandemic. My point is that as an entrepreneur, you can do your job perfectly and still find yourself in a position where you have to adapt quickly to solve a problem that could take the entire company under.
I’ve gone through a few of these business crises myself, and while each was unique, there were also a lot of similarities. More importantly, the lessons learned from these crises can help you to navigate your own more effectively, and that’s what I’m going to share in this article.
Let’s start with a story about a particular crisis I was blindsided by in my business about a decade ago.
I run a national workplace drug testing company, and we have dozens of franchisees all across the country to provide 24/7 service. Shortly after coming on board, initially as the marketing director, I realized I had walked into a firestorm. Due to a conflict between the current CEO at that time and a group of nineteen franchisees, the CEO had to step down and I was forced to take on that role. Unfortunately, those franchisees chose to leave anyway, and in an attempt to get out of the agreement they signed, they collaborated to defame the franchisor. Essentially, they tried to run us out of business to dodge accountability.
They published false information about our company everywhere they could, filling the first several pages of the search results with outlandish claims. They also tried to file a frivolous class action lawsuit, which they dropped almost immediately because it had no merit.
The crisis that followed was brutal.
These false negative claims destroyed our ability to sell franchises at that time, and it made it a lot more difficult to acquire new clients as well. Revenue plummeted, from multimillions to about $300,000 virtually overnight.
It took us years to recover, and that required a substantial investment of time and resources, but if we had approached this purely from a budgetary perspective, our company would have collapsed.
The traditional approach to a situation like this would be to cut costs to the bone. I didn’t do that, despite our CFO urging us to. Instead, I chose to go on the offense and invest what was needed to eliminate the problem.
Here was my thinking at the time: Our ability to generate revenue had been killed by the negative publicity, and that was not going to go away on its own. It would have continued to show up anytime someone searched for us online, so simply cutting costs to match our revenue wouldn’t have done anything to help us. Plus, that would have also forced us to cut staff and infrastructure, making us unable to serve existing clients, meaning revenue would have declined further.
So I made a big bet that would either save my company or put us out of business.
I went on an all out PR blitz to tell the real story, and in doing so, filled the search results with authentic, positive information that outranked the false, negative information. Over the next several years, we turned things around, slowly displacing the negative with positive, while acquiring new clients and onboarding new franchises. We climbed back from a paltry $300,000 in revenue to over $7 million after a lot of hard work and perseverance.
Had I followed traditional logic by simply cutting costs and waiting for things to stabilize, we would have been forced into bankruptcy.
While you typically need to follow your budget religiously, a business crisis requires more nuance. It requires a strategic approach that may often seem counterintuitive. While I’ve never served in the military, I compare it to war—though the stakes are obviously not as severe.
Sometimes, you may find that you need to make decisions that are less than ideal in the long term, and may even be risky, in order to survive in the short term. And hopefully, if your strategy is solid and things work out, you can later fix any problems that may be caused by a decision that was necessary for your survival. But you can’t do that unless you survive.
This often means investing capital that you really would rather hold on to or even taking on additional debt in order to push through an existential crisis. My situation is one such example. The pandemic lockdowns were another. And today, many companies face crisis-level challenges related to tariffs, AI, and dramatically shifting consumer demand that could kill their businesses.
It’s important to be proactive here by paying attention to trends and adapting before a challenge becomes a crisis. This gives you more time to adapt, and if you can do that before your competitors, your chances of surviving will increase significantly.
The mistake most executives make is refusing to accept that things are changing and won’t go back to normal anytime soon if ever. We’ve all seen it—Kodak, Blockbuster, Toys “R” Us, corporate America is filled with examples of companies that simply stick their heads in the sand and continue to operate with a business as usual mindset. On paper, they seemed to be doing the right thing, but since all they focused on was the budget, the root cause was never resolved.
This is a recipe for disaster.
Instead, you need to meticulously analyze how the particular crisis you’re facing could impact your business if it continues, and then determine what you need to do to work around or eliminate it.
As I mentioned earlier, this might mean making a risky investment with an aggressive move to change the circumstances. In my case, this meant a massive PR campaign to combat false allegations by competitors, but it could also mean launching a new product line, going into a new market, or even acquiring a competitor. These are all things that probably aren’t part of your current budget, and may even blow it out of the water, but when it comes to an existential business crisis, this is sometimes necessary.
I look at it like this—while a budget is critical to a healthy business, the real world doesn’t always operate as a simple equation.
Sometimes you’ll need to make counterintuitive financial decisions in order to survive, and with the economy in the condition it is today, we’re all more likely to face a variety of business crises compared to recent years and we need to be prepared for an unconventional approach.