Prepare Yourself for the Next Downturn
I started my consulting business 11 years ago with a laptop computer in a living room. It grew quickly. The first year I made more money than I had in the previous three combined, the second year I doubled that, and by the third year I began to fantasize about retiring within the decade.
Then everything crashed: the dot.com revolution, the financial services industry, and my business. This was 2001. I should have seen it coming; it’s so obvious now. And even back then I had inklings. But I didn’t anticipate the collapse.
Last week I wrote about the hazards of focusing too much on the present. I suggested that often, especially in times of fear, we’re better off acting based on what we see coming in the future.
But what if we can’t see what’s coming?
These last few years took many of us off guard. Sure, we thought, there were some sectors that were overvalued. But we didn’t expect the recession to hit every sector so hard and for so long. How could we have prepared for that?
Perhaps we couldn’t. Sometimes, the future sneaks up on us.
Losing money or a job or a business is a serious blow, but it isn’t necessarily an unrecoverable tragedy. There are worse things. Like giving up after the loss. Or not learning from it. That would be like rebuilding a house after a hurricane that couldn’t withstand the next hurricane. That’s a tragedy.
But there are ways to avoid it.
When I rebuilt my business after the 2001 storm, I thought hard about withstanding the next hurricane. When I had started my company in 1998, I planned to grow and sell it. I wanted lots of employees and high revenues. I hate to admit it, but pride played its part; I wanted to be seen as a successful entrepreneur.
Four years later, when I rebuilt, I rethought. What did I truly want? What would make me happy? What would sustain me and the business through the next downturn? I came up with three things.
- Do work you love. Choose work you’d be happy doing the rest of your life. That almost guarantees you’ll be great at it. In demand, even during hard times. Hopefully it will be profitable. If not, at least you will have enjoyed it. If the money disappears, the fulfillment will still be there.
- Build strong relationships based on who you are, not what you achieve. Your character is something you can control. If your business fails, you may lose the friends who hung around for a piece of the action, but you won’t lose the ones who hung around for a piece of you. As long as you are surrounded by people who trust you and whom you trust, rebuilding from a loss is likely. Also, research points to strong relationships — not money, not power, not title or position — as the determining driver of happiness. And after losing money or a business, your state of mind is critical.
- Spend less money than you have. No matter how much or little that is. Do everything possible not to go into debt. If you’re in debt, do everything possible to get out.
These rules seem simple and obvious, but they are frequently broken. We often justify exceptions to them. We deviate, slightly at first, and then, over time, more flagrantly. We make a small trade-off in a relationship in order to make a little more money, never fully appreciating the impact on our reputation. Or we buy something we want even when we know we can’t really afford it. Or we trade our passion for a paycheck, imagining it’s just for the moment.
And we only notice our real loss when the bubble bursts. When the business isn’t there and no one is willing to help us rebuild.
What’s not so simple about these rules is the negotiation with ourselves when we’re tempted to break them. It’s difficult to prioritize them above all the other things we want, every day.
Now I’m back to a laptop in a living room and I love it again. It’s smaller, more sustainable, and a lot more fun. And I have the time to spend with my family and friends. My fantasy is no longer to retire; it’s to keep doing what I’m doing for as long as I can.
See the original post here, by Peter Bregman @ Harvard Business Publishing