Fear, Optimism & How to Financially Prepare for the Next Crisis

The COVID 19 crisis is unlike any other that most of us have ever faced in our lives.  But, it is not the only crisis small business owners, celebrity financial managers, athlete financial managers and the entertainment industry in general have faced or will face.  Economic downturn, hurricanes, event shootings are some of the recent disruptive forces that we have had to learn to overcome.  The determining factor for the future is how we act during the downturn AND how we use the downturn as a motivational factor.  I hope the following is helpful for anyone leading a small business through this or any other crisis.

Fear

Fear clouds your judgement.  Fear forces rash decisions.  Fear has negative physiological impacts.

Fear can manifest in many ways in how you run your business.  You might sell assets prematurely at a discounted price and significantly devalue your company.  You might eliminate people on your team to jettison the cost which decreases your ability to serve clients and therefore ultimately sends customers to competitors.  You might do whatever is possible to bring in revenue during the crisis, but fundamentally diminish your value in the market place.  Celebrity and Athlete financial managers may act in a way with partners, clients, or other stakeholders, that diminishes their opinion of the client and decreases the likelihood you’ll work together in the future.

Fear cannot be eliminated, but it has to be managed.  As a small business owner, there will always be fear and anxiety around one’s ability to stay relevant and generate business.  Don’t try to escape fear, rather, use it as a motivator.

Optimism

When I use the word optimism in this context, I mean an action-oriented and realistic mindset that generates from the notion that you will be successful.  As entrepreneurs, we have to look directly at the fear of failure, choose the antithesis of failure, and be confident that when we go to the marketplace, we will be successful.

In the same way fear manifests in many ways, so does optimism.  Optimism generates more success because you have spent your time thinking about how to achieve the desired outcome and what to do with it rather than dwelling on all the ways you could fail.  Optimism encourages you to focus on your core strengths and assets.

Like fear, optimism manifests in many ways in your business.  You will set your sights on the assets available to you – intellectual property, people, a process, or just something you do a little bit differently than anyone else.  If you’re optimistic as a leader of a business, you will inspire your team.  Optimism entices you to think creatively – the importance of which cannot be overstated in times of crisis.

What to Do

Small businesses and the people who work for them must create their own success.  The first thing we need to do is come to terms with the crisis.  Wishing it had never happened, or hoping it will end soon, or trying to bide our time until it’s over are not constructive business strategies.  Ask yourself the question – in this crisis, what do people need and want?  For example – if people need connection, then what is it that your business can offer for that connection?  Remember, it’s not always about making money right away.  Engaging with people in a meaningful way might lead to revenue quickly, but more importantly, it will likely lead to further engagement.

You might find that your business is not financially prepared to handle this kind of downturn and you should take steps to guard against being in that position again.  You can do this by keeping your debt low, keeping overhead costs minimal, and using the next expansion to your advantage.  In a time when revenue is good, it is hard to conceive of a time when that might not be the case.  We often justify today’s unnecessary expenses and borrowing by looking toward tomorrow’s revenue.  But, perhaps a better strategy would be to first ensure that debt is at an easily manageable level before taking on costs with uncertain return on investment.

It’s also important to diversify revenue streams in an expansion.  This is easier said than done, but by virtue of being artists, entertainers, and small business people, we are inherently creative.  Use that creativity to conceptualize how you can interact with fans/customers in different ways, not just the simplest.   Royalty management is always useful, but is particularly important for guarding against downturns.

Leading in a crisis is not for the faint of heart.  It requires creativity, strength, a bit of luck, and a willingness to push through any obstacle thrown in your path.  Don’t forget to take time out of the back-to-back phone calls and zoom conferences and let your mind be creative and constructively optimistic.