Business Musings: The Waiting Game Part Two (A Process Blog)

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One of our jobs as small business owners is to predict the future. (And writers, you are small business owners, whether you like that characterization or not.) We have to do forecasting, weeks, months and even years out.

The good news is that anyone who manages a household has a handle on how to do some of this. You know what your paycheck is, what your expenses are, and when they will hit during the month. You budget accordingly. Sometimes your job isn’t up to meeting your expenses, so you cut. Sometimes you earn more than your expenses, and in an ideal world, you save. But most Americans don’t.

That’s a point for a different blog. I just want you to understand that you already have the basic skill set I’ll be discussing here.

However, before we go any farther, I want you to cycle back and read the previous post.  I’m going to assume you have so that I don’t have to explain my points again.

And for those of you who might be faint of heart, I will be brushing against politics, not to influence your views, but to show the thinking that Dean, Allyson, and I did as we developed our business plan for the past few years and into the future.

It’s imperative for any small business owner to take the national and international temperature, and try to look at everything as dispassionately as possible. It’s also imperative that you gain a historical perspective.

For example, here in the U.S., our presidents have a lot of power. And, often, we elect people who are brand-new to that level of national and international responsibility. We did so in 1992, with Bill Clinton, 2000 with George W. Bush, 2008 with Barak Obama, and 2016 with Donald Trump.

In the first year of an inexperienced president, that president makes at least one boneheaded mistake. Sometimes that mistake is a political mistake—Clinton didn’t pay attention to the down-ballot stuff in the 18 months after his inauguration, and opened the door to the opposing party’s control of Congress; 16 years later, Obama made the same mistake. It could be argued that Bush didn’t have time to make his boneheaded mistake or it could be argued that ignoring his intelligence briefings before 9/11 was his mistake.

The key for us, though, and for the analysis Dean and I did as the election rolled around, was that we knew there was a percentage chance we would have another inexperienced president, and who knew what kind of boneheaded mistake he would make. (Some boneheaded mistakes are minor, and some are…the Bay of Pigs.)

Experienced presidents, like Lyndon Johnson and Daddy Bush (who were both around the Oval Office throughout their careers), didn’t make these kinds of boneheaded errors. They made choices, and those choices were usually finessed. Those choices might ultimately have been unmitigated disasters, but they usually weren’t pivot points, moments—like 9/11—that can change the trajectory not only of the nation, but of the world.

When you hand one human that kind of power, you have no idea how they’re going to use it or if they’re going to ignore it totally.

Like the rest of the world, we thought Donald Trump would lose the 2016 election. However, we developed a business plan that postulated he would win. When he did, we put that plan into action.

We did the kind of analysis I discussed in the previous blog post. We evaluated where we were, and what kind of action (if any) we needed to take. The change of a president is not a Black Swan event, and we really did have time to make changes.

But we planned for a worst case, a messy middle, and a best case. Best case was that the economy kept humming and we would be fine. Messy middle was a lot of upheaval, including economic, and worst case…we thought…was a war or some kind of pivotal event, something that would change the world.

The key here—in case you aren’t getting this—is to divorce your politics from your analysis. I’ve voted for presidents who have screwed up my life royally, and I’ve voted against presidents who helped my businesses. You can dislike policies, and yet know that you (or your business) will benefit from them.

The analysis has to be a dispassionate kind, such as: inexperienced presidents make boneheaded mistakes, usually in their first 18 months; let’s hope the country can survive this person’s mistake.

Then the planning begins. If the boneheaded mistakes don’t happen, if everything remains the same, you’re fine. If things go south, you’re prepared.

Our plans, in 2016, focused on retooling our business. At the same time that we were analyzing the governmental situation, we were also looking at all the changes in publishing.

We implemented a lot of programs early on and did a lot of experimental things. In 2015, we had a bad year with a handful of bad employees, and we made some bad business decisions on top of it. We tried to predict how the industry would go and sometimes those guesses were wrong.

What we had in 2016 was a mishmash of good and bad business policies as well as the remnants of old plans that never got off the ground. We examined the business and cut the old plans.

Then we retooled, trying to see if we needed more employees or fewer, what we could do to improve our income, which parts of the business needed to grow and which parts needed to be trimmed.

When Trump won, we figured we had at least a year before we felt any financial effects for whatever his boneheaded error was going to be. We hoped we wouldn’t have a pivot point or a Black Swan, because we weren’t ready.

We made choices and changes as fast as we could, but not as fast as we wanted to. We wanted to have everything done by 2018, but my illness and our move prevented that. Then Allyson got sick, and that slowed us as well.

Still, by the dawn of this year, we were almost to where we wanted to be by 2018. We had cut the fat, except for one big monthly expense, we were trying to catch up on some extended projects that we would probably have to shutter once they were done, and we were making other choices that would seem small to most people but were large to our business.

We were also learning and making good choices about where we were going in the future.

At the beginning of 2020, we also thought that maybe, just maybe, we would get to the election without some kind of big international crisis. Fingers crossed, because we were nearly to where we wanted to be.

And then the virus hit. This Black Swan x 2, as I’m calling it, is a perfect storm. There’s a contagion for human beings, and because the crisis in the U.S. was so poorly managed in its early stages, large corporations made huge decisions without consulting anyone in government. We now have a contagion in the economy.

Best cast scenario, this is a bump that will have repercussions throughout the year. My initial post weeks ago looks at the first Black Swan as a bump.

But this is probably a pivot point, one that will change the economy forever. In doing that, it will change how some industries do business. When that happens, people lose jobs and there’s a lot of economic uncertainty, which might last through the fall.

Even if we weren’t in a Black Swan x 2, my businesses would be planning for the election. Once the Democratic nominee is known, we would know how to proceed, depending on who won. (Biden, for example, would be an experienced president like Daddy Bush; Bernie would be inexperienced and would have his boneheaded moment; Trump would be in a second term that would either leave him feeling invulnerable or trapped, depending on what happened with Congress.)

But now the election will be a continuation of a year of upheaval. We’re not even thinking about 2021 anymore. We’re concentrating on surviving the spring, summer and fall.

I’m going to give you a general analysis now, of what we did and how it could apply to you. What follows are expectations

Our expectations are that this is an L-shaped crisis—our sales will go down and stay down because there will be uncertainty and severe job loss. (We’re already seeing that here in Las Vegas.)  We’re not thinking this will be a depression, not yet.

Realize that we are starting from a good place. We’ve already done some of the hard work, based on what happened in the past four years. We are not the bloated company with extraneous limbs. We are not as lean as we want to be, but we are close.

However, you make different decisions when you have a lot of time. With entertainment events shuttering, people hoarding, schools closing, and jobs already being lost, we knew we had no time at all. We had to make choices immediately, and they had to be good choices—or at least the best we could make given the information that we have at the moment. (See the analysis at the end of the previous article.)

With that in mind, we had a lot of discussions starting on Thursday the 12th, discussions in which everything was on the table.

Everything has to be on the table, because if you don’t consider every option, you limit both your choices and your responses.

Here’s the hard first truth:

Black Swan Events Kill Businesses. Sometimes, they kill entire industries. Businesses that aren’t prepared, businesses that are marginal, businesses that are on a financial edge, don’t make it through.

Knowing that, then you have to ask yourself this at the start of any Black Swan event

  1. Is My Business One of the Vulnerable Businesses? If the answer to that is yes, then you need to ask the question below:
  2. Is It Better to Shutter My Business Now Before My Losses Escalate? Sometimes the answer to that is a hard and very sad yes. If your business has been teetering on the edge of bankruptcy for years, then maybe you should use this event as the tipping point to shut the business down.

If you do so during a Black Swan event, your losses will be part of a sea of losses. You might even be eligible for government aid for a business that went under during a time of crisis. (The U.S. government provided such aid during the aftermath of 9/11.)

  1. If you shut down the business, don’t do it half-assed. Shut it all the way down. Make the hard choices all at once. Limping it along incurs more debt, more pain, and doesn’t allow you to move forward.

I’m going to assume that most of you, like us, aren’t in any danger of losing the business. The publishing industry usually grows stronger in this kind of Black Swan event, and I expect that for indie publishers now.

So our analysis is going to be different.

The first question you ask, then, is:

How do we survive this crisis…in a healthy manner? You probably won’t come out of the Black Swan x 2 in better condition than when you went into it, but you don’t want to be worse.

And, if you plan correctly, your business will be healthier in 2021 than it was in 2019.

But it will take time to get there.

The first thing you do to survive in a healthy manner is to examine your priorities.

  1. What are the goals of your business? Are you a publisher, a writer, business executive? Do you teach or have podcasts or give speeches around the country?

Right now, you won’t be able to do everything you did even a month ago. There isn’t enough disposable income among your base to support all of your ventures. Plus, if you’re making a goodly amount of money giving speeches, that’s off the table for the next few months, until we’re allowed to congregate again. A lot of people who normally go to a lot of conventions are losing money by the hour this weekend.

If you have trouble answering this first question, you’re too scattered. Work on the answer to this question until you have an answer that makes you feel good.

  1. Figure out the core of your business. Here’s where it gets tricky. You might have started the business to write books, but you make most of your money giving talks around the country. Or designing covers for other people.

For many of you, there are two cores to your business—the core that you love, the reason you became a small business owner in the first place…and the core that earns the bulk of your income.

They aren’t always the same thing. (Lucky you if they are!)

During a business upheaval caused by a Black Swan event, you’ll probably have to chose between your two cores. You will only have so much time, and your supporters—whoever they are—no longer have as much money as they did.

So you’re going to have to pare down to bare essentials, and only you can figure out what those essentials are.

Those of you who don’t have two cores—whose business is correctly aligned (your initial core brings in most of the revenue)—good for you. You’ll still have some choices to make, however.

  1. If there’s fat to trim in your business, trim it now. Right now. Make the hard cuts as quickly as you can. Calculate the losses, if any, and factor them in.
  2. You might have to cut out a beloved project or two. Put it on the back burner, if you can. Revive that beloved project if the economy recovers. Realize that you might never revive it…and yes, all the money you’ve already put into it is gone.
  3. Some of these cuts will result in instant financial losses. That’s better than letting a bloated business spiral into complete failure six months from now.
  4. After you’ve made those cuts, examine if you can do most of the work in your business yourself or with less assistance than you’ve had. I’m assuming most of you have virtual assistants, or cover designers or copy editors or people that you pay to help you get your books out. (If not, this part doesn’t apply to you.)

Analyze whether or not they’re worth what you’re paying them. Can you hire them on a per-book basis? We actually have staff, because we want people working 40 hours on various projects, something that’s not affordable with a VA. Many of you go with contractors.

Figure out if you need them. If you don’t, then they’re part of the fat. If you do, then figure out how you can afford them. You might have to slow down production. You might have to speed up production to get more revenue.

That’s part of your business.

But let me tell you from experience, that you can cut too far when you get rid of help. We did that the first time. We were no longer able to produce product or even pivot, because we didn’t have enough people to do the work. Keep that in mind.

  1. Establish some timelines. You’re guessing right now. We all are. We don’t know how long the virus will last nor do we know how deep the economic impact will be.

Dean, Allyson, and I decided that we would keep a wary eye on events, but the pivoting that we’re doing right now is being done with an eye to July 1. At that point, we will go through this analysis all over again.

We need to put on our best future-seeing goggles and try to suss out if this Black Swan x 2 is over, is still ongoing, will continue to have an economic impact. We’ll also have to analyze whether or not we went through a V, a U, or an L.

And there’s an even worse case here than an L. This might be a series of linked Ls, in which we think we hit the bottom only to discover that nope, we drop again. The image ends up looking like a steep staircase composed of Ls.

If we’re in one of those, you’re going to have to go through these decision points all over again…as if the Black Swan has just hit.

Cuts that might seem unreasonable this month might be necessary in July. You might have pivoted in the wrong direction and need to pivot again.

The key for this part of the analysis is…

  1. Be Flexible. Just because you came up with a game plan in March doesn’t mean it will still apply in July. Situations like this are very fluid and you need to be fluid inside of them provided that you…
  2. Don’t Panic. Panic always makes things worse. You need to make all of your choices based on hard data from your business and a sound analysis based on what you know, what experts are saying, and what you’re actually seeing. If you’re seeing a recovery, then others will too. If you’re the only one, then maybe you’re engaged in wishful thinking.

Do your research, not just into the Black Swan event(s) but also into your own business. Analyze each corner of it with real numbers. If your numbers are guesses, you will make mistakes.

And here’s the most important point of all:

Make Choices For the New Normal, Not The Previous Normal. If you hear yourself say, “But I’ve always done it that way,” then you’re making the decision based on a world that no longer exists.

These Black Swan events, these pivot points, they create a brand new world, one we’ve never seen before. Some of the rules are the same as the old world, but not all of them. And some things that we know to be true are no longer true in the new normal.

It will take a year or more to figure out exactly what the new normal is, but you have an inkling already. Follow that instinct.

And if you’re deciding to do something because it’s always worked in the past or because you want to wait to see what the new normal is, you’re making a huge mistake.

You have fallen through a rabbit hole, Alice, and you are now in a world where things are very different from what you’ve experienced before.

When you make choices, make choices for now, not for what came before.

And, as you learn about this new world, revise your expectations and your assumptions accordingly.  Reassess weekly at first, monthly as the new normal becomes…well, normal.

On our side of things, after we all did our analysis and made our best guesses, we decided on a course of action for the next few weeks, as well as for the next few months, and for the rest of the year. We will reassess as the situation changes. We’re remaining fluid and flexible.

But the best thing about doing that analysis is that all three of us felt better afterward. Rather than drowning in uncertainty, we had a direction to go in. We’re as ready as we can be to face the future.

We know that other hard choices await. But we’re armed with numbers and ideas and a plan of action.

That helps.

We can’t control a Black Swan event, but we can control how we react to it.

And I hope that, with these past two posts, I’ve given you some tools to control how you react to it as well.

Good luck!

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“Business Musings: Waiting Game Part Two,” copyright © 2020 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / Gatherina.

 

4 thoughts on “Business Musings: The Waiting Game Part Two (A Process Blog)

  1. Very helpful article, Kristine. I’m making some changes that I hope will work in the new reality. Only time will tell, but I’m going with my instincts. All the best in this new business landscape!

  2. I’m not American so I shouldn’t really state my personal opinion of the politics but the projection I am basing my business on is several L shaped drops followed by steep improvement.

    This is depressing to say but if you look at the current epidemic data it’s pretty clear that in the next month there is likely to be over 1 million Americans ill given the current number of cases and the fact the exponential stage isn’t slowing. That assumes no policy changes. Policy is likely to change, I hope, but there will be vast costs either way.

    Historically, vaccines have never been deployed in less than a year.

    Historically, major pandemics have multiple waves.

    So… Multiple L shaped events. Followed by improvement next year.

  3. You watch this sort of thing much more closely than I do. Is this the first economic Black Swan event to occur since Indies achieved rough market share parity with Big Publishing in mass market fiction?

    I suspect Indies will walk away with the lion’s share of the benefits typically associated with Black Swans. Individuals can react and adapt faster than corporations.

    This event might wipe out thousands of Indies, but they will be replaced by thousands of new Indies who will not be burdened by the failure of their predecessors. If a big publisher goes down, they take everyone on the ship down with them. The corporate corpse can hinder those who escape the wreckage. An author might not have the rights to continue a popular series.

    As more people turn to books for entertainment or solace, more people will discover the relative low price and equal quality of Indie ebooks versus Big 5 (4?) ebooks. This last doesn’t apply to the paper market where prices are equal and distribution favours the large traditional players, but the first stage of this crisis involves locking people inside their houses where they have to use the internet to get their goods. When buying books on the internet, the paper book and ebook are displayed side-by-side. And everyone’s books are on the shelf.

    Inertia is a large part of consumer behaviour. This crisis might break many people’s book buying habits inertia. Once broken, a new inertia sets in and they are unlikely to return to their old behaviour when the crisis is past.

    1. Except that Amazon has deemed paper books “unnecessary,” so they’re not in the items being shipped right now. When Amazon staffs up, paper books will sell again. But right now, no. People who want new books are being forced to (mostly) go with ebooks.

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