strategic consultant to:  

I’ve been out and about lately, speaking at conferences, visiting colleagues, seeing clients in remote places and meeting new contacts and prospects.  The entire range of the economic condition is on view:  employees with secure jobs, consultants with long-term retainers, folks out of work for a long time, consultants struggling to find new gigs, managers doing the work of their previous staff (now fired) at a lower salary.

It is a quilt of many colors.  And the colors are not just of circumstances, but of responses, emotional and psychological.  Those with jobs are simultaneously grateful for the work and aggravated at the pressure put on them.  Those looking for work feel hope and despair and exhaustion from the emotional roller coaster of looking and not finding.  Some, no matter their condition, are depressed and cannot move forward. 

Older workers who anticipated retirement (once during the dot.com boom, then again these past couple of years) must shore up their energy to adjust to the long term of work before them to recover their portfolios enough to retire, if they can.   Younger workers, never having experienced a downturn, don’t know whom to blame, but surely not themselves.

Those with debt are particularly anxious.  Entrepreneurs seeking capital investment are finding little response.  Ongoing companies needing a flow of credit for their usual course of business are facing trouble if not disaster.

My compassion goes out to every one of these folks in each scenario.  The rise in the stock market of the past 3 months is helpful, but is still only a “leading” indicator, which leads by at least 6 months  before “recovery” (in whatever form that might take) begins to hit the larger companies.  It takes months longer to hit the small businesses and entrepreneurs and consultants.

Despite all this, I want to risk a positive thought.  There is opportunity in the downturn.  There are choices to be made.  You must keep up your energy, your health and your spirit despite it all.  Let’s face it – you can look for work or your next gig avidly and still only spend a few hours a day pushing forward on that front.  There are many empty hours, and these hours sap your energy and befuddle your spirit.

The choice is to use the downtime of the downturn to create your next new thing.  This may be the book you have never written, or the company you have only scribbled about in your notebook, or the technology you have never had time to plan and code.  In all cases the choice includes maintaining or restoring your health and fitness so you can move forward.  And any of these choices will keep the blues at bay.

• The opportunity for the entrepreneur is to get the “hidden year” out of the way while there is little else to do.  This hidden year involves planning, organizing, business plan writing, market testing, and initial development (in technology and/or otherwise) for that idea you have never pursued. 
• For the consultant, it is the opportunity to create all those marketing and positioning tools you have always squeezed in to your schedule and never completed, or only half-completed.  With the new social networks, these marketing tools and materials include preparing blogs, webinars, publications, and repurposed expertise into all media, then distributing through a community you develop. 
• For everyone, this opportunity includes learning something new that prepares you for the upturn, for the next new markets that will arise out of this time, and for adjacent markets you will need to enter to stay viable.

Stay the course with your search for new work or new consultations.  But look at the other hours of the day as your freedom to explore new realms, and the opportunity to pursue your dreams.  Who knows?  The next new thing you put your energy to may become your new work or your new company.

Recent posts have dealt with entrepreneurs and their consultants planning the endgame of the entrepreneur’s company.  Now let’s consider how consulting practices survive during downturns.

A consulting practice is itself, of course, an entrepreneurial venture. As a service business, it has different market pressures and costs, but other issues remain in common with product businesses.  And consulting practices fail just like other businesses.

Many issues are critical to maintaining a successful consultancy:  a reputation that you deliver what you promise; integrity known to your marketplace; extensive marketing and networking even while you are busy with a full schedule; glowing testimonials from previous clients, and so on.

The deepest secrets of survival for your consulting practice during a long downturn are these: cash, adaptation and setting boundaries.

Cash is the way you multiply your options.   It allows you to turn down work which doesn’t suit your skills or which doesn’t interest you.  It allows you to carry your clients through hard times without pay, and to wait for your arrears (if you make this choice).  It allows you to be without revenue for months and months, and emerge on the other side of the downturn intact, ready for your next clients.

Adaptation is the way you meet changing market demands.  You must be constantly monitoring what your market sector needs, how it is responding to changes in new technologies and revenue models, in the larger economy, and in new emerging standards.

Having identified what your market needs, you must move quickly to gain the expertise to supply that need, test your new knowledge, gain a track record in providing that expertise, and then market like mad to attract new clients and to provide this new skill to existing and former clients.  

Setting boundaries is the way you maximize your time and priorities.   

You must balance ~ 

• gaining your new expertise (and refining its pricing and revenue model for your practice)
• satisfying  your existing clients — the ones who are paying and the ones demanding your attention even when they cannot pay you
• marketing and networking relentlessly.

To do this, you must set boundaries ~

• on those who will try to take your time away from these essentials for non-revenue-generating efforts, and
• on yourself to ensure your own discipline during these trying times.
• One home-business client once wailed at me, “What!? No Oprah?”

Here is a list of strategies to protect your consulting practice from bad times:

•  Save money.  Put away as much as you can during the good times, preferably enough to cover 12 months of your total overhead (remember to include your own salary). 
• Keep these savings liquid (at least 6 months of your savings), invested so that cash can be transferred within 3 days to your corporate bank account.
• Stay the course with failing clients, and continuously assess what return these efforts will bring you, and set boundaries on how much time you will commit.
• Re-constitute your offerings for the current times.  Find what your market needs and provide it. 
• Move to adjacent market spaces.   It may be that your core skills or new skills are more in demand in market spaces you do not currently address.  Find those spaces and sell into them.  Go where you’ve never gone before.  Expand.  Take a risk.
• Network network, network.  Stay in touch with your clients, former clients, and referral sources, even when you are busy.  Reach out to trusted colleagues who work in adjacent markets to introduce you there.  Reconnect with organizations that address your markets.
• Market aggressively.  Get out and be seen.  Make presentations, especially about your new expertise. Publish and blog and be visible.
• Don’t panic.  Don’t stop.  Keep your energy up. Keep moving, networking, and marketing. Learn new things.  Do not give in to dread.  Do not blame yourself for what you didn’t do or couldn’t prevent.  All downturns end.

The current 2009 economic downturn is my 5^th, between technology sector crashes and general economic recessions.  I have survived all of them.  During the first, I didn’t know what was happening.  During the 2^nd and 3^rd I moved my expertise to international markets (Europe, then China).  During the 4^th, I went sailing for 16 months. 

And now we have another.  The same strategies apply each time.  Good luck.

If you choose to consult deeply and over the long term with small business entrepreneurs from the early stages of their companies, this is the moment when a good consultant must stay the course, and you must stay next to your client through to the end, without expectation of payment of your fees, or even your arrears.  Yes, that is irrational for your practice’s bottom line, and it is the still the right thing to do.  As my own long-time consultant CPA commented, “You and I understand our clients’ financial condition – how can we demand they pay the current fees in the midst of such a serious downturn?”  So, as good consultants, we wait for the recovery, while we support the company or plan the endgame.

The end game is a moment when all your skills, talent, patience and compassion are called upon to the fullest. Now is the time your client needs you to be the voice of calm reason.  You must listen anew and listen carefully to what your client wants to do.  You must erase your own preconceptions about what might be best, while you listen.

This will be an emotionally trying time for you as a consultant, as part of your task is to absorb your client’s most negative emotions—the disappointment, the blame placed on others, the anger, the angst, the sense of failure, the black humor and the despair.

Then, to yourself, you must reassess everything you know about your client from the months and years of working together – his or her skills, talents, suitability to grow and manage a company, to lead others, to stay focused on both the large view and the operational details – everything.  And especially his ability to handle a crisis, like the end game facing him now.

This is an important time for praise – to give your client a balanced understanding of his or her strengths and talents, which may seem to have been eliminated by the failure of the company.  And of course you must review the post-mortem and the “should-have-done’s” whenever your client is ready.

Next, you must help him focused on the next steps:  what options are most tolerable for the endgame?  Keeping the company in a legal but dormant form?  Searching for licensing deals (particularly in international or adjacent markets) to keep the intellectual property in play and some revenue coming in while the company re-boots?  Finding a strategic partner to acquire certain assets and absorb some debt?  Closing the operation altogether?

Finally, you must motivate him to take those next steps, and avoid depression and inaction.  The best way for an entrepreneur to overcome the stagnation of despair is to keep moving.  Keep him in play – with a job or a consulting gig or some partnership of his business with another company – so he is out in the world, watching the market, and not left alone with his loss of dreams.

You may find this part of your responsibility more troublesome than the early stages of building a new company, when there is optimism and energy to overcome the exhaustion and fear.  But managing the endgame is a key role in a good consultant, and vitally important.

Mr. or Ms. Entrepreneur, if you have run out of options and it is time to plan your endgame, now is the time to be calm.

If, to be calm, you must break down and emote, start now.  Be mad, be glad, be sad, say everything that is socially unacceptable to say (privately), blame everyone and everything within and outside of your control (privately), pitch a fit, and be done with it.  Get it out of your system.  Then calm down.

Got your breath?  Good.

Get some help

Now, get some help.  Really — the first thing is to get some help – some business and emotional support both. Planning and executing the end game is tricky — do not try this at home alone.

First, you need a voice of calm reason and common sense, preferably with some business savvy and experience. You need emotional support as well – informally or professionally. And, you need some external validation.  What does this mean?  Validation that you still have all the qualities that you had at the start of the company:  intelligence, talents, focus, courage, vision.  You know, the real stuff.  That didn’t disappear just because the market or the economy or your company tanked.

Your consultant, if you have had one, should provide the business and emotional support, along with the validation.  No money to pay?  A good consultant you have paid consistently should stick by you through the endgame.  I always do.  Address directly that you cannot pay any longer and ask for continued support.  Perhaps offer to pay later with some bonus for the deferment, or set a deferred fixed fee.  I bet you will get it.  After all, at some time in the future you will not be in the situation you are in now.

One client, facing the end of her company through divorce from her partner, continued on with my support, a spiritual counselor and a psychologist.  She held the company together for two more years to a successful exit, bringing her $25M.

Now begin to plan.

Confront your situation squarely – no dodging.  What is the current status?  Assess what you have and its value, now and in the future. Consider what can be saved for later, when the market may turn up, or the business model might be found, or the right partner might be negotiated.

Place no blame. It doesn’t matter now what you did or didn’t know, what mistakes were made, who did what, how the market behaved, and so on.  You can reflect on all that later, or in your old age.  It is of no use now.

If you can, protect your intellectual property, in case it is of value at a later time, either for sale or for the re-launching of your technology in a new iteration at another time.  If you have planned your exit in the beginning, as I insist my clients do, you may have protected the IP from the company’s demise as well.

Determine if you will maintain the company in a dormant but legal form and wait for next opportunity, or if there is no gain in holding on to anything.

Implement with as little drama as possible

Get help to protect yourself and the company while you execute the endgame.  Enlist attorneys (or friends who are attorneys) to delay lawsuits. Level with your creditors and make arrangements for payment plans.  Make deals for deferred payment to keep the help you need, and so on.

If there is any hope for a last-minute turnaround, hold your breath.  If one deal is pending, that could save the ship, then protect the company, search for the next bridge loan, and keep moving forward, holding your breath that all will not collapse before the deal comes in.  Be as rational as possible, and lean on the support system you have established.

If your company can be saved by finding a new partner, search for that.  One of my clients made a deal with a company that wanted her talents in IP sales. Her new employer took over the debt of her company in exchange for her working for his company for a fixed term.  Part of her compensation paid down that debt over a long term, while she let go of the burden of the company in exchange for a much less strenuous job with good pay, and the relief of her debt load.

Letting go

If there is no hope, let go.  Plan a simple closing of the company and move on to your next work. Simple closing?  Yes, make as simple a closing as possible.  Tell the truth, make deals to settle debt, avoid all drama, and get it done.  Next work? Yes, look again at your talents and values (get some of that external validation and common sense support now) and make your next move.  A job in your former industry? A return to consulting?

Get back out there

It is best to keep active.  Do not go home to “rest” or wallow.  Be out there in your industry.  Watch the market.  Keep your contacts alive.  The continuous interaction with others in a professional role will move you away from your loss and bring you renewed validation and opportunity.

As I had said in October 2008 when the banks began failing, we are in for a long recession and a serious failure rate among small business owners.  I listen to the economists every day and understand that the current (Q2/2009) uptick in the stock market is a “leading” indicator to recovery.  This means it is at least 6 months before we see the beginning of a “general recovery” and even longer before any economic recovery trickles down to affect small business. 

This is my 5^th downturn, counting both general economic downturns and technology-sector crashes.  Looking back over more than 25 years of consulting to technology entrepreneurs, I can review many strategies my clients and I have used when planning an end game. 

The primary lesson

The primary lesson is this:  the failure of your business does not mean you are a failure as a person, or as a player in business.

One of my favorite long-term clients is hitting the wall.  Last week we began the painful planning of his end game.  Sometimes the current situation of no capital, arrears to vendors, and the threat of bankruptcy and loss of his personal assets, like his house, is so extreme as to be ludicrous, and we laugh wryly in the midst of thinking through our next steps.

Entrepreneurs are brave, or they wouldn’t start a company in the first place, or sustain it when it hits the first road bumps.  The investment already made – in capital, time, promises to family, friends and investors, and other sacrifices – seems impossible to abandon until there is no other choice.

And they are, as he commented, “nearly eternally optimistic.”   This is why they persist when the early signs of trouble occur, and why they continue to risk everything to turn the company around.

The entrepreneur is identified with his company – it is part of the definition of who he is at this moment in his life.  So letting go of the business is more complex than making a rational business decision.

Each endgame is different

Each endgame is different, depending on the condition of the company, and especially on the opportunities for the CEO to re-create his or her life.  

• One client survived personal bankruptcy and moved directly on to a Vice Presidency in a major company in an adjacent market space. 
• One lost several million dollars over 3 years from his startup attempt, but was concurrently running his first business, which continued to succeed. 
• Another found a partner to absorb her company into his, and relieve her of her debt load.
• Another was betrayed by his partner, losing his family farm (the collateral), but continued on with other work, taking 17 years to pay down the debt.  On that day 17 years later, drinking coffee in his kitchen, we spoke the name of that partner for the first time since the end of the company, acknowledging the long road we had taken from those early times.

This week and next week, we will explore various strategies for the endgame, for the entrepreneurs and for the consultants who support them. 

• Stay tuned for parts 2, 3 and 4.