The natural and healthy state for a business is on the verge of bankruptcy

After Live Aid my old business partner went off to live in New York and I took on the office overhead in London in a dejected state personally and lacking in confidence.

I felt that the design business in Rock ‘n Roll had grown up and I was out of my depth. In fact I felt as if I had always been a bit of a scammer, having had no formal training, and that I’d got found out. But I had learned that when you hit a crisis if you blow the problem up out of proportion you can see it clearly and you can deal with it there and then before it comes back and slaps you in the face.

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Now don’t tell me that you don’t know what your problem is or even what the answer may be. I am telling you that you almost certainly do know, and in a great deal of detail, if you find the courage and discipline to address it. The trouble usually is that addressing it is painful, and keeping your head in the sand and hoping is easier.

Anyway within a week I’d made a decision and spent real and dwindling money on redecoration and partitioning. I let out all my office, except a corner for me (one of the first serviced-office lettings) and I let my secretary and draughtsman go. Immediately I was actually cash positive with time to think and explore my future.

The problem in America today is not that we fail, it is that we don’t risk failing enough.

Philip Knight of Nike

All businesses can be hit by a crisis, whether due to the activities of a competitor or economic change or even the boss’s personal circumstances. Unless you’re very lucky you don’t have surplus profits sloshing around waiting for that rainy day.

It’s really just like your finances at home – if you hit hard times the smart guy cuts right back on his spending or drops his price for odd jobs. Companies that can move and change the fastest are the ones that feel the safest.

  • Take Away

    Safety first

  • When you have an inkling about a problem, exaggerate it in your mind and deal with it early.

  • Plan for those possible crises you already know could happen – job loss, recession, competitors – and in my case, a fish scare!

  • Insure loss of profits in the case of fire or flood, for at least two years, preferably three …

  • … Someone who survived that calamity told me he could have bought any competitor he wished if he had been insured.

  • In good times, plan for the bad times by talking to your colleagues about what might be the unseen problems ahead.

  • Let risks focus your thinking before you take on more overhead.

  • Put a “dynamic” fund, however small, into a separate account and be prepared to deal with problems when they are still small.