Setbacks happen to everyone. Surviving them is hard. Surviving failure is even harder. But every successful person has had at least three failures before finding that success. So how do you turn failure to success? Read on…
TURNING SETBACKS INTO OPPORTUNITY
A Freelancer’s Survival Guide Short Book
Kristine Kathryn Rusch
Turning Setbacks into Opportunity
Copyright 2010 by Kristine Kathryn Rusch
Published by WMG Publishing
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Smashwords Edition, License Notes
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Table of Contents
We all fail. Sometimes we fail spectacularly. The key isn’t preventing failure. The key is picking ourselves up, dusting ourselves off, and moving forward.
Easier said than done, of course. Most of us want to do everything we can to prevent failure.
So this section of my Freelancer’s Survival Guide deals with surviving setbacks, recovering from failure, and using hindsight to solve future problems.
This short book is three chapters of what will be a huge how-to book called The Freelancer’s Survival Guide. I’ve been writing this book in public, posting chapters on my blog every week since April of 2009. If you want to read what I’ve written so far, go to kristinekathrynrusch.com, click on the Freelancers’ Guide tab, and look at the table of contents.
You’ll soon realize that I wrote the chapters out of order, as the topics came up. I’ve decided, as I am putting the book in its proper order for print and electronic publication, to post short sections. If you’re like me, sometimes one section has all the answers you need. The rest of the book is superfluous.
I hope this short book will help you avoid trouble. If you’re already in trouble, I hope it’ll help you resolve your problems.
—Kristine Kathryn Rusch
Lincoln City, Oregon
July 29, 2010
Essay #1
Let’s start by being completely honest: Setbacks hurt. And I don’t simply mean that they hurt your business. They hurt personally. They’re embarrassing, difficult, infuriating, and terrifying. They make us feel as if this hasn’t happened to anyone else before ever, and yet they happen to all of us.
They happen in successful businesses as well as unsuccessful ones. They happen in start-ups and they happen in long-term businesses.
The real key with setbacks isn’t preventing them; it’s surviving them when they happen. Over the years, I’ve become a connoisseur of setbacks. I’m not interested in other people’s misfortunes (except as a grist for my own fiction), but I am interested in how other people survive those misfortunes.
In other words, I am an inveterate studier of setback recovery. And believe it or not, that’s a hard thing to study, since most people hide their misfortunes, and do so very well. They pretend that nothing has gone wrong, and most of us remain fooled, partly because we can’t see deeply into other people’s lives unless they let us, and partly because we really don’t pay attention to anything outside of our circle, unless we’re forced to.
I spend a lot of my time imagining what would happen if. In fact, that’s my job. I must imagine what would happen if, because that phrase is at the heart of all fiction. So it’s only inevitable that sometimes I turn “what would happen if” from “what would happen if Godzilla suddenly appeared on the Oregon Coast” to “what would happen if I suddenly lost every dime I ever had.”
They’re not just good exercises for fiction writing; they’re good exercises for future planning. Fortunately, my husband, writer Dean Wesley Smith, has the same bent, so he doesn’t think I’m ghoulish when I start a “what would happen if” conversation.
In my studies of setbacks and recoveries, I’ve deduced this: There are four categories and probably a million subcategories of setbacks.
The four major categories are:
1. Financial
2. Mechanical/technical/production
3. Physical
4. Emotional
So let’s look at them in depth.
1. Financial Setbacks: The name speaks for itself. For some reason, something happens in the financial side of the business that hurts the business. Did the business undercapitalize? (What the hell does undercapitalize mean, anyway?) Is the business underperforming? Does it pay its bills? (What the hell does paying the bills mean exactly?)
Those are the practical aspects of finances, things that you and your accountant or you and your bookkeeper, or you and the math expert in your family should be able to figure out with a calculator, the invoices, the checkbooks, the bills, and a stack of receipts.
But I’m not referring to that here. In some ways, figuring out the profitability (or lack of profitability) in your business is the easy part.
The hard part is simpler—and much more terrifying.
Something financial that you planned on went horribly awry. Financial setbacks are always a surprise. Maybe not in hindsight, but as they happen, you’re usually caught flatfooted. This doesn’t mean you can’t plan for them, but you’ll never know when one is going to strike.
If you’ve been paying attention to the business news since the fall of 2008, you have heard about setbacks.
Some are extreme. For example, people who invested with Bernie Madoff and the swindlers of his ilk (well, of a lesser ilk, since he seemed to be the master swindler) lost everything. Or the bulk of their savings. Or the money they were going to use to survive their retirement.
In this case, people went from affluent to poverty stricken in the space of an afternoon. Or at least it seemed that way from their perspective. In reality, they went broke the moment they handed Madoff a check.
As an aside: I have little sympathy for people who dealt with Madoff directly. Those people didn’t do their due diligence in hiring an outside investor for their funds. Madoff didn't respond well to questions, which is a large red flag. But so many people had invested with a marketing fund or an investment group who then put the money into Madoff as part of a package deal. I feel for those people. I know what it’s like to be embezzled from. It’s happened to me twice—once a relatively small amount, and once a larger amount. That larger amount had never been in my pocket, however. The embezzler (a book agent) skimmed the money off the top and I didn’t even know that money existed. So I didn’t miss it when I learned it was gone.
What happened to Madoff’s investors is an extreme case. Most people never suffer through that, but they do go through very tough times. The news in the first week of September, 2009, reported that more than one million people lost their jobs since the beginning of 2009. That’s more than 125,000 per month—all of whom had just received a financial setback.
That setback is worse for some than others. Some had warning. Others planned ahead and had savings. But for each person who lost a job, the setback is severe. Immediately, the calculations begin: How long until I can’t pay my bills? How long before I lose my house?
I’ve gone through several financial setbacks in my life—from the first (and only) job I’ve ever been fired from when I was twenty (seems I had an attitude problem [go figure]) to the crash of our publishing company, Pulphouse Publishing, in the early 1990s to some business setbacks that started around 9/11. I honestly don’t want to count how many financial setbacks I’ve survived; just thinking about them makes my stomach twist. I know just how close I was to falling off some kind of horrible precipice, and how each day was a struggle.
But I’ve never fallen off that precipice. I’ve always found a way to make money, and I’ve always had a home. Which is more than my husband can say. He was homeless for a while in his twenties, and he talks about that with understatement. The difficulty of those days, the moment by moment panic, must have been agonizing.
Financial setbacks hit businesses as well. From the embezzling employee (like I mentioned above) to the loan that doesn’t come through to the big client who goes bankrupt, financial setbacks in a business can be as devastating as the ones in your personal life. In fact, they can lead to financial setbacks in your personal life, if you’re not careful.
And often, the financial setbacks are related to other setbacks, which I’ll talk about later.
How can you protect yourself against financial setbacks?
A. Plan for them. I know. I just said they’re always a surprise. But I also said that they hit every single business—and they hit every single person at one time or another in life. So have a reserve fund. Have a game plan for tough times. Have contingency plans. Try not to overextend credit to one client. Make sure you have more than one client. Know how much you can afford to lose in one year, so that when a problem does hit, you can assess whether that problem is minor, major, or devastating.
B. Assess the damage immediately. When a financial setback occurs, don’t think things will get better. Assess where you are now in the new reality, and then plan for things to get worse. Sometimes one financial setback is a precursor to others. (Think of the banks denying all commercial credit in late 2008, and then cutting credit lines. That destroyed a lot of business that use those lines to order stock and stay afloat in the off-season.) Figure out immediately how bad the loss is and how bad it could become.
C. Cut your losses immediately. If you lose a major client, don’t expect another to take his place. Cut your expenses, cut your salary to the bone, lay off workers if you have to, move to cheaper digs—do whatever you need to in order to compensate for that huge financial loss. The faster you do this, the more likely you are to save your business in the long run.
D. Search for a way to replace that income. This, of course, depends on your business. Get another big client, take out a loan from a different organization, sell off some inventory at lower than usual prices. Do what you can. If you do C & D in conjunction, you might just turn a financial setback into a blip on the balance sheet.
E. Be realistic. If the financial setback damages your business so badly that you are bailing water out of a bottomless boat, then shut the business down. Again, the faster you take action, the better off you’ll be. Too many business owners incur tens of thousands of dollars in needless debt by hanging onto a business that will die anyway.
Financial setbacks are often the easiest setbacks to see. Numbers rarely lie. In that way, they’re the easiest ones to deal with. You know what’s happening—it’s all there in black and white. Doing something, however, is harder.
Add to that the feeling of failure that inevitably comes with being unable to meet your obligations or pay your bills, and that’s a recipe for disaster.
Talk to the people closest to you. Have a plan. And expect the worst. You’ll go through it and come out the other side if you do.
2. Mechanical/Technical/Production Setbacks. These are often product-related setbacks, or setbacks that in some way involve the center of your business. For example, grocery stores went through this a few years ago when the government discovered e-coli in spinach. Thousands of dollars worth of produce got tossed, and even more didn’t get purchased. Even now, spinach sales are down from their peak before the e-coli debacle.
And imagine what that did to farmers who produced the spinach and the processing plants that packaged the wash-and-eat spinach. Some of those businesses got wiped out, just because some spinach somewhere (and I can’t remember where) got contaminated as it grew, and so the e-coli was entwined in the actual plant, and not on its surface. Who could have planned for that?
A writer I know got a million dollar book contract, paid out over years and several books. One editor bought those books, then left the company. By the time the writer turned in the first book in the contract (on time, mind you), she had been orphaned three times (meaning three other editors had presided over the project). The new editor who got the book wasn’t even familiar with the genre the book was in. My friend rewrote that book to the editor’s specifications for another year plus, before the editor decided the book was unacceptable, and asked my friend to repay every dime paid out in the contract thus far.
Think on this: the advance had been paid, the author had done the work—in fact, she’d done three times the normal amount of work—and she still had to repay the money. (She eventually negotiated this down to repayment when she resold the book, which she did—the original version, not the thrice-rewritten thing.)
For two and a half years, this writer made no money and at the end of that period of time, she was told she had to repay money she’d spent three years before. That’s a setback.
Sometimes mechanical/technical setbacks are the fault of the business owner. My friend could have written a bad book. (In this case, she hadn’t, but if she had, then the fault would have been hers.) Some of the e-coli cases in the news lately have been the product of filthy processing plants and uncaring business owners. They’re criminally negligent, and deserve the punishment they’ll be getting.
In some cases, though, setbacks are part of the business. Contractors who remodel houses, for example, never know what they’ll find behind ancient walls or underneath a rotted floorboard. And some businesses—like oil drilling—are by nature speculative, with many more failures than successes. Setbacks are planned things in those businesses.
How do you survive a technical/mechanical/production setback?