Managing any crisis is hard, but using the Life Raft Drill can help your business stay afloat.
John C. Maxwell says it best:
“Choices make us. Crises reveal us.”
When it comes to a business crisis, it reveals your leadership style, strengths, and weaknesses.
Essential Questions for Business Crisis Management
There are many reasons a business would go into crisis. But before you go into ‘repair mode’, be sure to ask yourself three very important questions:
1Am I okay?
First, you need to make sure your head is right and your reactions are appropriate.
You cannot be trusted to make any sound decisions until you have this foundation right.
It’s all hands on deck, and that includes your mental wellness.
2Do I know a trusted resource?
Whenever we are faced with a crisis, we tend to run to our friends and family.
While they may be willing to help, this is the wrong thing to do.
Instead, turn to someone in business you trust, who has been in a similar situation before.
3How much time do I have?
This is the most critical question of all.
If your company is going to go out of business tomorrow, then there isn’t much you can do at this point.
However, if you can keep operations running for another week or a month (give or take), and you take the information you’re reading here and apply it, you can actually turn a crisis into an opportunity to come out stronger than you were before.
The Life Raft Drill
I use the life raft analogy because it helps business owners visualize and understand the situation and what needs to be done in order to come out on top.
Picture this. You’re the captain of a 15-person ship where everyone has their own role. But then, the unimaginable happens — your ship takes a hit and it starts to go down.
It’s all hands on deck.
Everyone needs to work to stop the ship from going down, right? The same goes for your business.
You have to cut costs and make some tough decisions.
When it comes to your life raft, you need to be as transparent as possible with the people in your team. You need to tell them what’s happened, and what needs to be done in order to get out of it.
And in business, that usually means never going below the breakeven line. If this happens, that means cash needs to be funneled into the business, which means people’s salaries will be reduced to keep the business afloat.
But to keep that from happening, you have a revenue line and a breakeven line. This means that your target revenue per head should never be lower than $250K.
Once you go below that, you start to lose money. And then you’re in trouble.
Managing a business crisis like a true leader
You see, with the Life Raft Drill, there are a number of benefits:
- Employees become aware of the situation;
- Opportunity to work together as a team;
- Stay above the breakeven line;
- Strengthen your people, operations, and finances.
And listen, no crisis — business or otherwise — is an “easy” crisis.
The main takeaway from this is simple — you’re only as good as your weakest link. And in times of crisis, people will reveal themselves.
Learn more about navigating a business crisis and uncovering the secrets behind building high-performance teams with our 2-day People Essentials Workshop.