We previously discussed “black swan events”—highly disruptive events that are unpredictable before they happen—and how such events might throw your law firm plans into jeopardy. What, if anything, can you do to prepare for a black swan event so it doesn’t kill your dream if/when it happens?
Preparing for the Unexpected
The obvious challenge with black swan events is that no matter how obvious they seem after the fact, we can almost never predict them before they happen—we simply don’t have the perspective to do so. (As the saying goes, “We don’t know what we don’t know.”) Conversely, we could drive ourselves crazy trying to anticipate even the most improbable snafus. A better solution: Take basic steps to be prepared for a wider range of unexpected events in general. Some tips that may help:
- Set up a financial pad. Don’t invest every dollar of capital in your law firm, and don’t re-invest every dollar of profit. Since a black swan event is most likely to hit you financially, sock away a healthy savings account so you have something to start with if something cataclysmic happens. On a similar note—carry a healthy insurance policy for your business.
- Diversify. Don’t keep all your money in one place. Back up all your data in at least three places (including one offsite). Don’t pin all your hopes on a single investor or a handful of clients. Don’t limit yourself to one income stream. The more sources of funding you have, the easier it will be to withstand a crisis if one or more of those sources is affected.
- Create a contingency plan. A great strategy for prepping for a black swan is simply to assume it will happen and plan for when it happens. You don’t have to know what it is or from which direction it will come—you just need to assume it will disrupt your workflow and your finances, possibly for an extended length of time. Simply put—create a survival plan, preferably one that covers several scenarios. How will your law firm survive a 3-month drought? A 6-month drought? A year out of business? Set aside the funds and the resources, along with a contingency budget to chart your course.
Recovering from a Black Swan Event
Perhaps you’ve already experienced a black swan event and your law firm is facing dire circumstances as a result. What steps can you take to navigate this difficult season and emerge on the other side?
- Cut your overhead. Reduced income requires you to reduce expenses in order to survive. Go through your firm, identify places of waste or redundancy, and trim the fat.
- Think creatively. A black swan often creates unusual circumstances that require new solutions—including some that don’t fall within the scope of your past experience and training. The most resilient entrepreneurs think outside the box when the unexpected takes place.
- Reconstruct your success. Take an inventory of the level of success you’d achieved with your firm before the black swan hit. What did you do right? Would those same strategies work now? Does the black swan event change your perspective on what works? Use the answers to these questions to begin rebuilding your success—even if you have to go all the way back to the beginning.