Family legend tells of my European grandfather walking around the house naked, wearing a top hat. “Why are you naked?” my grandmother would ask. “Nobody is coming over,” was his response. So, “Why wear the top hat?” His response: “Somebody might come; you never know.”
A second example of poor contingency planning involves the Meteroa, a group of monasteries in Greece, built 600 feet in the air, on top of natural stone pillars. They allow for great solitude: the only way in or out, for hundreds of years, was via one rope, pulled up (or down) from the ground to the entrance. All people and supplies gained access to the monastery using the rope pulley. When a monk was asked how often the rope was replaced, he replied: “Whenever it breaks.”
The lack of well thought out contingency planning in the examples above is obvious. But as an entrepreneur, it’s something I can relate to.
Recently, my father-in-law and I were driving along New York’s West Side Highway. I had 20 minutes to get to the NY Department of Motor Vehicles before they closed. My daughter’s car needed to get registered before she left for school that weekend. Typical of most Fridays in the city, traffic choked the roadways. My hands were tight on the steering wheel as I maneuvered between cars.
“What will you do if you don’t make it?” my father-in-law asked.
“I’m not thinking about that at all,” I replied. “All my brain energy is focused on how we’ll get there — not on what happens if we don’t.”
A constructive sort of denial.
I made it to the DMV that day — by about 20 seconds. But the answer I gave to my father-in-law is typical of an entrepreneur. Cocky and sure, enamored with our ideas, most of us don’t ever contemplate the possibility of failure.
Yet, businesses with staying power need to have contingency plans. The right kind, ones that work, better than the ones described above. Things going wrong aren’t a matter of if: They’re a matter of when. A storm could flood your office. A fire could wipe out your warehouse. Hackers could steal sensitive customer data. Key executives can quit, or worse, leave with intellectual property.
So, here’s the dilemma.
While proper contingency planning is critical for business, it goes against most entrepreneurs’ DNA to focus on the downside. It takes critical mental energy away from visualizing success.
After much painful experience, the conclusion I’ve come to is this: Every company needs someone to prepare for those worst-case scenarios. But that person should most definitely NOT be the entrepreneur. Forward thinking, creative and boundlessly optimistic, a company’s founder is often best positioned to do the tasks that propel a company towards success. Defending against potential threats and downsides is a distraction. It’s time and energy not spent on winning. So, delegate it.
When our company went through one of its early capital raises, the process took longer than expected. I had turned down an investment offer because the terms weren’t favorable enough, even though our coffers were dangerously low. I believed it was only a matter of time before we would find the right investor who was willing to be a fair partner. In the meantime, our CFO secured a bank line of credit. We never needed it, but I was grateful that someone created a safety net in case I was wrong.
Empower others to act.
I love the magic of code and data, but have never thought deeply about the hardware that powers it. Luckily, once we grew large enough, our CTO moved our servers out of the office and into a web hosting company with geo-replication. When Hurricane Sandy hit in 2012, several large websites housed in the tri-state area, like Huffington Post and Buzzfeed, went down for days. Ours never even blinked.
We were certainly lucky to have executives who capably planned for what might go wrong, as I was 100 percent focused on making sure that key things went right. The job of contingency planning is an important one for all growing companies. Just don’t make it yours.