The Business Death Spiral and How To Avoid It
This morning, I decided my business was caught in a death spiral.
The Death Spiral: Explained
The death spiral is a concept I learned from one of my mentors, and it can apply at any time, to any part of a business, or even the business as a whole. It usually happens after the business has achieved a modicum of success, when demand increases, and sales and revenue start coming in steadily.
In order to meet that demand, close those sales, and keep that revenue coming in, the business does everything it can to chase it. That chase almost always results in a series of impromptu and informal processes that casually start to develop.
Those new processes could focus on increasing lead generation, they could be about pushing hard on production or manufacturing, they might even be around enhanced customer support.
It doesn’t matter what they are exactly, just that they require you (and everyone else at your company) to execute at full throttle from the first moment of the working day to the last.
And then when I say “working day” — those processes become a centrifugal force, stretching a working day that might have been 8:00 to 5:00 (or whatever) to the first thing you do every morning all the way to the last thing you do every night. This becomes especially true for the people leading the business (and more especially the founder). Those impromptu and informal processes then become company canon — the unspoken rules for getting things done.
But eventually, the business changes, the market changes, external factors encroach, and those processes start producing diminishing results. To compensate, the team (and its leader) has to work harder and harder just to maintain the status quo.
Soon it becomes apparent that something needs to change, because if this keeps up, productivity will go to zero and everyone will burn out.
But here’s the problem. As revenue shrinks ever-so-slightly but perpetually, the fear of large chunks of that revenue going away becomes palpable. The team is working so hard just to keep…