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With tough times comes the opportunity to show your true stripes and demonstrate to your clients and your staff who you really are. Additionally, working remotely may become the post-COVID “new normal,” so starting an office anywhere is a bit easier when resources can be shared across the entire firm. Denver is more of a calculated risk, but expansion has been one of our company goals since we started the firm. Silicon Valley is low risk because we can move people to San Francisco, and vice versa. We’re also evaluating the risk of our two new geographies-Denver and Silicon Valley. Although no business is invincible, I also believe that good management can set up companies to avoid layoffs. It’s hard to be optimistic when you’re worried that you could be laid off.
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But business requires trust, and once that’s broken, it's tough to rebuild-especially in consulting where our people are our most valuable asset. The obvious risk of that strategy is carrying the additional cost of the headcount. This is something that a few of our competitors have done, but I personally believe that's a death spiral. If you didn't know Propeller, you might suggest that the right move would be to lay off employees and begin hiring back when conditions improve.
BALANCING CAUTION OPTIMISM SERIES
Jeff FoleyĪt the start of the pandemic, we made a series of decisions in order to keep our team together. The advice I give all businesses is that with everything you do, always build forecasts and business models and use those calculations to inform your decisions. As we did then, the finance team will analyze a variety of scenarios to evaluate paths forward.įrom the work that our finance team does today to look at what could happen and how it could affect our firm, to what we did when we first started, there has always been a significant focus on analyzing multiple scenarios to understand the risk versus reward equation.
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This is the same practice we used when we started the firm. We continue to remain focused on analyzing various scenarios to understand the risk versus reward equation. Propeller’s finance team is doing just that: creating multiple sets of pro-formas to understand various “what if” scenarios amid uncertain times.
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The things we do at Propeller are going to be different, but the way we approach the market and the business remains much the same. The current environment hasn't changed that calculation for me. Optimism makes us more comfortable with taking risks, under the understanding that we never have perfect information and that there are no absolutes. On the flipside, acting too aggressively without taking an informed, balanced approach, may leave you over extended and set you up to fail. There's a risk of being too conservative. However, competitors that are more innovative, creative, and faster will be using your downtime to swoop in and gain market share. For example, you could take a low risk approach, hunker down, wait for strong signals that business is returning to normal, and only then invest time, energy, and money to build your organization. While the COVID 19 pandemic has caused upheaval in both business and home life, the risk versus reward equation hasn’t changed. Grit and perseverance are important too, but it's difficult to succeed when we aren’t optimistic about our chances.
BALANCING CAUTION OPTIMISM FULL
Being optimistic offsets our natural tendency to be risk averse and sets us up to reap the full reward. Optimism is one of the ways we rebalance risk and reward. Studies have shown that on average, people will take a lower salary or hourly wage if it’s consistent, versus a higher level of compensation when tied to revenue or profit. If the business is well run, there will likely, though not always, be a surplus (profit). This makes planning for expenses and paying bills more manageable. Take salaries for example: the vast majority of people prefer a fixed salary or hourly wage. One of the things I learned in business school is that people will pay a ‘risk premium’ to ensure stability and to create a perception of lower risk. To build or grow something sustainable requires balancing the inevitable risk with the optimism of being successful.īy nature, people are risk averse. You’ve heard countless times that there is no reward without taking on risk.
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