An entrepreneur with a seemingly never ending to-do list can be blindsided by crises ranging from a major client failing to pay or a member of staff stealing trade secrets when they leave. While it’s impossible to anticipate every potential pitfall, there are steps that can be taken to minimise the effects, or indeed to prevent them from happening again.
Managing poor feedback
With the rise in popularity of TripAdvisor and social media, every business can fall foul of bad reviews. The key to dealing with the situation is in knowing how to respond, rather than ignoring reviews in the hope they’ll go away. Ian Charles, chief executive at the rapidly expanding gardening e-tailer Primrose, was initially opposed to featuring online reviews on the site because he believed they would predominantly be negative.
While there is an argument that unhappy people make a point of leaving reviews, rather than satisfied customers, Charles now believes they are “good for us and good for the customer”. The business has also recognised their value when it comes to market research. If a product gets a string of bad reviews, Primrose will often change or stop selling the product.
Charles makes a point of always respond, whether the comments are negative or positive. It is important to recognise that responding to a bad review will reassure future customers, as well as placate the currently disgruntled one. But tread carefully. Charles advises “not to be too heavy or involved”.
“You can respond by helping the next customer understand what the bad review customer possibly did not understand about the product,” says Charles. And don’t be afraid to ask happy customers to leave reviews too: “For a more realistic spread, email your customers and say thanks for your order and please give us a review.”
It’s also important to be realistic about how quickly you can get back to customers, whether that’s via online forums or by email. Set up an automatic email reply to say that someone will be in touch within 48 hours, and set aside time each week to go through reviews.
When clients don’t pay
Lindsey Fish, founder of B2B events management company Little Fish, was left in a tight spot when a client failed to pay a £2,000 bill, which is still due over a year later.
She confesses to a certain naivety when she first started the business and failed to take heed of warning signs with this particular client. Her enthusiasm, she surmises, led to “rose-tinted glasses” about the contract.
“Even when I was having meetings with him he was getting calls from people asking for money,” says Fish. “He also told me about an experience of another contractor who left on poor terms.” Despite paying Fish the first four payments, the client failed to settle the final £2,000. He said it was because he was waiting for some venture capital money to materialise.
Jeremy Drew, partner of law firm RPC, says there are two reasons why people don’t pay bills. “One is they don’t like the service they got and the other reason is that they are playing games to defer paying because they have cash-flow issues.”
Drew believes in both instances the best first course of action is to start a dialogue with the company in question to find out which it is. “I would not go with threats or outsourcing to third parties and litigation because most of the time that does not help,” he says.
In most cases, Drew explains, a satisfactory resolution can be found by bypassing the credit controller or finance department, and asking to speak directly to the CEO or MD. “Often people are speaking to the wrong person”, he says.
Late payments are arguably part and parcel of running a business but certain parameters can help. Make sure you always state a deadline for payment and have a clear process for chasing clients – including firm but polite reminder letters at regular intervals.
Fish says she would have been in serious trouble as a result of the delayed payment if she had not landed other clients. If the outstanding money had been much higher, there could have been a much longer term impact. “Do not put your eggs all in one basket,” she says.
Securing intellectual property
Kat Wczesniak, the founder of Curious Kat’s Adventure Club, reveals she was “terrified” when a member of staff left to set up a rival business because “they had access to all our resources and customer lists”. Luckily for Wczesniak, the rival venture failed when the former employee realised he did not have the financial acumen to run a business. He abandoned his plans, apologised, and even asked for his job back.
Wczesniak says it was a “turning point” for her and made her realise she needed to keep all of her company information secure. She now insists on getting all staff to sign confidentiality agreements, which she admits she should have had initially.
“The problem with setting up small businesses is there is never enough time for everything,” she says.
If you are not as lucky as Wczesniak, what steps can you take if your intellectual property (IP) is stolen and not voluntarily returned? Drew, who also heads the IP, technology and outsourcing group at RPC, says speed is of the essence.
“Do a full investigation very quickly of what has happened and work out what has left the building,” says Drew. “If something valuable has left, you immediately need a letter to go to the former employee reminding them of their obligations.”
The employee should be given a short time scale of around 48 hours to return or destroy the information. The next step is to injunct them if they do not co-operate. The deadline is important, because a court is unlikely to issue an injunction if a company does not demand the return of information within a week.
Drew explains an injunction has the best chance of success because suing for damages – particularly if it’s an asset such as a client or supplier list, rather than a violation of a trademark or patent, is rarely worthwhile due of difficulties proving the loss to the business.
The best approach is surely to “keep your information safe in the first place”, says Wczesniak. Pursuing any action could be costly and difficult to prove without a prior contractual agreement.
Find the balance & opportunity
In today’s modern world, client and customer expectations of a business are high. But Lee Miles, Professor of Crisis and Disaster Management at Bournemouth University, says whatever crisis may befall an entrepreneur: “It’s about finding a balance between a client expectation of 24/7 service delivery and developing selective resilience to keep the company operating.
“There is a differentiation between ‘always on resilience’ and ‘resilience that is always on’”, he adds.
While SMEs often do not feel that they need a crisis management strategy because they are too small, Miles argues that they often need it the most. “No matter how big a firm is, all companies need a resilient, continuous business plan.
“The impact may be a short-term financial loss, but there can also be a reputation loss that causes a company to lose its market share and profile.
“Crises themselves are not just a burden, they’re also an opportunity for change and can transform a company’s reputation.”
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