Every so often, entrepreneurs find themselves facing the unexpected, whether it's a drop in sales, revocation of a credit line, or the emergence of a strong new competitor. What's important is how they approach, confront, and overcome the "out-of-left-field" news that can leave a small business reeling, says Scott R. Singer, managing director at The Bank Street Group, an investment banking firm based in Stamford, Conn. Singer, who co-wrote the new book How to Hit a Curveball (Portfolio, April 2010), spoke recently to Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.
Karen Klein: Conventional wisdom says that small businesses adapt better to change than their larger counterparts. Is that really true?
Scott Singer: There are benefits to small companies. I've worked for very large firms and now I work in a boutique firm with 25 people. Smaller companies are able to be more nimble, that is clearly the case. However, they also tend to be run by an entrepreneur who's the decisionmaker and the visionary and generally has a very strong opinion about how the business should be run.
So if the entrepreneur wants to do things the way they've always been done, that ability to be nimble doesn't really matter?
Exactly. An important component for those entrepreneurs is to make sure they are getting advice from others and listening to that advice and thinking outside the box. In the book, I use the baseball metaphor and talk about listening to your coach and filling out your lineup. Both of those processes describe the need to confront and overcome things by getting other peoples' perspectives before you make a decision.
What kinds of perspectives should small business owners seek out when they are faced with a sudden change?
Your coaches can be everyone from friends to family members to executive coaches, industry groups, or people you meet at trade shows. Within your own organization, it's important to make sure you are encouraging others to express their opinion. You need to have people on staff who look at change as an opportunity: Encourage and foster that mindset so that when things do happen—which they inevitably will—you don't fall apart.
Do business owners have a tendency to fall apart when that curveball comes at them?
The most common reaction is to blame someone else. It's that shipment that didn't arrive or that salesman who didn't meet the quota. Another common thing for some people is to become like a deer in the headlights. They don't know what to do, they freeze, and they fall into a depression.
The best reaction, of course, is to step up to the plate. You stop worrying about how you got where you are right now, you acknowledge what happened, and you start thinking about what you are going to do about it. Because in the end, that's really all you can control.
What's the danger of having one of those bad reactions?
You can end up making bad decisions that can have clear negative repercussions, not only on your business but also on your personal life. Most of us—entrepreneurs especially—identify our success by what we have achieved or done in our careers. If that success gets taken away, it affects our view of how we fit into the world.
Sometimes people panic when they get bad news and try to keep it secret. Is that common?
I did that myself. Back in 2002, I got fired from Bear Stearns when I thought I was the king of the hill. I flailed about, worried, and pretty much got everything wrong. I was so embarrassed. I was determined to get a new job before anyone found out. I was putting a suit on every day, taking my kids to nursery school, and then going home and changing back into my sweats and working the phones.
Later I realized that being up front is the best policy. If you try and hide an issue and work to solve it before anybody finds out, the chance of it growing and potentially blowing up gets stronger.
In the book, you talk about being the batter, not the ball. What does that mean?
Don't let your imagination get the best of you. Be a realist, not a pessimist. We tend to immediately start thinking about all the ramifications of what just happened. Then we let our minds run out of control and sabotage our own success. Nobody jumps to the conclusion that this could be the best thing that's ever happened, because it's probably in our DNA to expect the worst.
What's the optimal way to react to bad news?
Keep your eye on the ball. Focus on what you can do, instead of worrying about what else might happen that's beyond your control. The other thing is not to react instantaneously. Stop, think, talk to other people. Step out of the box and solicit outside input. If you seek out advice, particularly from creative people, you'll usually find that there are several solutions you can choose from, depending on your situation and your company's strengths and weaknesses.