The Frozen Domino Effect™

Nobody Thinks Their Business Is Going to Be Wiped Out (Until It’s Too Late)

The year was 2008 and everything was going well…

Until one day, it wasn’t.

I was recently speaking with Tracy Matthews, the Chief Visionary Officer of Flourish and Thrive Academy, who told me the story of her first highly-successful jewelry business. She had poured her heart and soul into the business. All of her hard work paid off. Her collections were in over 300 stores. Celebrities were wearing her pieces. She was selling collections internationally and she was being featured in high-profile media.

Revenue was rolling in.

Cashflow was dialed in.

Her hard work and persistence were paying off. 

Tracy’s primary means of generating revenue was via wholesale orders to retailers and specialty boutiques, essentially making up a single “channel” through which her products flowed and revenue returned.

That reliance on a single channel created “a single point of failure.”

Where Does Your Business Have Single Points of Failure?

Anyplace in your business where you are 100% dependent on one thing working as expected, you have a single point of failure. Imagine a business that only has one customer. As long as that customer keeps buying, business is great. The moment they stop buying, the music stops.

How did this play out in Tracy’s business?

When the financial crisis hit, many of Tracy’s buyers found their lines of credits being reduced or cut off. Many of those buyers couldn’t (or wouldn’t) pay her invoices.

Consumers were reducing spending in response to the uncertainty created by the crisis. As retailers watched their sales numbers plummet, many exhausted their reserves and lines of credit. Many of those retailers started declaring bankruptcy. As the bankruptcy notices rolled in, the cashflow Tracy needed to fuel her daily operations started to slow to a trickle.

Tracy knew she needed to find another way to generate sales, but there was just one problem…

The resources she would need to expand into other channels had to be allocated towards payroll, rent, and accounts payable. Tracy was caught inside of a very real scenario I refer to as…

“The Frozen Domino Effect™”

Imagine a long-line of dominos, equally spaced apart and ready to be toppled as soon as the first domino is knocked over…

Now, imagine your business being a domino somewhere in that long-line of dominos.  As long as all of the other dominos are standing, your business is relatively safe. But the moment someone knocks one of the dominos over, it’s only a matter of time. 

At this point, you’re in one of three different scenarios:

Scenario 1:

You prepared for this. You have identified your single points of failure and you have plans. You have resources set aside. In short, you can get out of the way before the falling dominoes hit you.

Scenario 2:

You are already acting on your contingency plan (e.g. different sales channels, different suppliers, different advertising channels, etc.).

Scenario 3:

If you haven’t done either 1 or 2 above, then your business is a “Frozen Domino™”.

The Frozen Domino Effect™ occurs when the window of opportunity to take corrective action has already passed BUT before you feel the impact of the tidal wave of consequences coming your way. That’s not a fun place to be and it’s one I hope to help you avoid.

How to Avoid Being Tipped Over

Here are some practical things you can do right now to avoid being tipped over when the dominos starting falling your way:

1. Identify the single points of failure in your business.
2. Brainstorm how you can start to build in redundancies, backups, reserves, and alternate sources for the things your business needs to survive (advertising channels, sales channels, suppliers, etc.) in the event that one of your single points of failure fails. For example, many hospitals have back-up generators that turn on when the local utility provider experiences a power failure.
3. Put a plan in place to implement your best ideas while you still can.

If you read through those three steps and do nothing, you’re putting your business at risk of becoming a Frozen Domino™, so let me encourage you to act now…

Make Your Move (While You Still Can)

In my experience working with business owners, we identify a number of problems. They know they need to solve those problems. But, when it comes time to make a decision and get to work, many of them want to continue the process of collecting possible solutions. In their defense, “collecting options” is something that we’re almost programmed to do…

For some reason, we tend to feel like we’ve solved a problem just because we’ve identified a potential solution. This weird feeling of accomplishment, which is really a release of dopamine by the brain, also occurs in the moment when we invest in a solution (but before we’ve actually put the solution in-place).

Let’s face it, collection options feels safer than making decisions.  To decide is to cut off other options.

To some extent, we assume our decisions are going to be final – if we make the “wrong” decision, we think we’ll be stuck it. When it comes to skydiving and which parachute you’re going to use, that’s a valid assumption. When it comes to business however, we often find that we can make course corrections. For example, if you realize the last decision you made wasn’t the best decision in light of new information, you can very often make another decision…

You just have to make a decision while you still can.

Frozen Dominos Can’t Move Out of The Way

Before the financial crisis, Tracy’s first business was great. Cashflow was healthy. She had plenty of resources, both within her business, and within her network of contacts. That was actually part of the problem.

When she could make the moves required to expand into other sales channels, she didn’t need to. When she needed to, it was already too late.

Her business was like a domino, frozen in place, as she watched the dominoes in front of her toppling one after the other. She couldn’t get out of the way. It was too late. 

When things are going really well, we tend to celebrate. We think things will continue on as they “always” have. We tend to spend easier and save less. We even have a tendency to go all-in.

As a society, we even tend to make fun of the people who say the ride won’t last. We tend to give them nicknames designed to turn them into ridiculous characatures that can be dismissed. Why? Because what they have to say makes us uncomfortable.

Do you want to know what’s really uncomfortable? Imagine knowing that you need to make a change, but realizing it’s too late.

Stay In Motion (Because The World Isn’t Stopping)

Why make a decision now when you can wait until later? Because waiting is expensive (even if you don’t realize what it’s costing you in the moment).

The world isn’t frozen in place – it’s a moving, shifting, ever-evolving system of systems, and if you don’t keep moving, you get left behind. Being left behind might not feel so bad, until you realize being left behind also means being left with fewer and fewer resources in a world where solutions tend to increase in cost.

Being decisive and taking action now can save you and your business. It’s a balancing act of course, but the world is evolving at such a rapid-pace that standing still is often risker than deciding, realizing you’ve missed the mark, and adjusting. That’s what happened to Tracy – she learned a lot and came rocketing back with a business that now helps thousands of jewelry designers and creative product designers build highly-profitable and resilient businesses designed to weather the storms of life.

Speaking of taking action, where are the single points of failure in your business? Which scenarios do you need to run to identify where your business is at risk? How are you going to make your own business more resilient and less dependent so you can endure the storms that life has in store?