Build for Winter

I’m writing this from Fairbanks, Alaska.

One thing becomes obvious when you spend time this far north: you have to respect the conditions.

Fairbanks can experience extraordinary temperature swings throughout the year. You don't build, plan or prepare as though every day will be comfortable.

That got me thinking about business.

A lot of companies are built for summer.

They work beautifully when sales are coming in, employees are performing, customers are paying on time, advertising is converting and cash is plentiful.

Then winter comes.

A major client leaves.

Advertising costs increase.

An employee quits.

Cash gets tight.

The market slows down.

Suddenly, the company that looked incredibly successful six months ago is fighting for oxygen.

After more than a decade in business and marketing, I've become increasingly interested in a different question:

How do you build a company that still works when conditions aren't perfect?

Fairbanks gave me a good framework for thinking about it.

1. Know Your Business's Survival Number

Every business owner should know one number without asking their accountant:

What does it cost for this company to survive for 30 days?

Not thrive.

Survive.

Payroll. Rent. Software. Insurance. Debt. Essential contractors. Minimum advertising. Everything required to keep the doors open and customers serviced.

Call it your Survival Number.

If that number is $75,000 per month and you have $150,000 of accessible cash, you don't have "$150,000 in the bank."

You have roughly two months of operating runway, before considering incoming cash flow and other variables.

That's a completely different way to see the same money.

I think business owners should know three numbers:

Survival Number → Normal Operating Number → Growth Number

Survival is what keeps the machine alive.

Normal is what properly operates it.

Growth is what allows you to invest aggressively.

Knowing which mode you're currently in can prevent emotional decisions.

2. Run the 25% Test

Here's an exercise I think every owner should do this week.

Take your current revenue and reduce it by 25%.

Then ask:

What breaks?

If revenue dropped 25% for the next 90 days, could you make payroll?

Would your advertising immediately stop?

Would debt become a problem?

Would you still be profitable?

Which expenses would you cut first?

Would one client leaving create the entire decline?

Don't wait for a difficult quarter to answer those questions.

Write the answers down now.

That's your Winter Plan.

You don't prepare for cold weather after the temperature drops.

3. Measure Client Concentration

This one gets overlooked.

A company doing $2 million annually can look healthier than a company doing $1 million.

But what if $1.2 million of that $2 million comes from one customer?

That's not necessarily strength.

That's concentration.

Take your largest client and divide their annual revenue by your total annual revenue.

If one relationship represents a huge percentage of your company, recognize the risk.

The goal isn't necessarily to fire great clients or artificially limit large accounts.

The goal is to know what you're exposed to.

There's a difference between having a great client and needing a great client.

I prefer the first.

4. Every Important Job Needs a Backup

Ask yourself something uncomfortable:

Who could disappear from my company tomorrow and cause absolute chaos?

It might be you.

That's a problem too.

If only one employee knows how billing works, you don't have a billing system.

You have an employee who knows billing.

If only the owner can close a sale, you don't have a sales system.

You have an owner who sells.

If one person has all the passwords, vendor relationships, processes or customer knowledge, that's not efficiency.

That's dependency.

I like a simple rule:

One owner. One process. One backup.

Every mission-critical function should have somebody responsible for it, a documented process, and another person capable of stepping in.

It won't make an exciting Instagram post.

It will make a better company.

5. Give Every Dollar a Job

I've watched businesses make more money and somehow become financially weaker.

Revenue increases.

Then the office gets nicer.

Payroll expands.

Subscriptions multiply.

Company expenses creep upward.

Eventually, last year's luxury becomes this year's fixed expense.

So give money assignments.

Instead of seeing one big operating account, mentally, and where appropriate, financially—separate money into categories:

Operations. Taxes. Reserves. Growth. Owner distributions.

The exact percentages will be different for every company.

That's not the important part.

The important part is refusing to treat every dollar entering the company as available money.

Revenue is not cash flow. Cash flow is not profit. Profit is not necessarily spendable cash.

Knowing the difference has saved more businesses than flashy marketing ever will.

6. Create a Weekly Dashboard You Can Read in 10 Minutes

Business owners don't necessarily need more reports.

They need better visibility.

I'd rather have seven numbers I trust every Monday morning than 70 pages I never read.

For many companies, the dashboard could include:

Cash on hand | Revenue collected | Accounts receivable | New leads | Sales closed | Current pipeline | Customer retention/churn

Your numbers will vary depending on the business.

But here's the rule:

If a metric doesn't change a decision, ask why you're tracking it.

A dashboard should tell you where attention is needed.

It's an instrument panel, not decoration.

7. Separate a Bad Week From a Bad System

This is one of the most useful disciplines I've learned.

When something goes wrong, don't immediately redesign the company.

First determine what kind of problem you have.

I use three categories:

Event. Pattern. System.

One salesperson has a terrible week?

Could be an event.

Sales decline for six consecutive weeks?

Now we may have a pattern.

Leads consistently arrive but aren't followed up for three days?

That's probably a system problem.

Business owners waste enormous amounts of energy treating events like systems and system problems like isolated events.

Diagnose before you react.

8. Protect the Heat

In Fairbanks, heat isn't a decorative feature.

In business, there are certain functions that deserve the same level of protection.

I call these Heat Sources.

They're the handful of things that keep the company alive.

For one business, that's lead generation.

For another, customer retention.

For another, recruiting.

For another, sales.

Ask yourself:

What are the three activities that, if we stopped doing them for 60 days, would seriously damage this company?

Those deserve disproportionate attention.

It's amazing how often businesses neglect their heat sources because everyone is busy handling things that feel urgent.

Don't confuse activity with importance.

9. Build Your Company So You Can Leave It

Travel has taught me this one personally.

Leaving town exposes businesses.

If everything falls apart because the owner is unavailable for three days, the owner hasn't built a company.

They've built a job with employees.

Try something.

Take one process you currently handle personally and remove yourself from it.

Document it.

Assign ownership.

Create the decision boundaries.

Determine when something actually needs to be escalated to you.

Then stop touching it.

Do that repeatedly.

Your goal isn't to become unnecessary to your company.

Your goal is to become unnecessary to routine operations, so your attention can move toward decisions where you actually create the most value.

That's a huge difference.

The Fairbanks Test

Here's the framework I'm taking home.

Every quarter, I think an owner should sit down for an hour and answer these questions:

SURVIVAL: What is our monthly survival number?

RUNWAY: How long could we operate if revenue suddenly declined?

EXPOSURE: Where are we dangerously dependent on one client, employee, vendor or marketing channel?

VISIBILITY: What seven numbers tell us whether the company is healthy?

SYSTEMS: What repeatedly goes wrong because we haven't actually fixed the process?

HEAT: What three activities keep this business alive?

OWNER: What am I still doing that somebody or something else should be doing?

You don't need a retreat.

You don't need a 100-page strategic plan.

You need honest answers.

Then pick the single weakest area and spend the next 30 days improving it.

Repeat next quarter.

Do that for three years and you'll probably have a remarkably different company.

Don't Build a Business That Requires Perfect Weather

Fairbanks reminded me that resilience isn't something you add after conditions become difficult.

You build for it beforehand.

The same should be true in business.

Have reserves before you need them.

Build systems before somebody leaves.

Diversify before losing your biggest account.

Know your numbers before cash becomes tight.

Document the process before it breaks.

Develop leaders before you're overwhelmed.

And fix the roof while the sun is still shining.

Growth gets most of the attention in entrepreneurship.

I understand why. Growth is exciting.

But resilience is what gives growth somewhere to live.

Don't just build a company capable of having a great year.

Build one capable of surviving a difficult one—and still being strong enough to take advantage of the opportunities that appear when the weather clears.

That's building for winter.

Writing from Fairbanks, Alaska.

— Corey Flores
Founder, Flores Marketing Firm