During COVID, Canary's biggest threat wasn't churn but its reliance on physical checks from hotels. The fear of a lockdown preventing mail and banking access created a sudden cash flow crisis, forcing a frantic scramble to collect payments before services shut down. This highlights a hidden operational vulnerability.
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Relying solely on a time-for-money service model is precarious, as a personal crisis can halt all income. Entrepreneurs in service industries should conceptualize passive income streams from day one, even before implementation. This builds resilience and provides options when they can no longer trade time for money.
When COVID-19 shut down their events business, Campaigns & Elections avoided temporary solutions like webinars. Instead, they focused on building a durable membership model that would thrive after live events returned. This ensured they emerged from the crisis with a larger, more diversified business.
Relying on one lead source, revenue stream, or indispensable team member creates critical vulnerabilities. Businesses must mitigate these dependencies to survive shocks, adopting the Navy SEALs' mindset: "two is one and one is none." This applies to technology access and key suppliers as well.
Jimmy Wales highlights Airbnb's early crisis where a single host's home was trashed. While statistically rare, the severity and visibility of this one negative event threatened their entire business. This shows that relying solely on aggregate data can blind leaders to existential threats rooted in individual customer pain.
Assembled launched with usage-based pricing and no minimums. When the pandemic hit, customers scaled usage to zero, and revenue flatlined. The team initially blamed their product, only later realizing their pricing model made them vulnerable to customers' cost-cutting measures, independent of product value.
When COVID-19 invalidated its revenue plan, Nextdoor's GM used a pre-existing worst-case scenario to pivot the product strategy. The focus shifted from subscriptions to features that provided immediate cash flow to local businesses (e.g., gift cards), enabling a quick, board-aligned response to the crisis.
Founder failure is often attributed to running out of money, but the real issue is a lack of financial awareness. They don't track cash flow closely enough to see the impending crisis. Financial discipline is as critical as product, team, and market, a lesson learned from WeWork's high-profile collapse despite raising billions.
While bootstrapping, Shure's founders secured a large anchor customer, a sound wedge strategy. However, the customer's unexpected death completely derailed their progress, highlighting the extreme risk of building a fledgling company around a single point of failure.
Rapidly scaling companies can have fantastic unit economics but face constant insolvency risk. The cash required for advance hiring and inventory means you're perpetually on the edge of collapse, even while growing revenue by triple digits. You are going out of business every day.
Relying on a single bank is a major vulnerability. Maintaining accounts with at least three banks—one primary and two backups—provides critical redundancy. This strategy protects against institutional failure, account lockouts, poor customer service, and provides leverage in disputes.
