What’s Your Zero Revenue Plan?
Question: What would make your business drop to zero revenue tomorrow? “New competitors!” Yes, but would they take ALL of your business — overnight? “Amazon!” Maybe. But would your business go away in a day? What would it really take to lose every single dollar of revenue? Not just a small dip, but a giant, fall-off-the-cliff nosedive?
Well, we’re currently looking at it.
This may be your uncomfortable reality right now, or you may see other companies and industries experiencing it, wondering if you’re next. The pandemic presents a unique opportunity to ask these questions as more than a hypothetical threat.
My proposed solution is a Zero Revenue Plan. This is the moment to contemplate the previously unimaginable, so you can brace yourself with greater confidence when the next “never gonna happen” catastrophe strikes. You can’t control the external factors, but you can control how you prepare for these suddenly not-so-far-fetched catastrophic scenarios.
That’s why I want every business to develop a Zero Revenue Plan, starting today:
1) Identify the constant in your business. Most businesses are built on a particular core constant that drives the majority of their revenue. The Zero Revenue Plan demands a realistic interrogation of the constants you’re taking for granted: Restaurants assume people go out to eat; airlines bank on people traveling; gyms assume people leave their homes to work out. In the last two months, we’ve seen these and other constants crumble in a matter of hours and days, shifting some companies and industries from what promised to be their best year to their worst nightmare. What’s your core constant? It’s likely that 80 percent of your business relies on that constant. You wouldn’t invest 80 percent of your retirement in one stock, so why do that with your business?
2) Create a list of what could cause that constant to go away overnight. Unfortunately, pandemics are not the only potential catalyst for plummeting to zero. Let’s say you’re in the automotive industry. What if no one bought a car again in the future? It sounds crazy, but during COVID, the total number of miles driven has gone down 50 percent! It’s such a dip that insurers are giving substantial refunds on premiums. If COVID could lead to us driving half as much, what could lead us to not driving at all? What would that world look like? Give yourself permission to really envision the unthinkable.
3) Reimagine your company’s core offering. This is a big one, and it might hurt a little! Your irrational vision is what your company or industry might look like devoid of the constants you’ve relied upon. The irrational vision works well when you can control most of the variables, but for more extreme situations (like now), where you can’t control seemingly anything and all forecasts could be summarized with the “shrug” emoji, you need the Zero Revenue Plan: This is your emergency button for when everything people thought couldn’t happen happens. You still want your irrational vision, but right now, the Zero Revenue Plan is your life support.
4) Determine how quickly you can get to this Zero Revenue Plan. In my book, Embracing Irrationality, I talk about one-degree decisions as the incremental stepping stones to actualizing your irrational vision. But sometimes one-degree just isn’t fast enough. If this crisis has taught us anything, it’s that we tend to overestimate the amount of time it takes for change to happen. The current pace is moving faster than we’re processing — and we aren’t prepared. The Zero Revenue Plan still embraces irrationality, but it revs it up to turbo mode. When the sky is falling, you don’t have the luxury of a blissed out stroll toward eventual innovation. It’s time to sprint toward your contingency plan with bigger, faster decisions.
No Plan? Big Problems
We’re already seeing what happens when companies don’t develop a Zero Revenue Plan. This month two industry-leaders collapsed: Gold’s Gym, a 50-year fitness brand, filed for bankruptcy, as did retail apparel giant J.Crew. Could a Zero Revenue Plan approach have prevented these crashes? It’s impossible to say for sure, but here’s my best guess:
Gold’s Gym — like most gyms — relies on the constant that people leave their homes to work out. As a result, their business model is a monthly subscription to an in-person service (with the assumption that many people won’t actually use it very regularly). In the case of a pandemic — just one extreme scenario they might have entertained — the likelihood of their revenue going to zero is quite high. But if, instead of seeing themselves as an in-person subscription service, they decided their core value proposition was to own people’s fitness outcomes, their future might look very different. They could have created a model in which they would still collect $30 per month from members, regardless of whether they set foot in the gym, by diversifying their offerings and operating in a more pandemic-proof way. They might have launched virtual classes or training sessions long before the lockdown, offered holistic nutrition resources and online tutorials, and tracked fitness outcomes via an app — or even purchased Peloton. That doesn’t mean they would need a real estate-free business model, but rather a model where their revenue remains steady regardless of whether people can still take gym selfies.
Until now, it was easy to dismiss scenarios like this as baseless catastrophizing. You could skate by for long periods of time without ever really needing to interrogate your constants. One-degree decisions were enough, and you could feel safe and cozy rooted in your old ways of operating while you inched toward your irrational vision (if you even had one). But now the impossible has happened — and if I’m a betting man, I’ll wager it won’t be the last time.
How Irrational is Irrational Enough?
Companies helmed by irrational visionaries are in a better spot than the rest, but even many of them are struggling, begging the question: were they irrational enough? Airbnb was an industry disruptor led by irrational visionaries when it launched, and yet, it’s currently in a very rough spot. Were they really just a distributed ownership hotel company at their core? Could they pivot to (virtual) experiences and rebound? Whatever the answers, I bet they wish they had a Zero Revenue Plan in place right about now.
The coronavirus has forced companies to make sharp 90-degree pivots. And whether it’s a result of a virus or technology, constants can and will disappear overnight. Irrationality is still the answer, but I understated its urgency in my book. I tried to make it an incremental exercise for companies to move through over the course of a decade, making small-and-steady changes to reach a long-term irrational vision. But I wasn’t aggressive enough on the timeline. Sometimes you don’t have the luxury of ten years or even one. The time for a Zero Revenue Plan is now, not someday.
In my work with companies and executives, these doomsday scenarios often feel scary and too far-fetched, and we don’t like to talk about scary stuff. But we must. We can’t be willfully ignorant if we want our companies and industries to survive and thrive when unforeseen wrecking balls barrel through.
In the book, I call out ten industries that are over-reliant on constants and generally lacking a cohesive Zero Revenue Plan:
- Higher ed
- Auto dealers
- Real estate
Over the course of the next few months, I’m going to address each of these industries, identifying their vulnerabilities and presenting an irrational vision and Zero Revenue Plan for reframing their core value proposition to make them more resilient when their constants inevitably come tumbling down.
What’s your Zero Revenue Plan? I want to hear from you about how you and your company are disrupting constants and reimagining your future.