After designer Casey Smith took a year-long maternity leave, she shut her business. Writing on her company’s blog in 2018, she describes the move as “a huge mistake.” When she re-opened, she found she had no plan, no marketing strategy, and heard nothing but crickets.
“It was an awful experience that I would never want to relive,” she wrote.
It was also a result that every business owner and freelancer would expect. Building a new company, establishing a brand, and deepening trust all take years. It takes time to find customers and win referrals. Reject new work and stop serving old clients and customers and they’ll find competitors who will serve and supply them instead. Shut the business down and if you choose to reopen it, the benefits of all that early work will have faded away. You’ll be starting from scratch, with none of the momentum that keeps a business moving forward.
And yet, small businesses close temporarily for all kinds of reasons. Sole proprietors take maternity leave. Illness can force a business owner to focus on their personal health instead of their company’s health. A relocation can mean closing a store and reopening it again elsewhere.
And a reopened business isn’t quite the same as a brand new business, and not just because the owner has years of experience to draw on. They also have connections that can be useful when powering the business back up.
In a recent study, a group of researchers in Sweden and Australia looked at the challenges involved in reopening one company in Sweden. The researchers wanted to know how a hiatus affects the process of resuming business operations and how that resumption is affected by the reappearance of former connections.
Digging Up Old Relationships
The business the researchers examined was an iron ore mine that an entrepreneur wanted to re-open after a closure of twenty years. The mine had been in operation for more than 400 years but a glut in the supply of iron led to a fall in prices that prompted the owner, a partially state-owned company, to shut the company. The mining firm handed over its documentation to the state, restored the landscape, sold off its machinery and placed what it couldn’t sell underground.
In 2005, an entrepreneur with a doctorate in geology and a background in mining saw that increasing demand for iron in China was pushing up prices. After reviewing the mine’s documents, he calculated that reopening the mine would be profitable. The process started in 2005 and the mine reopened in 2012.
The researchers conducted 17 interviews with people involved in the company’s resurrection. Interviewees included the entrepreneur who revived the firm and served as the new entity’s first CEO, two subsequent chief executives, as well as the firm’s customers and suppliers, and members of the local municipality. Interviews focused on four main themes that the new company encountered as it reopened. The business had to apply for the relevant permits, build up the mining business, deal with suppliers and sub-contractors, and search for potential customers.
After analyzing the interviews, the researchers soon understood that the connections an old business had forged, even twenty years after the company’s closure, were vital to its rebirth.
“After a cessation of business operations, and a period of ‘business inactivity,’” the researchers wrote, “some – but not all – of the prior counterparts reappeared during the process of resuming business operations, although not always in the same types of roles.”
The researchers identified three types of roles played by counterparts as the business resumed operations.
Some contacts acted as gatekeepers. The new mining company needed the approval of the local municipality and had to abide by regulations governing the operation of a mine.
“Gatekeepers,” the researchers explain, “can be seen as a specific kind of brokers that can affect the type of exchanges which may or may not occur with other parties in the business network.”
Although those gatekeepers represented an obstacle in the return of the company, they could be managed. The new mining company found that the gatekeepers were largely supportive as long as the company produced the documentation they demanded and showed that it had the capacity to start mining. The gatekeepers laid down conditions but if the company could meet them, the gatekeepers opened the gates.
Other contacts acted as promoters. The new company found that former customers and contractors involved in moving ore from the mine to buyers abroad played a critical and supportive role in resuming operations.
Prior customers had kept records of their purchases and had extensive knowledge of the product. Even after twenty years, some individuals at these companies were still in place and knew how to make use of the kind or ore the mine produced. “Relationship energy” in the form of social bonds can be transferred from previously ended business relationships, the researchers noted, providing help when reactivating a relationship.
Mine Your Social Network
Those social bonds stretched to include former employees. Even though mining technology had changed significantly during the period the mine had been closed, making those former workers’ technical knowledge less relevant, they still had an understanding of the business that proved valuable. One chief executive, for example, described a visit a pub near the mine one night where he soon found himself in conversation with some locals. Old men keen to tell him about the “good old days” of the mine, they also had plenty to say about problems with the current mining operation and how to solve them.
The CEO then spent a large sum of money on consultants before discovering that the consultants’ recommendations were the same as the suggestions he’d heard in the pub. “You should take old knowledge seriously,” he told the researchers. “It’s actually an important thing when you start up… you should sit in the local pub and listen to what the locals say.”
Other former employees and their families took on new roles as investors and shareholders.
The researchers concluded that the new mining company would not likely have succeeded in resuming mining operations without the reappearance of previous relationship counterparts, whether in the form of customers, suppliers, local officials, or former employees sitting at a bar.
Restarting an old mine after a twenty-year break in operation poses particularly big challenges. The capital investment is large. The site has to be pumped and cleared. New equipment needs to be bought and permits arranged. Staff with specialist skills need to be recruited, and that’s before the company’s even started shipping ore to customers.
But every restarted business begins with an asset that a new company lacks: its connections. The researchers describe prior relationships as “dormant resources,” assets that can be reinvigorated and brought back to life. And those assets exist in every dormant business.
The researchers advise the owners of companies coming out of dormancy to investigate where and how remains of previous business operations can be found, recovered and reemployed. They should examine the roles different counterparts once had as well as the roles they’re likely to assume once the company restarts. Those roles may differ from the parts they had in the past. A previous employee could now become an investor. A supplier could now be a customer. Know who can help, who might stand in the way, who now functions as a gatekeeper and what you now need to do to get past them.
For owners of smaller business, the success of the restarted mining company suggests that the best place to begin resurrecting an old firm then is a contact list. Before bringing the company to life, make a note of everyone the company served, bought from, employed or sold to, and check what they’re doing now. Some old connections you’ll be able to find on LinkedIn while other potential key contacts you can meet in person to catch up and find out exactly what they’re doing. The researchers in Sweden warn that reactivating previous relationships comes at a cost, though a lower cost than the price of investing in new relationships. You might have buy a few drinks and pay for a few lunches.
But perhaps the most important lesson is simpler. If you know you’re shutting down your business temporarily, whether it’s because you’re taking maternity leave, relocating or need to deal with something in your life, don’t let your current relationships wither. Keep in touch with your key contacts. Make sure you know what your customers, clients and former staff are doing and continue helping them whenever you can.
Businesses relationships take time to build but they can also take time to fade away. The more you invest in those relationships, even a little, the longer they’ll last and the easier you’ll find the reopening.
Every attempt to restart a business is difficult. But if an iron ore mine can restart after twenty years, get digging and find customers, there’s no reason that waking any business from its own deep coma should be the worst experience of your life.
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