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Build trust and enlist support by communicating bad news early

Founders by nature are optimistic – otherwise they’d never start and believe in the crazy journey that is required to build a company from scratch. And sometimes that pure optimism is the only thing that can get them through hard times.

However, there is one area that I’ve found that founder optimism continually hurts them and the company – communicating bad news or misses.

The initial optimistic founder reaction often to a miss or bad news is “Hey, I can fix this and make even better than before.” In all likelihood, the founder probably can do this and great founders do this continually, but sometimes it will take longer than you think and sometimes it might not get fixed.

And while we at Range Ventures love founders that can put the world on their shoulders, I’ve learned from making this mistake many times, that the best course of action is to get in front of bad news/misses and enlist others to help as quickly as possible.

Here’s a situation: a company misses revenue targets materially two months in a row from a new product line that is not going to plan.  The founder in their optimistic founder heart believes it will all be fixed before the next board meeting.

Scenario 1: The founder communicates nothing, works crazy hard on their own and the miracle happens.  Everything is back on track by the board meeting.

Scenario 2: The founder communicates nothing, works crazy hard on their own and the miracle DOES NOT happen. The revenue miss continues/gets larger.

Scenario 3: The founder communicates early to investors/employees, aligns expectations and brings everyone together to help solve the problem. Everything is back on track by the board meeting.

Scenario 4: The founder communicates early to investors/employees, aligns expectations and brings everyone together to help solve the problem. Everything IS NOT back on by the board meeting.

On the happy path (scenario’s 1 & 3) company performance is equal, but if the founder delays sharing the bad news they will be more stressed/ burned out and will missed a key opportunity by not enlisting the help of others early to built trust.

On the un-happy path (scenarios 2 & 4) company performance is also equal (equally bad in this case) but if they chose not to share the bad news they’ve both been alone/isolated during an incredibly hard time and by waiting to reveal the miss for months have destroyed trust with others.

The best outcomes are scenarios 3&4 and while you can’t always control the business outcome you can control what scenario you end up in.

Good investors and seasoned employees know that even at the best companies nothing goes up and to the right forever an inevitability there will be stumbles (or even falls) along the way – it’s part of building.

Go early to them with bad news and if you have the right people on your team the first thing you will hear is “How Can I Help?”

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