5 ways to deal with a business crisis, from the CEO of a company that became illegal overnight

caption
Jessica Rovello, CEO and cofounder of Arkadium.
source
Arkadium

There are plenty of risks to consider when you start a business. You may hire too few or too many staff, your profits might not be what you expected, and the biggest worry is that your idea just won’t take off.

Entrepreneurs calculate these risks and they make decisions that mean they will be able to deal with things if they go wrong. That’s what determines whether a business is ultimately successful.

However, one thing many people probably don’t plan for is a Russian invasion.

Jessica Rovello, the CEO and cofounder of Arkadium found out just what happens in this situation when she and her husband set up their company in Crimea.

Arkadium is a digital company that works with publishers using a program that reads and understands a page of content. From this, it creates infographics for readers to interact with as they are reading a story. The idea is that engaging infographics keep readers on a page for longer, tackling a growing problem in the digital publication industry – readers rarely get to the bottom of an article.

‘When we moved there, we’d never heard of it before’

In 2000, Rovello and her husband knew they had a good idea, but they couldn’t afford to hire developers. So, they moved to southern Ukraine where an American businessman agreed to be outsourced by them. When he moved back to the US, Rovello took on six of his employees, and from there the business grew to about 100 staff over seven years.

Rovello told Business Insider that she and her husband made a second home for themselves in southern Ukraine, in a city called Simferopol.

“When we moved there, we’d never heard of it before. Nobody we knew had heard of it before,” she said. “We’d be lucky if people knew Ukraine.”

However, once 2014 came around, the region would have quite a name for itself. First, the riots started in Kiev, and then the president of the country was deposed. Rovello and her staff were watching from afar, and making contingency plans just in case the riots spread to the south.

They thought the chance was remote, but they wanted to be prepared just in case.

Russian invasion

caption
A woman walks past a Russian military personnel carrier outside a Ukrainian military base on March 18, 2014 in Simferopol, Ukraine.
source
Dan Kitwood / Getty

“A couple of months later…these tanks started rolling through the streets, in this little city of ours that nobody has ever heard of before,” Rovello said. “These armed unmarked men started taking over the buildings, the government buildings and everything. Of course we found out a few months later that this was the Russian army and this was the Russians annexing the region.”

Over the course of 2014, the region became Russian territory, and Arkadium had to deal with the aftermath. The time zone changed, the currency changed, and all of the company registrations that were Ukrainian had to become Russian. Rovello could no longer get access to the country, so everything had to be decided over email, instant message, or video conference.

“If you’ve ever done business in Eastern Europe you know that changing anything is a really long, arduous process with a lot of red tape,” Rovello said. “Not only did that have to happen for our company but it had to happen for all our employees. They had to get Russian working papers and many had to get Russian citizenship or apply for it.”

‘All of a sudden it was just instantly illegal’

When things started to look like they were settling down, there was another shock to deal with. In December, the American government sanctioned the region, which essentially made it illegal for Rovello to have any business there at all.

“We went through about six months of changing everything over, then all of a sudden it was just instantly illegal,” she said.

What’s worse is there was no official notification – Rovello found this out via a Google news alert. Suddenly, she couldn’t speak to her lawyers, she couldn’t wire any money, and she couldn’t get any code transferred, unless she wanted to face jail time and a quarter of a million dollar fine.

Christmas bonuses couldn’t be paid, the rent couldn’t be paid, and everyone in the US government had left for the Christmas and New Year holidays, meaning there was nobody to help.

“What we basically decided was, we either have to shut down our business, completely, or we’re going to have to make some radical changes to figure out how we can survive, and figure out how we can save as many people’s jobs as possible,” Rovello said.

Out of the 100 total employees, 50 said they were willing to move to another city Rovello had never heard of – Krasnodar in Russia, the closest city to where Arkadium had been which wasn’t under sanctions.

“Over the span of two weeks we shut everything down, moved everyone and their families and all their belongings to this new city, and opened up an office,” Rovello said. “Ironically, we became this Russian company. So we’d gone through basically six months of trying to become a Russian company, and we stayed a Russian company because that was what was easiest for us to do at the time.”

Just over two and a half years later, Arkadium now employs 75 people, and 2016 saw its highest revenue it has ever had as a business.

So what did Rovello learn when she was knocked down in the most unimaginable way possible?

1. There’s no playbook for when things go wrong.

When Rovello started off in business, she had people she looked up to, like everyone does. However, she began to realise that, much like how a child assumes their parents have everything figured out, she saw her mentors that way too. However, when things started going really downhill, she went to the titans of business for advice, and they said: “I don’t know what to tell you.” “There’s no playbook for something like this,” Rovello said. “There was a little bit of realisation of coming into your power and realising that sometimes you have to be the person to figure things like that out. You can kind of come out the other side and there’s definitely power in that.”

2. Don’t take anything for granted.

Rovello never saw the Russian takeover coming. She says it reminded her that there’s a lot happening in the world that’s dramatically affecting businesses. There’s a huge category of displaced people, and it wasn’t until she saw her employees in that position that it started to feel real. “Unfortunately it’s a sign of the times that we live in,” she said. “We hadn’t opened an office in Iran, or Libya, so you wouldn’t expect that we would be in a region that was ripe for being sanctioned by the American government. It was not something that was on our radar.”

3. Treat your colleagues well.

Rovello says from the beginning the business was run fairly atypically – the CEOs were married, and still own the majority of it over 16 years in. She says they always put the people before the business, and lead from a place of kindness. The fact 50 employees stuck around in the toughest of times shows that there’s a lot of merit to that. “If we hadn’t built up those relationships, if we hadn’t spent the time there… if we hadn’t treated our employees in Russia entirely equally to our employees in New York, and treated them like an outshoring office, then we wouldn’t have had people who were so dedicated to helping the business get back on its feet,” Rovello said. “It’s not easy to pick up and move yourself and be away from your family, or move your entire family, to a place where you’ve never been before. I mean, who does that?”

4. Put your setbacks in perspective.

When a business is facing challenges, it is often within a sphere of control. You can decide how to respond to competitors, or how you’re going to grow a market share. However, becoming illegal overnight was certainly outside of that sphere. “There was nothing we did that caused this, nothing we could do to influence this, or to to change this, so it does help in that when these quasi-big things happen in the business now, we’re able to more easily put it in perspective of the fact we control our destiny here,” Rovello said. “We’ve been in situations before where we didn’t, so we’re at an advantage now where at least we can.”

5. You can’t have a “give up” attitude.

Rovello says you get knocked down so many times as an entrepreneur, it would be impossible to carry on if you weren’t resilient.

“This was definitely the biggest knock down we ever had,” she said. “Although we didn’t know why it was happening, and we suddenly had a lot of sleepless nights, and there was a lot of tears, I think underneath it all we knew, because this is how we tend to live our lives, that everything happens for some reason, whether we know it in the moment or not.”

She added: “This real tragedy for the business was very heartening for us, because everybody also showed their true colours. They really showed that we as a team could kind of come together and get through it. Especially if you think of the animosity, especially at a political level between the American government and the Russian government. The fact [the employees] can ignore all of that and just work together for the good of the business and each other, I find to be really inspiring.”