How to recover from the loss of a project?

If the client took you project back without cause, there should have been a buy out clause for you. If you had no contract or your contact didn't cover this, you should probably watch Mike Monteiro's talk about setting up good contracts.

On the other side, you have 25 people who know people who might need things done. Rather than them sit idle, you could have them reaching out to bring in new business. If you are super rich and can afford 25 people with no work to do, start an open source/creative commons project to build reputation and a portfolio.

Worried? You should be more than worried.

I was in this situation once, and it hurt.And you need to be aware that you are now on a cash-flow trajectory that is vertical straight into the ground, and then keeps going.

You need to figure out a few things. I am assuming you have no other income, or not enough anyway.

1. Figure out how much you have earned or are going to earn. Be conservative. Only count agreed work in hand.
2. Figure out what your outgoings are. From personal experience you may get a few shocks. $4,000 dollars a month on phones is nothing with 20 staff working away and earning. It is hell of a lot in an empty office with you and your empty pockets. Track down your expenses and get on top of them.
3. Draw a line. This will show you D-day - the day you have $0 in the bank. You need to do something before this happens.

What you then do is up to you and your particular circumstances.

A few things we did: 1. Set up a separate bank account for new money, so your bank doesn't decide to shut you down and use your cash to pay of debts. 2. We stripped down our staff to a few select individuals who were critical to our future prospects. In that round we went from 20 to 5. It hurt, but it bought us time. 3. When the time comes to shut the doors, shut them and walk away. You will feel better one day, and your staff will all find new jobs (really). 4. Pay off your debts.

Good luck, and I hope it works out better for you than it did for me.

First, you need to understand your cost and cash positions.

How much are the people costing and how long can you afford to keep them?

This might be the time to be incredibly aggressive and try some ambitious unsolicited proposals with new prospects "we'll do X project with Y benefits for you - if you like it, you'll pay us $Z, and if you don't like it, don't pay us". Pick areas where you know your team is strong and can deliver value.

In other words take the risk off the table for the prospect, quickly create some value, and see what happens!