Shit’s going down, we all know it. That’s why we wrote this guide to help!
It’s no secret that we’re going into a recession. And while it may not be affecting your business yet, it’s only a matter of time before it does. That’s why it’s important to take steps now to Recession Proof Your Business. We’ve written about the changes you can make to your agency to help protect it from the economic downturn (aka the potential Cashmageddon).
Looking at things like making changes to client reporting, sales focuses and staff training, as well as operational areas you need to consider. So whether you’re just starting out in business or you’ve been around for a while, read on for tips on how to make your agency as recession proof as possible!
1 – Strategy
- Build a strategy if you don’t have one (guide here)
- Review and adjust what you have in place
- Make it measurable, please make it measurable
- Communicate the plan to your people, they need direction too
If you don’t already have a strategy for your agency, get one!
A plan helps guide you and your team through what would otherwise be distracting or cause unfocused activity. If you know where you are going, the route is more clear, if the route is more clear, then having to take a slight detour because of an external situation doesn’t cause harm to the business. If anything, having a clear, and clearly communicated plan in your agency helps to keep people on-track and focused, even if things happen around them. Check out our strategy guide here for the basics, ask for some help if you need it!
Don’t panic that your strategy isn’t moving forward! Adjust!
Recessionary periods are a time to get scrappy, be entrepreneurial and save money. This will help you stay afloat whilst others around you are struggling. You need to have a clear understanding on what you want your business to achieve and how it will get there. This means having measurable goals in place so you can track progress and make changes where necessary. You might have worked hard on a strategy, it may have been working out well until recently but things are starting to look like that may not continue. What is important is that you don’t throw the plan in the bin, adjust it to fit the new situation.
It’s not a strategy if you can’t measure it!
Your strategy should have measurable goals so you can track progress and make changes where necessary. If you can’t measure it, how do you know if it’s working? This is important in good times and bad, but especially during a recession when things are more uncertain. Keep an eye on your metrics and review them regularly to see how things are going. If you need to make changes, do so quickly and efficiently. Look at the leading measures of success as more important indicators than the lagging ones. For example, monthly Client Churn rate as a ratio of New Closed Sales is leading indicator of potential future cash flow issues.
2 – Finance
- Keep plenty of cash to hand for running the agency
- Review where you’re spending your money and be smart, don’t just cut costs
- Get a GREAT accountant who will produce management accounts for you
- Price properly
- Make it easy to get the clients money
Make sure you have a solid understanding of your financial situation.
Knowing the numbers means that you can make more informed decisions about where to allocate resources, against your strategy or when external elements change. Do you have management accounts? Are you forecasting cash flow?
Financial Management Accounts
Having management accounts on a very regular basis (at least monthly) will help you understand the current financial situation of your agency and give you insights into potential problems that could occur in the future. This will then enable you to make decisions which protect your business, rather than putting it at risk. If you don’t have these in place, now is the time to get them! Your accountant, or an OMG Agency Financial Resources, can help here.
Forecasting Your Cash Flow
In any business, but particularly in an agency, cash is king. So it’s important to have a good understanding of your current cash position and what might happen in the future. This means forecasting your cash flow on a regular basis. This will help you identify any potential shortfalls and take steps to avoid them. It will also help you make the most of any surplus cash you have, by investing it in things which will help grow your business.
Lights Out Money
What we call “Lights Out” money is essentially a minimum amount of Cash at Hand within the agency to ensure all bills are paid, including salaries for a period of time. Imagine an unlikely situation where all clients leave at the same time, and you’ve lost all income, how long until the lights go out? Retaining at least 3-months of “Lights Out” money means you have time to find more clients as well as help your staff. If things still don’t improve, at worst you can dissolve the business having paid all your bills rather than declare bankruptcy, which impacts many other future opportunities.
And finally, don’t forget to review your external suppliers. Are you getting the best value for money? Are there any areas where you can negotiate a better deal? Sometimes there is a $10 monthly spend on a tool that creeps into the stack and isn’t used anymore. Sometimes, especially in larger but not well operationalised agencies, there are lots of accidental external spends that sneak in by people being a bit lazy or forgetting they bought a tool, and someone else then also buys it. Get your P & L report out, go through it line-by-line and supplier-by-supplier and ask “can we afford not to spend this” and “is there a cheaper, similar, alternative” or “can we negotiate a lower fee”. It’ll shock you how much you can save in a year by doing this!
Get clients on a Direct Debit
There are two super good reasons to get a client on a Direct Debit. Firstly, it means you’re less likely to be spending time chasing invoices. This prevents wasted time and also causing friction with the client when you have to chase (which may increase churn). Secondly, if things aren’t going so well, from their perspective, they’ll cancel their Direct Debit before they email you. This will give you a heads up so that you can look into where the points of friction might be before you reach out to the client.
Pricing is tricky but important
It’s important to get your pricing right, based on economic factors externally but also internal factors connected to the ability to deliver with a profit. Below are some things to consider when thinking about your pricing strategy answer them all in full and it will help you pick the right price points:
- What does the competition charge?
- What are our overheads? (Staff, Tools)
- What is our desired profit margin?
- How much does it cost to deliver the product/service?
- Are we using any tools or technology which have a monthly subscription fee?
- Are there any other costs we need to consider? (HR, Office)
- How much time will it take to deliver the product/service? (People, Utilisation)
- What is the perceived value of the product/service to the client?
- What are our clients willing to pay?
You shouldn’t try competing on price as it often ends up as a race to the bottom. Instead, for us on competing on results and value. Focus on proving you are experts, with the expertise that warrants the fees you’re looking to charge.
3 – Marketing
- Don’t stop! Stupid people cut marketing in a recession
- Focus on things you can prove work
- Focus on things you know you can deliver best
- Get everyone in the business on marketing the business
Take a close look at your marketing efforts and see where you can make changes. This may mean reducing your overall spend but making sure that the spend you do have is targeted and effective. Cutting marketing is the fools approach to tackling a recession. Focusing spend on the right areas is the smart approach to tackling a recession.
How do you market in a recession?
It’s not easy! But there are things you can do to make sure your marketing is as effective as possible.
- First, take a close look at your target market and make sure you understand them. Who are they? What do they want/need? How will your product or service help them?
- Second, make sure your marketing efforts are targeted. Trying to appeal to everyone is a sure-fire way to fail. Focus your efforts on those who are most likely to buy from you.
- Third, make sure your marketing is effective. This means having measurable goals and objectives so you can track progress and make changes where necessary. If you can’t measure it, how do you know it’s working?
- Finally, make sure you have a plan. Having a plan gives you something to work towards and helps to keep you focused. Trying to wing it is likely to result in wasted time and money.
Focus your marketing on what will resonate with the audience
The audience’s needs will not have changed, what will have changed is how they perceive the needs and their allocation of budgets. It’s often the case that companies pull back on marketing in a recession, it’s part of the business psychology unfortunately. What is clear though is that marketing in a recession is usually still a good thing, just done right.
Henry Ford said “Stopping advertising to save money is like stopping your watch to save time.” and Angela Ahrendts the CEO of Burberry said “Never waste a good recession”. This is the kind of thing you as the agency leader need to remember as much as the client. If everyone around you cut back, and you keep going or increase budgets, then you’re going to win the audience in the long term. Focus your marketing on what the audience need to hear, focus on long-term wins and investing in the future rather than quick wins and risky tactics.
What are the most effective marketing channels during a recession?
There is no easy answer here as it will depend on your target market and what you are trying to achieve. However, some channels which tend to be effective during a recession include PR, SEO and email marketing. Our guide on how to get more Digital Agency clients will be a big help here. The real answer is to look at which channels (on and offline) your audience live on. Where they are, is where you should be and the application of your resources should match their thoughts at the time… Marketing shouldn’t be too salesy, especially when the first thing a prospective client thinks of is the budget. Marketing should sell the idea, sell the result and scratch the itch!
Marketing in a Recession – Summary
In summary, when marketing in a recession you should:
- Take a close look at your target market and make sure you understand them.
- Make sure your marketing efforts are targeted. Don’t do it if you can’t be sure your audience will see it.
- Make sure your marketing is effective. Stop what you can see is not working!
- Make sure you have a plan, or don’t commit resources to it.
4 – Sales
- Make sure what you’re selling is simple to understand
- Sell on outcomes, not fluffy deliverables
- Make it easy to get the client to sign
- Read this other post on getting more clients
Review your sales process and see where you can make improvements. This may mean changing your focus to target new markets or segments. It could also mean changing the way you sell, or the products/services you sell. Whatever it is, make sure your sales team are on board and understand the changes.
Remember, you’re selling the invisible!
Selling a service is like selling something invisible. You’re selling the promise of a future result based on delivering things which are often not fully understood. If you were selling a computer, there is a physical product, the customer doesn’t need to understand how it works. You’re selling something intangible and asking for the money for it now. Back up your invisible with as many case studies, testimonials and evidences as possible. This book is an oldie but a goodie in that regard.
Make the sale easy!
You need to remove all reasonable barriers to the sale, otherwise you make it harder to get the real YES and ink on the contract from the client. Check out our guide on that. No long contracts, reduce the pitch process from 3 meetings and 6 presentations to something less slow. Make the sale results focused and show real or projected ROI figures, even if they are forecasts. Numbers make selling a service easier.
Remember that people buy from people.
In a recession, people are more likely to do business with someone they know, like and trust. So make sure you and your team come across as friendly and trustworthy! You need to make sure that you’ve got a credible presence online as well as presenting the same attitude throughout and following the sales process. If you’re trustworthy, and you’ve done what you promised in the past, then current and past clients will have no concern with recommending you or being reached out to by a buyer.
Do you have a CRM system?
If not, now is a good time to invest in one. A CRM system will help you to manage your sales process more effectively and help you to track progress. It will keep you on track and make sure you don’t hold things up. From a long-term perspective, the sales CRM can also support your future marketing efforts in both identifying and reaching new audiences.
Qualify, qualify and qualify!
If you don’t properly qualify your leads before using resources on selling to them you’ll be wasting time and money. You need to make sure that your leads are qualified against certain criteria, for example:
- Are they in the right budget bracket?
- Do they have an immediate requirement?
- Is the decision maker easily identifiable and contactable?
- Do they have a preference for the type of service you offer?
Not properly qualifying may mean you miss a potentially good client whilst spending time with one that isn’t, or selling something to someone who churns early and leaves you with a cost.
Collaborate with other agencies… it’s not a bad thing.
An unqualified lead for you may be a qualified lead for someone else. Speak to your peers about their qualification criteria and make a basic commercial agreement with them to refer prospects you don’t want to them for a small fee. Make it reciprocal and make a few agreements and you’ll get the leads they don’t want, but fit your agency too. It’s also worth partnering with agencies that offer services your clients will need and you don’t provide. You shouldn’t try offering their services as white labeled solutions, rather support your clients by recommending a complementary service which gets you a referral fee.
5 – Operations & Systems
- Automate everything you reasonably can
- Monitor and measure the things you cant
- Have proper processes!
- Keep the pulse of the client with NPS
- Outsource non-automatable but repetitive tasks
- Reporting should be bulletproof
Smoothly running agencies lose less staff, and retain more clients. They also waste less money on inefficient tools or activities whilst getting the right results for their clients. Review your systems and processes to see where you can make efficiencies. This may mean automating certain tasks or streamlining your workflow. It’s also a good time to assess your technology and ensure you’re using the most up-to-date software. This will not only improve efficiency but can also help with reducing costs.
Automation of Processes
Consider automating or semi-automating as many processes as possible. This will help to improve efficiency and free up time for your staff to focus on more important tasks. There are a number of software solutions that can automate various tasks such as social media posting, email marketing, lead generation and appointment scheduling. There are also more ‘God Mode’ agency automations that you can use with tools like SEO Powersuite and cloud technology for tracking, auditing and reporting at a tenth of the cost of a platform like Semrush for example. Get your team to keep a list of all repetitive tasks over a month or two and then meet together to see what can or can’t be automated. Even a simple Excel Macro can speed up the sanitisation of a data export so that it can be used for a client for example. Saving 5 minutes here and there over several people, over several months is time you can use to better effect.
Consider outsourcing certain tasks or functions if it makes financial sense to do so. This could free up internal resources which can be better utilised elsewhere. Only outsource what you’re not good at or is not a high thinking based task. Not to suggest that outsourcing is for low-thought tasks, but focusing your agency on the thinking and any outsourcing on the doing is likely to keep your output consistent and result in better outcomes for the client.
Processes keep things consistent and to a standard that generates the results that clients expect. If there’s no process in place, this is an area that needs attention. Clients come to agencies for thinking and results, if your agency can be more consistent with both, you’ll have happier clients that stay longer. Ensure that your processes are measurable and you can track their progress. This is something you ought to have nailed down in any agency, even more important during a recession where any mistake or missed opportunity is a potential churned client or overspend you can ill-afford.
NPS is still a thing in a recession
Running regular NPS surveys for clients is a great way to get under the hood of the perception of your agency from clients. It helps you to make changes that may have been a blind spot, or you were unaware of. Furthermore, it’s a good way to keep clients happy and engaged with your agency. If they feel like their voice is being heard, they are more likely to stay with you during tough times.
Make your reporting bulletproof.
Take a close look at your client reports and see where you can make improvements. This is a great way to identify areas of your business that need attention and make sure that you are providing the best possible service to your clients. Think about what will show them that your current efforts are likely to lead to the results they are looking for. Make those leading measures obvious and include the right level of insight, both in quantity and in their language! Answer their questions in the report, before they even ask them. This helps to show that you’re doing that ‘invisible’ thing you sold them and helps them feel comfortable with paying the next bill!
Ensure you keep up your regularly planned meetings and calls with your clients, keeping in contact keeps them from assuming things that may not be the case. Leaving them to imagine their own interpretation of a report or data they look at is a sure fire way to creat conflict that may end up with you churning a client. If a client doesn’t want their scheduled call or meeting to discuss activities and results, record a screen share video (like a Loom recording) where you can interpret the results in a concise way as well as remind them of any actions outstanding on their side.
6 – People & Culture
- Like marketing, cutting training and development in a recession is foolish
- Look after your people, they are humans too
- Review your culture and outward tone of voice if the situation needs it
- NPS your team too
Don’t neglect staff training and development.
Make sure your team is up to date on the latest industry trends and changes. This will help them be more effective in their roles and better equipped to deal with clients. Things still develop in a recession, they don’t stop changing. Arguably, not keeping up with people development during a recession will put your team on the back foot in the long-run. Yes the good ones will work on their own self development, but managing a programme of growth is what helps keep things consistent.
HR is also still a thing! Look after the people!
HR is often something only thought of in a hire and fire perspective, which it is for in many cases. It’s also the toolset you use to keep an eye on the wellbeing of your team members. Taking your eye off of the ball here may lose you a great member of staff because they aren’t being looked after, or you missed opportunities in key periodical reviews to support them. Digital Agencies are essentially people businesses, if you don’t look out for the people that deliver your services to the people who receive them, one side of the people equation will fall down. And that will cost you!
Align the Company Culture to the times.
Review your company culture and make sure it is aligned with your business goals. This may mean making changes to your values or the way you operate.
Some things to consider:
- What are your core values? Have they changed in light of the current situation?
- What makes you unique? Is this the same as it was before?
- What drives you and your team to get out of bed in the morning?
Ensuring that your company culture fits the realities that people face is something that needs to be checked against. If it doesn’t fit properly, it may need adjusting. An adjustment to the culture slightly may keep you from losing staff, or clients.
NPS for your team…really?
Yes really! Running regular staff NPS surveys help you understand how your team are feeling, what their motivations are and helps identify any issues early. Just like you do with your clients, make sure you take action on the feedback given! People need to feel heard, and valued! The best way to operationalise this is through NPS and then clear and concise communication of the results, with changes mapped to the findings. If people see that you’re listening and are able to plan actions, they’re likely to ride out whatever is bothering them. It may be that you identify a need to explain to them why you are not able to spend on things so that they don’t assume you’re being miserly.
Now is the time to get creative with your strategy and make sure you’re doing everything you can to stay ahead of the curve and keep your business afloat. By making some small changes in the way you operate, you can ensure that your digital agency is prepared for whatever comes next.
Recession, downturn, depression – whatever you want to call it. It’s coming and there’s not a lot we can do about it. As the leader of a digital agency, it’s your responsibility to make sure that your business is as prepared as it can be.
This means making changes to the way you work, both in terms of the services you offer and the way you operate. It’s important to be proactive and make these changes now, before the recession really hits.