Well, we’re in weird times right now aren’t we? I’m only 35 so I wasn’t really paying attention to the broader world during the economic crash in 2000/2001, didn’t really think about SARS when it was ongoing, and I had just started my first professional job 3 weeks before the 2008 recession began.
Interestingly, that company about doubled in size during that recession and I learned a few things.
Right now, with the COVID-19 virus spreading and the oil war going on in the Middle East, we seem to be in a perfect storm of things going on that could go either way. It might all recover quickly, and it might get a lot worse. I’m no predictor of the future, but I do like to be prepared.
And right now, my suspicion is that it’s not going to recover quickly.
So with that in mind, I have a few thoughts for you about what to do to make sure your business survives and maybe even thrives in a bear market where fear runs rampant across businesses.
Note: this post is primarily written for service business owners, but most of it can apply to anyone really.
“Be fearful when others are greedy and greedy when others are fearful.”
First, I am a big fan of Warren Buffett’s “Be fearful when others are greedy and greedy when others are fearful.” I don’t that I’d use the word greedy the second time (though the quote wouldn’t work as well if it were a different word), but I’d be very happy using “courageous” or “strategic” as I think it conveys the same message.
So right now, in your service business, what would I recommend you do to make sure you survive and maybe even thrive?
There are four areas I’d pay attention to right now:
- Protect your cashflow
- Tighten up your sales processes
- Encourage clients to double down when there is opportunity
- Add more value
Protect your cashflow
First, protect your own cashflow. The ANA (Association of National Advertisers) recently (here’s a Dropbox link to the full PDF) released a study showing that “37 percent of respondents report extending payment terms and 18 percent report shortening terms for a list of marketing services covering agency fees, research, media, production, and talent payments. Meanwhile, 91 percent report keeping payment terms the same.” They go on to say that “Those services noted most for extended payment terms are agency fees, research, and production.”
I don’t think this is major cause for concern, but it is something to keep an eye on if the economic adjustments we are seeing right now continue. If you do not have a clause in your contracts about clients ending early, talk to your lawyer about implementing one ASAP.
Part of protecting your cashflow is retention of clients also, so I recommend that you make sure you speak with all of your clients in the next week so that they know you’re there, you’re doing work for them, and how their numbers are looking.
And if you haven’t been reporting to them and thus showing them the business value of your work, it’s time to do that.
Tighten up your sales and client/customer acquisition process
Second, tighten up your own sales process. In speaking with firms over the last week or so (as I usually do the first half of each month), most are not yet seeing a decrease in leads or projects closing. We’re also not seeing it on Credo, but I’m prepared for it.
If you’re relying on a big influx of leads so you close enough, it’s probably time to tighten up that sales process.
Double down on opportunity
Third, be proactive with your clients. If competitors stop buying ads or producing content and your client has been doing both and has potential to catch up or build a moat, then you’ll be doing well to encourage them to double down in those areas that are working for them.
One example of this would be if you’re in a space where your well-funded competitors have been paying a lot of dollars to be listed at the top of a list of providers on a site like G2 or Capterra. If that competitor tightens up their budgets, you might be able to get that same spot for a lot cheaper if the platform is trying to keep revenue going.
Greedy when others are fearful.
Add additional value
Fourth, try to find new ways to add additional value. This doesn’t even have to be new services that you charge for, but think back through (or pay attention to on your calls) the things your clients are asking about that you don’t have a good answer for.
If it’s a fit for your business, then consider layering it in.
This does map back well to retention, but also adds even more value to your services which means that once things turn back around (if things do indeed tighten up) you’ll be able to charge more for your services because of the value you now bring.
In fact, if the economic downturn doesn’t materialize then this will overall be better for your business anyways.