With US financial markets taking a frequently disconcerting roller-coaster ride, and global markets exhibiting shaky indicators, a long-predicted recession could be around the corner. Now is a good time to take stock of your agency’s position and start behaving like a recession is inevitable… because sooner or later, a recession will arrive.
Since the Great Recession, most smaller agencies have become leaner and more careful about financial management. But that means we have a lot less leeway to reduce costs should a recession occur. Following are a few tips to help you clear the decks for battles to come.
Stick to your business plan. Yes, you may have to make some adjustments to address short-term problems, but keep your eye on long-term goals. Continue to make decisions based on your plan, and avoid reacting in panic mode to the pressures of immediate circumstances.
Keep an eye on your financial statements. To make adjustments or needed economies, you must have a clear idea of your current financial standing.
Watch payroll and overhead against AGI. Know the ratios for a healthy agency. Watch liabilities and debt carefully. You can fend off disaster more easily if your agency is already operating within sensible standards.
Keep an eye on clients’ financial status, too. Discreetly inquire into client credit ratings and stay attuned to market rankings for client companies. Watch for slowdowns in their paying agency invoices, and be prepared to have a discussion about collection times. Develop some discounting strategies to encourage timely payment so you can offer those if clients start to stretch out payments.
Proactively recommend ideas to clients. Don’t wait for them to assign you a project. As budgets tighten, marketing may become the first casualty. Stay relevant—and valuable—by offering ideas that are cost-effective and results-focused.
If you must cut payroll, think about alternatives to termination. You may be able to hang onto key personnel if you reduce hours rather than let an employee go. But if it is necessary to make cuts, make them and get them over with.
Make sure you have a cash reserve in case of a financial crisis. Many financial advisors recommend ignoring the market news and focusing on building savings. Start now—the markets are rattled given the US/China trade negotiations and other unsigned trade agreements. At the same time, U.S. stocks are trading at all-time highs. Make hay while the sun shines, but build savings as well.
Keep pursuing and pitching new business.You must have new accounts in the pipeline in case current clients roll up the sidewalks.
Watch employee morale. It does not hurt to have a company meeting and reassure your team that you are watching the markets and keeping tabs on client business. Ask people to help by keeping their eyes open for potential new business referrals, and welcome suggestions for small economies.
Economic downturns are no fun, especially for smaller businesses. Smarter, sharp-eyed management can protect your agency from disaster, and help you stay strong through a downturn.