The Covid-19 crisis busted the budgets and plans of most PR and marketing agencies. While a few are doing better, many are doing worse. Either way, it’s not likely that things are shaping up the way you planned them for 2020.
In this webinar, Chip Griffin looks at what you should be focused on right now when it comes to budgeting and planning. How should you forecast revenue and what should you be doing about your expenses?
There’s a lot of uncertainty, but Chip shows you how to break things down into manageable chunks to ensure you get through the immediate challenges in a position to thrive in the new normal that is yet to come.
- Webinar slides (PDF)
- Coronavirus Financial Crisis: How is it Impacting the PR Profession? (Gould + Partners)
This is a computer-generated transcript. Please listen to the audio to confirm accuracy.
Hello, and welcome to the agency budgeting and planning amid the crisis webinar, I am your host Chip Griffin. And we’re going to talk about all sorts of issues related to setting up your agency for success in the future by revisiting your budgeting, your strategic planning, and all those other things. Before we dive into the meat of today’s webinar, I do want to take a few moments for housekeeping. There will be a recording and the deck will be shared with you after this so you don’t need to take detailed notes. It’ll all be taken care of by being able to rewatch the video if you want. In addition, if you have questions, the question and answer function at the bottom of your screen, says q&a that’s where you click on it and I will take those questions at the end of the presentation. If you have questions afterwards or even during it that you’d like me to answer privately, feel free to email Chip at Agency Leadership Advisors. Always happy to be helpful in that way. And then
The hashtag. If you happen to be on social media talking about this webinar, use the hashtag agency leadership. And of course, you can get lots of additional resources at agency leadership.
Couple of upcoming webinars to let you know about the first one is Next week, we’ll be doing one on business development during the crisis. So we’ll look at the tone and tenor of your messaging, what tactics are working in which ones you should be thinking about adopting, and just all the issues related to finding new revenue opportunities for your agency business. And then the week after next we will be having a special guest, Patrick Rogen, who is a human resources consultant has worked with a lot of agencies and he’ll be talking about some of the employee and HR issues that you need to be thinking about at this time. Everything from new rules and regulations to how do you handle staff internal communications, working with the paycheck Protection Program, and also
sorts of stuff like that. So feel free to register for those just go to agency leadership comm slash webinars. And with that, hopefully we’ve had given people a chance to log in at the top of the hour. So we’ll move on and into the actual substance of today’s broadcast. And if you think about it, right now, a lot of you are probably worried you’re probably looking at your business, sort of like this image, you’re seeing your business on fire to some degree or another. And regardless of whether you’re one of those agencies that has lost revenue, or someone who perhaps, is thriving because you’re in crisis communications, you probably feel a bit like this. At the end of the day, you’re stressed out, you feel the pressure, you’re not sure what’s coming next, you’re having to deal with a variety of family and health concerns, while at the same time trying to run your business and trying to work with your employees. And so you don’t really know where to turn next and the budget that you put together.
Last fall, it just doesn’t make any sense anymore the strategic vision that you had, it doesn’t make any sense. So I think the first thing that everyone needs to do is to take a deep breath. And if it makes you feel better, set the actual budget or strategic plan on fire safely. Of course, if you do it, I want to make sure that you have one of these, because I don’t want to be responsible for even more problems during this current crisis. So, but the bottom line is, if you’ve got a budget, which I hope you do, if you have a strategic plan, which I hope you do, it really just It doesn’t make sense anymore. The assumptions that you made at the start of the year aren’t panning out in all likelihood. And even if you’re one of these agencies that has done a good job of thinking about the possibility of a looming recession, what we’re dealing with now with this pandemic is not likely something that you specifically included in your business planning. And so as a result, you need to think about very carefully, what it is that you want to do.
With your business going forward, but I suggest that the way that you do this is to break it down into manageable chunks. Don’t sit down right now and try to come up with a brand new budget for 2020 or start looking out 12 1836 months, don’t put that kind of pressure on yourself, it’s not worth it. You need to start looking at manageable chunks. So by manageable chunks, what I’m talking about are 90 day plans. And because there’s so much uncertainty right now, as I sit here today talking to you, we don’t know when our individual states are going to reopen. We don’t know what reopening is going to look like. We don’t know how people are going to respond. Even once they’re allowed to do things like go out to the movies or restaurants. Are they going to start showing up right away? Or is there going to be a confidence gap that needs to be overcome? How are our clients and potential clients going to react? Are they going to jump in with two feet and say, we’re ready to start working with you as an agency again, we don’t know. And so what you need to do
is trying to break down your planning into manageable chunks so that you can get through from one step to the next, as we continue to learn more, and these plans are going to have to be updated. So right now you want to be thinking about a plan that’s getting you through roughly the Fourth of July, maybe a little bit longer than that. And that’s something that most of us can see at least a little bit. We may know more about our own individual regions, whether it’s in the US in our states, or if we’re, if you’re one of the International attendees on this webinar, looking at what’s going on in your own country, and what the likelihood is of resuming business as usual, at least in your own offices or where you’re operating individually.
And it will give you some sense of control to be able to deal with something that is more foreseeable than say what’s going to be going on at Thanksgiving or Christmas or January 1 or whatever longer time horizon you want to use. So focus on those manageable chunks.
That should help you quite a bit in thinking things through.
And you know, as you as you think about, you know what it is that you’re doing, it’s it, you’re really sort of, you know, sprinting down the aisle of the grocery store, everything’s kind of flying by you. There are all sorts of choices. You’re not really sure which way to turn. And so you have to think about, you know, what is your plan of attack. And as you do that, I would encourage you to do two things. And they’re going to sound a little contradictory at first. But when you think about it, I think you’ll realize that it actually makes sense. And the first is to plan with pessimism. And that doesn’t mean that you ought to be you know, morose, about things and say, Oh, my God, it’s all going to hell in a handbasket, but take a pessimistic slant to your planning. Because one of the big mistakes that you can make right now is to be too optimistic about what’s likely to happen, and then put that in your plan and you really want to be conservative in your planning.
And be pleasantly surprised. But you need to have optimism and then optimism comes in how you operate, it comes in the steps that you’re taking the vision that you’re creating for your agency business. And so if you balance those out and you, you plan for the worst case, but you work towards the best case, that’s how you’re going to achieve the best results for you and for your team and for yourself.
You need to start with thinking about what it is that you need for yourself. And I know this is going to sound selfish, and some people aren’t going to react well to that. But as a business owner, you need to realize that the business exists, in large part for most of you to provide your own income. And so you need to make sure that your business is doing what it needs to do. And I’m not talking about a pie in the sky. This is what I’d like to do. This is sort of think back to George Bailey and it’s a wonderful life and he’s handing out the cash that he has available in his savings and loan in order.
To try to keep the bank solvent. And so the first person says, I want all my money and he says, look, you don’t really need it. All right now, what do you need to get through the next few weeks? And so think about it the same way, if you’re doing a 90 day plan, think about what you need to get through those 90 days. Do you have the personal cash cash cushion, to survive it yourself? Or do you need to be still taking in a positive income stream from your agency business in order to survive and Look, I know people who are listening, there’s a full range of you there are some of you who are very comfortably positioned, you’ve got a large cash stash for yourself or for your business. And there are other agencies that are living much closer to the line and maybe you are personally in your own finances as well. It doesn’t matter to me so much what your situation is as long as you’re paying attention to it, and making sure that you’re planning accounts for that, because you’re not going to do anyone any good if you’re magnifying the stress on yourself in order to simply protect the business.
So let’s start with the the planning process. And you have to start by assuming a few things, you have to try to have your own point of view on what’s going to happen. And that involves a whole mix of things. You need to look at your local conditions. So what’s going on in New Hampshire is different from what’s going on in New York is different from California is different from South Dakota. All of these places have their own circumstances. So you need to know if you’ve got an office. What’s going on there? If you work from home? If you have a virtual team, what’s going on where you and your team are? How is that impacting you? You need to know what the status of the industries that you serve are. Many of you are niched into particular industries, some are being impacted differently than others. If you’re a crisis commerce firm, as I talked about earlier, you’re going to be very busy, but you’re going to be handling that kind of crisis work. If you serve the restaurant industry, it’s going to be a very different picture for you. So you need to boil those assumptions in and say
What do you think is likely to happen? some industries are likely to come back faster, even if they’re shut down now than others. So if you’re in the cruise industry, and I know I pick on the cruise industry and a lot of my talks lately, but if you’re in the cruise industry, that’s probably going to be one of the last ones to bounce back. You know, likelihood, some of the ones that will come back sooner, are probably things like restaurants, I think there’s a lot of pent up demand to go out to eat in restaurants. But you have to judge for yourself and based on your own expert industry knowledge, what’s likely to happen with the clients that you serve? You need to think about the overall economic climate and even for those of us who, you know, may work with folks in industries who aren’t directly impacted by this. What’s the climate like? What are you know, is this going to cause businesses to be more reluctant to spend money with outside firms? Or is it going to cause them to think about, maybe I need to be more nimble so using an outsourced PR marketing firm might make more sense than having internal
That’s sort of a more of a sunk cost. So it could impact you positively or negatively depending on your outlook. And it’s something that you need to think about based on the services you provide and the industries that you serve. You need to think about the assumptions that you’re going to make around what your clients and staff are going to do, as things start to return to. I’m not going to call it normal, but whatever the new normal is, and for those of you who’ve been watching some of my videos online, I don’t think we’re in a new normal right now. I think this is the new abnormal for most of us in that we’re shut down and
essentially on house arrest, if you will. And if that’s going to change, and whether that changes next month, or in three months, or whenever it’s going to change and that’s when we start getting into some sort of a new normal. How are your clients going to react? Are they going to be jumping in with both feet? Just like prospects in your industry? Are they going to say yes or no, let’s resume the activity we were doing. What’s your staff going to do what you know?
If you open if you have an office and you open an office, are they going to come right back? Or are they going to be reluctant to maybe they can’t because they’ve got childcare issues, because schools may be closed longer than offices are. So you need to look at that you need to look at the overall family circumstances that people have, and how that may impact them on either the client side or the staff side. So you need to think about all of these assumptions that are going into your plan, because it will really cause you to make different decisions about what you think is likely to happen from a revenue and expense standpoint, what is likely to happen from a strategic standpoint. So think about those assumptions and think about how you want to incorporate that into your planning process.
Then you have to start thinking about what’s your baseline forecast? So before you can really get into planning you need to say to yourself, if everything stayed the same as it is today, what’s the likely outcome what’s likely to be my revenue over the next 90 days?
90 days rather than 90 months. Oh, that would be nice, wouldn’t it if we could predict that far out? If we if you start thinking about, you know what’s likely to happen. And so you need to look from your forecast at a few things. And you need to look at both sides of the ledger, both the revenue side and the expense side. So you start with your existing client revenue. And you look at what do you have currently on the books? What do you think is likely to be spent by those clients with you are folks who have not paused likely to consider doing so? There’s been some great research produced through some surveys by Rick Gould, Gould associates. And I’ll include a link to that in the post the follow up posts that I’ll do to this webinar, but he’s done some great research looking at PR agencies in particular, and has found that substantial numbers have already lost revenue or had clients pause. It’s similar to a survey that I did actually at the very start of this crisis. Just as the lockdowns were starting in most states.
And so we know that most people are seeing paused revenue already. I’m continuing to hear from some of my clients and folks I’m talking to about new pauses that are taking place even just this week. So just because someone hasn’t paused yet, you shouldn’t necessarily believe that, therefore certain not going to, but you need to be having those conversations with your clients to understand what their behavior is likely to be in the time ahead. You need to look at from a revenue standpoint, not just who’s booked and who’s going to stay with you, but also how is it going to impact the timing of their payments? So cash flow is going to be critical here. And so you need to be looking at things in terms of when is the money coming in and when is it going out the door? Can you slow down some of your payments out the door if you need to, in order to massager your cash flow forecast. Do you want to look at perhaps differentiating so if you’ve got independent contractors, maybe you accelerate payments to them.
build some goodwill because you know that they need it. But maybe slow down some payments to just meet your contract terms on the dot with some larger suppliers. So think about all that think about what your unavoidable expenses are the things that you just cannot get away without think about what it is from a staffing perspective that you have, what is your headcount, what’s it going to be over the next 90 days? What are the the impacts that that’s going to have? What is the the cost or the what is the amount of money that you’re expecting to get from government aid here in the United States, that’s the paycheck protection program and some of the disaster grants from SBA, or other things. That’s something you need to factor into your forecast. One critical thing to think about there is a lot of that money is coming in a lot more slowly than people would like to see. There’s reports that all of those programs in the US are oversubscribed. I just saw a note earlier today from Rick Hold on a second phase of his survey that indicates that video
Very few agencies are actually seeing any of this cash come in the door, despite the fact that a lot of them have. A lot of the government programs have talked about being speedy, and getting money into your pocket quickly. So you need to factor that in. And again, in the idea of planning with pessimism, assume that you’re going to get some of that money a bit later than you would otherwise anticipate. Because that may impact some of your decision making whether you have to look at cutting some expenses. Look at your pipeline. From a business development standpoint, when all of this came up, you hopefully had a pipeline of possible new business. Some of that for some agencies is continuing to close right now. What I’m not seeing a lot of from the agencies I’m talking to is new business that wasn’t already in the pipeline coming in and closing quickly. So if you don’t have a pipeline already, it’s going to be a lot harder to start building your revenue. But if you’ve got a pipeline, continue talking to those folks and try to guess for your forecast how much of that might actually come in the door again,
plan with pessimism. So don’t sit there and say you’re going to achieve the same closing rate that you would have otherwise, don’t assume that you’re going to come in at the same levels that you would have predicted if all this hadn’t happened, but do factor in that pipeline into your forecast for the next 90 days. And we’ve already talked about the cash flow piece. But all of this feeds into that, because it’s not just about how much you’re getting in booking over the next 90 days, that’s when it comes in. That could be really important depending on your agency’s individual circumstances.
You need to think about some some specific things that are unique to this about the reopening process. And this is particularly true for anyone who has physical offices and I know a lot of you listen, have virtual agencies, but a lot of you still have traditional offices. If you’re opening up offices, you need to think about that both strategically and financially. Because you need to look at one of the policies that you’re going to be putting in place how you’re going to handle staff coming in. Some of this will be useful.
justed by state or federal government guidelines, I’m sure. But you need to be thinking about things like probably taking temperatures of your staff maybe asking them if they or family members have been ill. Some of this, you may want to make some updates to your handbook policies. So perhaps that you have a policy similar to what a lot of schools have, which is you can’t come to work for a certain number of days if you’ve had a fever. And so you need to think about how you’re going to change your policies. But you also need to think about what are the potential impacts on costs. I think a lot of you who have offices are probably going to be having to think about more thorough, more frequent cleanings of your offices than you may have done before. There’s an expense to that. It may even be challenging to get some of those vendors to help you because a lot of them are very busy right now, understandably. And so this is something that you need to think about as you’re putting together your plans for reopening and it’s something that you’re going to need to budget for, to make sure that you have all
have the resources that you need. Maybe you need to be buying more hand sanitizer to have around the office or Clorox wipes or all of these different things. Things that you wouldn’t think about are normal circumstances but are going to be important potentially, to your planning and budgeting process going forward. You need to be thinking about all the things that are going into staffing, you need to think about how reopening is going to impact them based on their family circumstances like we talked about before. But you know, the psychological impact you really, you always need to be concerned about your team because agencies are a people business. But now more than ever, you need to be thinking about doing what you can to allay their fears and ensure that they’re being as productive as possible by supporting them, you know, in a variety of non work needs. You might want to start thinking about incorporating some financial advice and planning because a lot of families have taken substantial hits. So even if you’ve been fortunate enough to keep your staff intact through these times, perhaps
They have a spouse who was not as fortunate. And so maybe they’ve had some challenges from a financial standpoint that you want to be helpful to them with, you need to think about as you’re reopening. How do you handle childcare? Are you going to let some people work from home and other people have to come into the office? How does that all come together and you need that needs to be part of your planning process. And even if you’re in a state that may not be opening until June or later, still start thinking about that. Now, you need to think about when you reopen, how is that going to impact travel? So even though people may say, okay, it’s okay to travel Now, what’s your policy going to be? What are your clients going to want? Are your clients going to be comfortable with that? How about your staff? If you ask your staff member to travel to a meeting in New York, as soon as New York is open? Will they be comfortable doing that? You need to be respectful of that and understand that and it’s going to take you into some difficult territory that you probably typically wouldn’t go in as an employer, and frankly, things that I would do
Generally encourage you to stay away from his employer in normal times, like talking about family health situations and things like that individual
medical conditions, you’re probably going to end up veering into some of that just to make sure that you’re doing right by your employees. So think about that. And also think about talking to your professional advisors to make sure that you’re not crossing any lines. Because just because you think it’s a good idea, and it seems like the right thing to do, you may run into some local jurisdictional issues about what’s okay to talk to your employees proactively about so definitely involve professionals when it comes to some of those things. Particularly if you’re looking at updating your, your handbook policies around it.
Then you need to think about your clients. And as I said before, when you’re doing your revenue projections, how are they going to behave? What are their changes going to be as they start to think about reopening? So there’s a lot that goes into this mix of putting together your forecast, but remember, the forecast is just that the difference between a weather forecast and
Business forecast says that you have more control or leverage over your business forecast. And you really right now need to be careful to avoid the self fulfilling prophecy. And I do see some agency owners who are on this path where they’re just they’re frustrated, they’re overwhelmed. And so instead of trying to figure out what can they do to make change, they are instead finding themselves just going along for the ride. You need to be taking proactive steps. And that’s part of your budgeting and planning process to make sure that you’re steering your ship in the right direction.
And steering your ship in the right direction doesn’t mean panicking however, and so this is a few words of caution here. I’ve had a lot of clients or prospects talk to me about you know, what are some recession proof industries I can get to get into, you don’t want to seek those out. This is not the time to make wild shifts in your industry focus. There’s a big difference between pivoting which I endorse and pure wedding or spinning around
On a 360, or one ad or anything like that, you need to be smart in how you’re making adaptations to the services you’re offering and who you’re serving. But if you’ve served,
you know, restaurants now shifting over to serving the pharmaceutical industry is going to be a bit of a leap. So you want to be careful about that panicky decision that causes you to go too far. You want to be aware of over servicing and notice that I say be aware of and not be aware of. And that’s because you it may be strategically valuable to over service some clients right now. But you want to be careful that that doesn’t become the default free organization because that can cause real long term damage to your profitability and actually impair your long term relationship with those clients. So you need to be thinking about how it is that you can go about giving, you know, maybe going the extra yard or extra mile for a client but maybe
Ensure that you’re doing it intelligently that you’re doing it consciously. Particularly if you’ve lost business, if you’ve lost 1015 20% or more of your revenue or client base, you’re going to have staff that has extra time, staff members have a tendency to fill whatever free time they have available. And contrary to popular belief, most of it isn’t in playing solitaire on their computers or whatever people play these days, it’s instead about probably spending too much time working on perfecting some project for a client. So use it strategically to invest in the relationship, don’t do it accidentally, because that’s what can be damaging over the long term. You want to be careful about making Pennywise pound foolish decisions. This comes particularly on the expense side of the equation. And there’s a tendency when a firm goes through challenging times to just start slashing spending indiscriminately. And while that may get you through the short term, it may be a real problem over the long term. In particular, you
Want to make sure that you’re continuing to do things for business development, just as you’re probably telling your clients, they shouldn’t be cutting out PR and marketing services right now, if they want to rebound, you need to be careful that you don’t do the same yourself. It’s very easy to give the advice and forget to take it for your own firm.
And then finally, to avoid panicking, sleep on tough decisions. And, you know, it doesn’t necessarily have to be an overnight sleep, it can be just a walk around the block, clear your head, take some time to think there’s there’s going to be these kinds of decisions that are going to come up for you that you’re you feel like you need to make in a split second, but almost always you have more time, take the time to think them through so it becomes part of a plan. If you are careful about all of that you will be in a position where you can bend your own curve. We talked about bending the curve when it comes to the virus, bend the curve when it comes to your financial situation. Take a look at the forecast but then figure out how you can make adjustments to it. How can you curb costs
smartly, maybe you’ve got to pick it up subscriptions A lot of us do. When it comes to Software as a Service these days, maybe you can make some adjustments there. Maybe if you’ve lost some clients, you can pare back on some of these accounts. You can be having conversations with your clients to better understand what their needs are, be helpful to them be helpful to prospects, it will open up doors for you that will help you maybe not in the next three days, but perhaps in the next 30. And certainly over the next 90, it will be something that you can use and leverage to grow your business, you’ll learn a lot that will help you perhaps make adjustments to how you’re running your business. So you can find additional profit. You want to be looking for the opportunities that are out there, the whole landscape is shifting in front of us. And if we assume that we just follow a straight line path and do what we used to do, and things will recover and we’ll be fine. Maybe it will but instead you should be looking and saying Okay, you know what, what has this created as far as an opportunity what new things
Can I do anything to think about what may not be coming back as quickly? I know a lot of people are talking about events being postponed to the fall. I’m personally of the point of view that there are unlikely to be large scale events anytime in this calendar year, that could change some therapeutics pop up, or if there’s some substantial new development. But I think the likelihood is that large scale events aren’t going to happen in 2020. So how does that impact your business but what opportunity does it create at the same time, and if you’re creative, you will create those opportunities for yourself for your business that will position you not just for the next 90 days, but for years to come.
The way you’re going to do this, though, is not by acting in a vacuum. If you’re just you know, locked in your your isolation at home and trying to come up with these plans, you’re going to be in trouble. You need to talk with your employees and your independent contractors, get their opinions, get their advice, they have ideas, I guarantee it, they may be reluctant to share
At times, but now, people are being much more open. So ask them, find out what their behavior is going to be so that you can start to expand your worldview, and not just make assumptions about whether people are going to go back to the movies or restaurants, or start traveling. Find out by talking to more people. Ask your trusted friends, maybe they run businesses and other spaces. Maybe they work in other industries. The more that you can learn the more this will inform your perspective and give you ideas that you can take advantage of. You should be talking to other agency owners, we need to view one agency and another is not necessarily competitors, but view it more as Co Op petition. Particularly in times like this. I’ve seen a lot of agencies coming together, who would often be competing head to head on deals, trying to figure out how to help each other offer each other advice. So reach out, have those conversations I’ve got to tell you. Over the past few weeks, I’ve had more candid conversations with more people that I wouldn’t have expected than ever before. Taking
advantage of that, expand your knowledge, and also be helpful. You may have leads for them or tips for them, they may have some for you, if you make it a two way street, it’s going to be a productive relationship. Of course, you’ve got family that you want to be talking to. Those folks are a valuable resource. You know, whether you’re talking to your immediate family or extended family, talk to them too. And finally, talk to your professional advisors. Before you make some of these big decisions. Make sure that you’re involved in conversations with your lawyer, your accountant, your tax professionals, HR advisors, different people who can make sure that you’re doing things the right way. And if you’re tapping into all of these different resources, it will position you for success. Okay, so we’ve talked about the framework that you need to use now let’s get into the nitty gritty. So you start with the revenue side of the budget always. And the reason why you want to do this is because it will help inform some of your expense decisions, particularly in the agency world.
Have expenses that are tied in to what you’re forecasting and predicting from a revenue standpoint. So start by going client by client. Look at them very carefully. If you’re thinking about potential new business showing up, make sure that you’re identifying it specifically, particularly because we’re talking about 90 day plans here. Remember, we’re not talking about revising your 2020 budget, we’re talking about a 90 day plan right now, how do you get through that? What’s going to happen? You need to assume that there are some hiccups. So whatever you think, is likely discount that a little bit. So if you say, Okay, I’m going to keep 100% of my client revenue, maybe knock it back to 90 or 95%. And figure out, you know, what’s what’s most vulnerable. On the same thing on the pipeline side, like we talked about before, assume that your close rate and your average sale is less than it was before. You need to anticipate that your sales cycles are going to elongate. People aren’t making split second decisions right now. They really are taking time to wait and see what’s happening. But the only way that you’re going to know this is if you ask
I know a lot of you are reluctant to ask clients or prospects, what their plans are particularly clients, because you’re nervous about what the answer is. Do yourself a favor, ask them, they’re more likely than ever to be honest with you. And if you say to them, Look, you know, how are things looking for your organization? Do you cutting back in other areas? What do you think might happen with our relationship? It’s better off to know what might be coming than it is to simply sit there and guess. So don’t be afraid that you’re going to cause business to go away at this point. There’s not a lot that you’re going to do, just by asking, that’s going to cause the business to go away and instead, you’re likely to get some good intelligence that will help you put together a more accurate revenue budget.
So after you do the revenue, you need to look at the expense side. And don’t assume that expenses are fixed. Even typical things that look like they’re fixed in normal times would be like your office rent. Don’t assume that that
You can’t get some sort of a concession. Don’t assume you can’t get a concession out of a cell phone provider or a cable company. If you’ve got those services for your team, pick up the phone, I would talk to just about every vendor you’ve got. A lot of folks are having success right now in getting forgiveness, forbearance, reductions, all that kind of thing with various vendors. So there’s absolutely no harm in asking you should absolutely be having those conversations, see if you can trim some costs in different areas, or see if you can get delays and payments that will help your cash flow. If that’s important to you. You also need to be looking at your one time expenses that may be coming out here that are different from the ones that you would normally have in your budget. So in particular, I’m thinking of any short term legal and accounting. Perhaps you had to use your accountant to put together your PPP application, or perhaps you’ve had to pay severance to employees are planning perhaps to do some reductions that may require some severance payments.
Maybe you’re going to cancel some contracts that have early termination fees, but you still end up saving enough that it’s worth it. So make sure you don’t forget to include these one time expenses in your budget. Don’t forget to include those post pandemic expenses that I talked about before office cleanings and that sort of thing. Make sure that you’re setting aside time and money both for growth initiatives. Because again, you don’t want to be thinking, this is not a time to turtle, this is a time to look outward, and figure out what opportunities might exist. Both traditional business development as well as some strategic partnerships. So carve out that time and resource in your budget. And take a look, every line item, every expense, it’s worth taking a look at right now, there may be hidden things, the larger your agency is there, the more likelihood is that there is some fat in there that can be trimmed. And even if you’re doing well, even if you’re one of those crisis comms agencies that’s going gangbusters. It’s still worth going through and making sure that you’re as lean as possible.
To grow smartly, but to grow profitably into the future.
Once you’ve put together your first version of this budget, give yourself a reality check. Make sure you look at it understand what your burn rate is. In other words, what does it cost just to keep the lights on in your business, so you understand what your your core revenue number has to be just to make ends meet, make sure that you’re comfortable with what you’re projecting for profit. And you want to be taking a look at, you know, is this substantially deviating your target profit margin over the next 90 days, it may well be, but you need to understand that and it needs to be a conscious decision. If you’re going to allow that to be impacted. You need to look at what your confidence level is, your confidence level is probably going to be higher. If you’re more diversified in your clients. You don’t have you know, one or two whale clients or 20 30% or more of your revenue. If you’re if you’ve got a lot of smaller ones at this point, you’re probably going to have a more accurate prediction than if you still got some of them.
Those bigger ones that could pause business with you and cause a bigger hit. And then ask yourself the basic question. If you’re off by 10% on revenue, what would that mean? That well, that 10% number gives you a good indication as to how close to the edge you’re playing it. And it will help you understand, you know, what your flexibility is if if things go sideways in the future.
And as we’re sort of coming in towards the the end of the presentation here, before we get to questions, if you do have questions, do feel free to share those in the q&a box. I want to share a quote by Rahm Emanuel, former mayor of Chicago. But when he said this, he was actually President Obama’s chief of staff. And it’s not a it was said in a political way. But it’s not a political quote, per se. I think it’s so important for us to be thinking about this right now as business leaders. And what he said was, you never want a serious crisis to go to waste. And what I mean by that is, it’s an opportunity to do things that you think you could not before.
And at first glance, it sounds crass. But there are real opportunities here. And you can take advantage of those opportunities without taking advantage of people. And if you think about it in those terms, and you ask yourself, what did you think you couldn’t do even six months ago, that now maybe possible? What doors is? Is this crisis opening up to you that you want to factor into your strategic planning process? What are the new right now more people are spending time on these virtual events? Just like you are listening to me today? How does that impact your business? How does that level the playing field perhaps between the agencies who can pay substantial sums to send whole teams on site to meet with someone now maybe you can play in that venue at least for a period of time and get some foothold and we don’t know what the long term impacts are here. I suspect that this is going to have more lasting impact than
2001 or 2008, I navigated businesses through both of them. And both times, I remember lots of people in the midst of the crisis egg. This is going to change everything, particularly in 2001. People said this, life is never going to be the same. And yet it started to come back to pretty much the same. And if we look at post 911, or post 2008, most things have come pretty close to the way they were before. I’m not so certain that this is going to do that in all aspects. I think some of that will come back. I think the economy will come back. How fast is it a V? I don’t know. Is it is it going to be a more gradual return to normal or is it could be some hiccups? I think that’s really unknowable. I don’t think the experts know.
But if you think about it, I think that in some ways, this is a little bit closer to the Great Depression. And I remember growing up with a lot of
senior citizens who had been through the Great Depression and a lot of them still seem to have the scars even you 50 years.
I think there’s going to be some of that scarring. Now, whether that comes down to you know, people are washing their hands more, or just handshakes or, you know, maybe there is less travel in the near term. How long does that last? I don’t know. But the bottom line is there are opportunities out there for you need to be looking for them, you need to throw out your your previous beliefs of what was impossible, and instead, look for those new possibilities. So I want to leave you on that optimistic note, I know a lot of you are dealing with heavy stuff right now, a lot of you are dealing with some significant financial challenges. We’ve talked about a lot of that, but there is hope. There are opportunities and you need to find ways to take advantage of it because they’re not just going to come to you, you have to go out there and look for them. So with that, that will conclude the fixed portion of the presentation. And now we’ll
have a chance to answer some of the questions that I’ve seen have been coming in while I’ve been talking. do feel free to continue
To submit those questions, or if you have something as I said before, that you’d like answered privately or that you think about after this live session ends, feel free to email me at the email address right there on the screen. So, grab a sip of water here, take a deep breath and start answering questions.
Okay, so the first one that I see here is why shouldn’t I look for recession proof industries.
Okay, so the reason why you don’t want to look for recession proof industries, now is a is too late. The likelihood that you can establish yourself as an expert in a particular industry aren’t very high. If someone’s in a recession proof industry, they’re probably busy with existing agencies, or they’re already inundated with requests. So you will spend more time barking up the wrong tree if you try to come up with that kind of a golden solution to the current chapter.
So I really encourage you to look at making
more modest adjustments to your targeting as opposed to seeking out entirely new industries.
If I need to lay off staff, how should I do it?
Okay, I’m not sure exactly,
exactly what the question is asking. So if you want to ask a follow up, feel free, but I’m going to take a stab at, at what I think you mean. And so there’s, there’s a couple of different things here. From a process standpoint, actually, it’s something that we’ll probably talk about in a webinar in a couple of weeks, that I mentioned at the top of this one where we look at some of the HR issues. So I’m gonna set aside the process side, but if you think about it from a strategic business standpoint, there’s a couple of different ways or more that you can go about doing staff reductions if you need to. You could look at it in terms of, you know, cutting out people based on the projects that they’re working on, you can look at reducing staff base
Based on skill sets, in some cases, it may be easier to access certain skill sets through contractors on an as needed basis, for example. So perhaps it’s the the specialists that you trim back, but you keep the generalists who are, you know, keeping the trains running on time.
I would not encourage anyone to look at lastin. First out or anything like that, you really need to look at the best talent and the talent that meets the needs of your agency business going forward. And this is tough, because when it comes to layoffs, you tend to have an attachment to the employees who’ve been there the longest, but they aren’t necessarily the ones that you need for the future. They may have been the ones for the past, but not necessarily the ones that you want to see going into the future. So there’s lots of tough decisions that you would have to make if you’re looking at layoffs. I would say just generally on the picture of layoffs because it is important to budgets, you need to be thinking about it. You can’t just say look, we’ve got this this money coming in, whether it’s you know, the UK
program or the PPP program in the US or some of the other ones around the world. Don’t put off making decisions about your staff size. If you’ve lost 20 or 30% of your revenue, you need to be looking at making staff reductions. You need to be doing it in a responsible way. That’s, that is as thoughtful to the employees as possible, but also helps you build the business that needs to survive. Because if you bend over backwards to avoid layoffs, you may help a group of people in the short term but impact even more people in the long term, if it makes your business non viable. So take any government funding that you’re getting or any cash reserves that you have and use it to build yourself a roadway to the agency that you want to be in the future and don’t use it to put off making some of those decisions. So hopefully that answers your question about how to do layoffs. If not, I will look for potential follow up.
Is it okay to use my own personal money to subsidize the agency for now?
That’s a personal decision. Obviously,
if you’re in a position where you can loan money to your business to keep it afloat,
it’s something to think about, I would be very cautious about it. I think generally speaking, using debt, whether it’s debt to yourself or debt to from a line of credit, or from credit cards or government loans or whatever, you need to be really careful because too often, they become an excuse not to make tough decisions, whether that’s making a decision about layoffs or furloughs, or making a decision about trimming back on certain vendors or perhaps even looking at unprofitable client accounts that now maybe maybe the time that you want to go ahead and fire the client, or at least find a way to transition to a more profitable place. So be careful about using access to these different forms of capital put off too soon to put off decision making
But if you are in personally the financial position to do that, and you honestly believe that the business is a good investment,
then yes, I don’t see a problem with you using your personal funds for it. But it’s a pretty high bar. And you need to be comfortable with what the consequences are of not seeing that money come back to you. It’s very easy to be overly optimistic in these times, particularly when it comes to loaning money to your own business. That’s where it’s good to step back. be pessimistic, take that walk around the block or sleep on it, talk to some folks and make sure that it’s the right decision because you really don’t want to be in a place where you’re so focused on the survival of your business today, that you jeopardize your own and your family’s future as a result.
This is asking Should I get a line of credit? I mostly I think I’ve just addressed that. Frankly, if you don’t have
Have a line of credit right now it’s going to be tough to get one at the moment, particularly if you need it generally a time to get a line of credit is when your business doesn’t need it. So I, I’m a big fan of agencies having access to lines of credit. I only like to see you use it to bridge accounts receivable gaps. So I don’t like to see you use it to, you know, fund payroll or things like that on an ongoing basis, what I’d like to see you do is I’ve got a big client who’s slow paying, and so I use a line of credit just to smooth over the delay in that payment that I see is okay, but be very careful about using any kind of debt in an agency for actual day to day operations on an ongoing basis. But again, I think it’s unlikely that if you actually need a line of credit that you’re going to get one now.
Our agency is still winning new business and if so what kind so yes, agencies are still winning new business. I’ve talked to a number of my own clients as well as
Some other folks in the industry over the past few weeks, they are continuing to win clients. Most of it as I think I mentioned earlier in this webinar is business that was already under discussion. Prior to there are some exceptions for folks who are in particularly hard pressed industries or services like crisis like health care, you know, where perhaps they’ve had to go out and get some emergency help. Most of it, though, is not in that category. Most of the new business that I’m seeing is, are things that have been just, you know, lingering, and now folks are having more time to pay attention to it. Some of it is starting with delayed start dates. So, it they’ve agreed to the business, in principle, but the work may not be starting until June, July one or later. And I think that that’s a key point. You need to be flexible with your prospects with your clients and figure out how to make terms work on a much bigger fan of negotiating terms. Then again,
bushing fees. At the same time, you do need to be reasonable about the fees that you’re charging right now you need to think about very carefully, particularly if you’re a smaller agency and you’re, or a solo agency and you’re competing against other solos, there’s going to be a lot more folks in that pool at the lower end of the spectrum right now. And so there is going to be a supply and demand challenge, because will all sorts of senior folks already laid off or who will soon be laid off from big companies from agencies, there is there is going to be an issue there. And so you need to be not stubborn about the way that you’ve done things in the past. Instead, take a realistic look at what’s what makes sense in the current market.
unless I see anything else
let me just check over. Just check my email real quick to make sure that nobody said anything in there that I should answer while we’re here but I I think at this point
Yeah, no, I think that covers all the questions that have been asked. So I appreciate everybody taking the time to be part of today’s webinar. I will be sharing with you a recording of the podcast, or sorry, I’m the webinar. I do. I do so many podcast recordings, I sometimes forget what I’m doing in any given moment. But I will be sharing a recording of this along with the slide deck with everyone who registered. So if you’ve attended live, you’ll get a copy. And of course, if you simply registered, you’ll be now listening to this on video. So you already know that it was available that way. Again, if you have any questions, I would welcome them at chip at agency leadership comm I would encourage you to go to the webinars page on ABC leadership comm to register for our upcoming webinars on business development HR issues. And with that, this will conclude today’s broadcast. Thank you