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Surviving a Recession (Part I)
Most of our work involves marketing and most of that marketing is in the lead generation space. If you have a product or service with a sales cycle and turn leads into customers, then that is our sweet spot. That said, we also do a fair amount of e-commerce work as well as TV production for more branded spots.
But there is a core group of clients who look to us for straight up business advice and lately we have been talking a lot about how to survive and recover from what’s recently happened to the global economy.
This will be my fourth recession as a business owner. Here’s what I’ve learned getting through the first three.
The News is Not Your Friend
It’s easy to get sucked into the news media’s coverage of the economy. It is especially easy to do so when things are bad. The problem is, for the majority of businesses in the US, the news media only covers the largest, splashiest sectors of the economy. Much like our perceptions of Hollywood, we focus on the big names and don’t spend much time thinking about the lot of the “working class actors” who diligently put in the time every day to make the whole machine possible.
Your business is most likely one of those “working class actors”. Ours sure is.
This means that pretty much 100% of what you hear about companies in the news is worthless to you. And worse still, any perceptions you have of “how the economy is doing” will be based on the wrong data.
For a small business that is struggling to survive, there is absolutely zero benefit in hearing Tesla gush about their latest car, seeing the stock market surge (or fall) to ridiculous extremes, or listening to tales of doom and gloom that don’t really apply to you.
The Emotional Landscape
After 9/11, we didn’t get paid by most of our clients for almost six months. We survived, but nearly exhausted our Line of Credit in the process.
It was grueling and demoralizing to feel like we had no options and our prospects for growth were limited. But the thing that made the trauma have a truly outsized effect on our business was not acknowledging the fear and uncertainty we felt.
When things get bad, you need to address your feelings about the situation while (or before) you begin to work to correct it. Until you acknowledge “Yeah, I’m scared right now and anxious about all of this uncertainty”, you will not be able to step outside of those emotions long enough to start planning for your recovery.
First Things First
When things go south, it is VERY tempting to start “rallying the troops” and making big gestures. It is easy to experience some kind of setback (like losing a line of credit or seeing a large customer or two walk away) and then make some big pronouncement to your team about everything you will do for them if they just hang in there.
Or throw some big party to “relieve stress”.
No, no, and no.
The most important thing you need to do when you know that things are turning sour is to look at your current liabilities, your cash on hand, your existing credit facilities, and your accounts receivable.
Once you have a true handle on your cash position and predicted inflows and outflows, it’s time to look at your sales pipeline and things you can do to get more cash now. From there, you look at expenses, and so on.
Communicating clearly and honestly also gives team members confidence that you are not hiding things from them.
This will cause your employees concern. No doubt about it. And some of them will be so concerned that they leave. That’s fine. It’s a good way to identify and cut dead weight without having to fire people.
Cash is King & Clients Don’t Care About You (Neither do Suppliers)
When 9/11 happened, we did not get paid by many clients for almost 6 months. It wasn’t because they couldn’t pay us. Instead, they chose to hold onto the cash and delay and obfuscate as long as they could.
From the perspective of their financial teams, it made total sense. In the wake of the attack, big businesses were breaking contracts right and left claiming that the ‘national emergency’ imposed an undue hardship. If you could plausibly do so, it made sense to keep the cash and stretch out payment as long as possible.
Our clients were nice people. They meant well. And they were wholly and utterly concerned about saving their own businesses. If delaying payment to us by another 60 days would make a Senior VP happy, then they were going to do just that.
And that is okay. It’s natural and to be expected.
But it does mean that you have to be extra careful about hoarding cash whenever possible. And it also means that you should look at your existing contracts and see where you can safely delay payment and which ones you can drop altogether.
Money is nothing but options. When you have cash on hand, your options are greater than when you don’t.
Rank Order Contracts
Some contracts and services you use are vital. Some are not. When things go south in a big way, it’s time to sit down and assign these contracts a value or ranking based on how important they are to your ongoing operations.
For example, web servers are vital to our ability to conduct business. We simply cannot do what we do without them. Along with that, we need security and regular updates as well as a variety of software licenses. These contracts are all top priority to us.
Tech support is a different matter though. While we outsource some tech support to our server provider, the skills involved are completely in the wheelhouse of our internal team. We just have better and more lucrative things to do with that time, so outsourcing makes sense.
In a crisis, servers stay, but it might be smart to let the tech support piece go and handle it in house.
There are constant trade-offs big and small that work like this.
Again – all of our business lines have an international dialing plan on them. Why? We do some travel to other countries a few times per year and rather than pay the individual rates, it was cheaper to bundle it all together across the entire account (plus it’s a nice vacation perk for folks when they are away and makes me feel less guilty about calling them if something blows up).
Recession looming? Chances are good that we will only be traveling out of the country for exceedingly promising opportunities. Time to shave off those extra $60 per month and keep the cash.
Plot Worst, Middle, and Best Courses Forward
In the midst of a business crisis, I hear many clients and friends say that they are “too busy bailing to worry about strategy”. I think the idea here is that the current situation is so intense and immediate that they literally have zero time to step back and plot out the possible courses for the future.
Frankly, this is nonsense.
If you have ever been in a situation where you are literally bailing out a boat that is taking on water, you know that it is basically a two state system: Either the boat is going under NOW or you have a bit of time to call for help over the radio before you go back to bailing. If the boat is on its way down, stop bailing and start abandoning. If it’s not going down, take a minute and radio for help.
The time frames on a business crisis are much longer and frankly, there is never an emergency so real and so acute that you cannot find an hour (or even half a day) to sit down and plot out where events might take you.
To go back to our nautical theme: when the boat is foundering, it’s always a good idea to see if you can also avoid the rocks ahead. Blindly staying “head down” is a sure way to compound your problems.
Refine your MVP
If you are in crisis mode, you’ve got a clear picture of your cash position, you’ve addressed your expenses, and you’ve thought a bit about how to navigate the future, then it’s time to start refining your minimum viable product and making it as efficient and profitable as possible.
One great example of this practice in action came from a restauranteur friend of mine during the recent COVID-19 business shutdowns.
He owns a very popular spot downtown with a casual Italian style menu. When the shutdown came, he furloughed all staff who would do better on unemployment than with reduced hours and then rebuilt the kitchen with a smaller core of line cooks.
Then he pared the menu down to three or four of their most popular items and offered those for pick up by appointment. Wood fired pizza is a big draw for them and they offered two (and only two) varieties for dinner each night.
When the state allowed carry out cocktail service, he offered two (and only two) cocktails for sale.
A couple of interesting things happened as a result. First, the pizzas got better. I mean, they were pretty darn good to start with, but after two months we noticed that there was not a single pie with a “loose” center and that the presentation on all of them was close to flawless.
For the cocktails, they started including the ingredients and a little story about each as part of the order. This caused a (very) small amateur mixologist craze of people trying to duplicate a particular cocktail’s flavor on their own… which in turn caused the sale of more cocktails (purely for research!!) as people chased the perfect mix.
Did this replace their income from the restaurant being fully open? Not at all. But it did allow them to put intense focus on a smaller set of problems and work to make that line of business as efficient and profitable as possible from production through marketing.
As always, you want to communicate clearly with your own clients and customers. (If you want to learn more about that, you can check out or video on crisis communications and our course on addressing your target audience’s deepest needs – all free.) And you want to pay close attention to any opportunity to deepen your relationships with existing audiences and the potential to serve new audiences.
I titled this “Part I” because I am sure that in the coming weeks there will be more occasion to talk about tactics and strategies for surviving a difficult business climate. As you navigate the days ahead, it is important to maintain your confidence and resilience. In a sense, you must become a leader to yourself as well as your team.