You’ve probably read this at least 36 times in the past couple of weeks, but that’s because it’s bloody true: crisis is both a threat and an opportunity for a business. Likely, there are a few painful decisions you’ve had to/will have to make – but if managed right, you can coast through the rough terrain and hit the ground running on the other side, making significant gains.
Follow along as we go through the steps that agencies, B2B service-businesses should take to minimize the impact and make the most of what is surely a crisis unfolding.
It’s COVID 19 this time, but it happens once every 10 years on average: markets adjust (read: plummet), the scent of panic fills the air, people are laid off and policy makers actually work long hours. Businesses close.
Except, this time it’s different. It really is. Human lives are at risk and the speed and scale of the economy shutting down is historic. But bear with me, because we’re finding the way out.
Your most important obligation
Although this article is about how to treat and leverage a crisis in your business, the human-safety aspect has to come first.
Crisis? Use it!
How bad is this recession going to be? Nobody knows, the impact is different for everybody and it’s definitely not the right question to ask. Neither is “how long will it last?”
I’m a big fan of finding the right questions to ask in all situations. This time, it’s this: how can I manage, then thrive in a recession? We’ll get to this, but first, you have to respond and take measures to stabilize things. So first, let’s start with mindset. And I don’t mean positive thinking, as important as it is.
If you’re a business owner, you are by definition, an investor – and should think like one. You’ll know that the savviest investors and business leaders rub their hands when an economic crisis is looming. It is because everything goes on sale in a recession and if one is prepared, there are great gains to be made. Not at the expense of others, but for the benefit of your employees, stakeholders, family.
It’s not just securities and “money products”. Media – advertising, property, talent, partnership opportunities – everything becomes negotiable in a downturn for the business owner who is ready to step up, move forward and innovate when their competition retreats.
Understand that crisis encapsulates both danger and opportunity (and no, this isn’t a Chinese thing). So, let’s now look at what steps you should take if you are in professional services such as consulting, professional services, coaching or if you run an agency.
First, you’ll have to deal with the setbacks. This will be mentally-emotionally tough, so prepare. But you’ll get through it – and as we discussed, you’re coming out thriving on the other end.
Now, join me as we go through the steps.
How good leaders plan now
Have a plan. A plan means you have scenarios for different situations that can arise in the coming months. These scenarios are usually tied to drops in revenue or client count, cash flow levels – or all three. Outlining the scenarios beforehand makes hard decisions less emotional. Some will still be tough (that’s why they’re “hard decisions”- right?) but if you’re following a plan, you’ll make the necessary decisions at the right time, and with less distress. Because…
When things get economically scary, business people understandably resort to cutting expenses.
There are a few areas where you can save money – and as a service business, labor costs are probably the most apparent in your P&L statement. Wages and subcontractors likely make up the largest chunk of your expenses. Still, you should hang on to your best employees and subcontractors ‘till the last moment.
I get that for most companies, keeping everybody on board is not an option. But for many, it is. While I’m sure you understand the real value of skilled and awesome people in your company, here are three reasons why it’s worth fighting ’till the last drop of blood to keep good folks around.
You are a savvy investor and realize that you’ve invested not just money, but time in them. You’ll need to to start over with recruiting, training and onboarding new hires.
People you let go may end up with a competitor who is financially already stronger or has more faith in a turnaround.
You are compassionate and you care. And you’re also saving the economy. Here’s why: They have homes to pay, maybe families to support. If your employees don’t make money, they won’t spend either.
While your talented people will be fine after a while, their drop in spending trickles down to the most vulnerable workers of society, who will be out of jobs and possibly have existential problems, as Don Miller pointed out.
Again, it may be inevitable that you send some or all of your people away during these months, but you can also get creative. For example, if you have cash set aside for a new venture, now may be the time to start developing it and you can use idle people from your existing business.
As a general rule, the expense items that will contribute to growth are the ones you should treat most delicately. I think great people top this list for any company; probably yours too.
A better way to deal with cashflow issues when business gets tough is to cut costs in other, non-human areas. For that, several experts recommend this eye-opening exercise, including my favorite small biz finance-saga, Mike Michalowitz:
print out your expense-statement from your bank account for last month
- mark every expense-item you can operate without
- repeat after 15 minutes
repeat again the following day
- quickly go and cancel those subscriptions and unessential costs you’ve identified
Crisis-strategies for B2B service providers
When times get tough for your clients, you can be sure of one thing: they’re going through the above-exercise and pondering whether they should cross you off the expenses-list.
If your service is a nice-to-have for your client, you’re likely going to get fired. If on the other hand, you are a must-have extension to your client’s business, you will stay. If you think you are a nice-to-have service and not a must-have… is it too late to do anything today? No.
NOW is just the right time to position your company. As a general rule in positioning B2B services, you need to tie everything you’re doing into the bottom line. Your client (probably like you) is thinking cash flow at the end of the month. Tying your input to the bottom line, constantly proving your contribution is good practice regardless of economic times, but is crucial now.
Now, as a warm-up question to the next section on strategy: think about what your clients need most now? Most need clarity, insight. It’s been great for the past 10 years, now things have flipped in a matter of weeks. Pointing to the right direction or selling by making sense of things is now probably of greater value, than ever.
Here are the strategies to solidify crisis
If a client is not experiencing a big setback and isn’t slaughtering costs and has a strong growth-mindset, you can add “thinking” services to your business – or reframe/reposition your existing consulting-offering.
In dire situations like a pandemic (but also in less dramatic times when there are huge shifts in the marketplace) it really pays for your clients to see their options clearly.
Depending on the situation of your clients, you can either help them find direction (if they’re lost) or help them gain momentum.
1. Help find direction.
Use this when a client is overwhelmed and doesn’t know which way to go, what to do next, or when it can be assumed that they need a radically new strategy.
Strategic direction happens on many levels – you don’t necessarily have to be in management consulting to provide insight. The new crisis has implications on many areas of business, so it may be that your client’s social media strategy needs to change. It may mean that a huge dev project should be finished differently than planned.
Understand how you can provide direction and calm in the storm. And then do it. Because your client is likely to have a lot more questions and overwhelm than answers and clarity, it makes sense for them to pay for a service that provides the latter two.
2. Help gain momentum
Because the landscape has changed, your client may now be in a position to build momentum. This is true both for shops that needed to temporarily close and for those who are sitting on reserves. Right now, new opportunities are popping up everywhere.
While everybody is panicking, you could be the one who points out the need for continuity and providing value in new ways. It’s the best time to be building lists, creating goodwill, providing value up front (content). This is the chance to expand on the scope or depth of services you offer them, but this too, starts with thinking.
Is your client aware of new opportunities and new strategies? If they are too defensive, help them understand and capitalize on the opportunity of making big leaps during these slower times WHILE putting out fires.
How you help with the above depends on your business model. If you’re doing some sort of consulting, this will be natural. If you are in the done-for-you sphere, you may be uncomfortable giving advice and charging for it. Now is the time to change that.
The important thing is that
if you produce any kind of a formal plan and do thinking, you need to charge for it.
Your insight, if acted on is what will make the ship turn north – this is immense value. You obtained your knowledge and experience at a significant price – and if you bundle it into a consulting/planning/coaching project, you should get paid for it.
The solution can come in the form of a plan. You can offer a money-back guarantee and frame your offer like this. “Dear client,
- you either like the plan and implement it yourself
- you’ll like the plan and have us implement it
- if you don’t like the plan, you can ask for your money back.”
That offer is a no-brainer.
And yes, it is more than OK to be selling in times of crisis. You are saving your business and you help your clients stay afloat and thrive. On a larger scale, you are helping the economy recover.
How to get paid (big time) when nobody has money
At this point, several of you are thinking: “But my clients can’t even pay my past month’s service, I’m not about to sell them more.” I hear you. The strategies above are aimed at clients who have money to spend. So now, let’s look at how to create a win-win with great clients who are unable to pay in time during a crisis.
Your clients may ask for a reduction in service-quantity and/or price. I suggest not going for a discount. It will be hard to raise prices in the future, as this discount will become the new baseline, a new anchor.
The second best option if clients can’t afford to pay you in full, is to reduce the quantity of work you provide for them. They may want to insource some things anyway. (What often happens in these cases is they end up appreciating your service even more now, that they have to do it.)
Blair Enns suggests two other ways to sell to existing clients: one is a “pay when you can” term in pricing, which obviously has its risks and doesn’t help your near-term cashflow pains, but you can charge a premium for it.
The best option with the right client who isn’t comfortable paying high prices these days is to get equity in their business. This will typically be an option with clients where you have a crucial role and very positive relationship. You can waive some of the recurring fees you charge in exchange for a stake in the business unit or the company. A master at striking equity deals is Roland Frasier. He gives you a primer to equity deals in this podcast episode.
Most essential of all:
Back to mindset again! We started with mindset and end with it. It’s not a coincidence.
Getting around a crisis requires you to be at the top of your mental game. And you may not feel ready for it now. But don’t worry, you will be. When you step up to a challenge like this, when you take control of your business’ and your team’s destiny, you grow. You’re growing up to each challenge by stepping up to the one preceding it.
In times of crisis is when most development and growth happens – but only if you let challenges shape you, and not break you. A quote from James Clear really stuck with me… win the next moment!
Win the day.— James Clear (@JamesClear) March 17, 2020
There are many questions swirling right now...
How long will this last?
How will we manage?
How will we recover?
How worried should I be?
Leave it be. Nobody knows the answers.
Have the best day you can, today. Win the moment in front of you now.
Win the day.