Strategies for entering turbulent times associated with the emergence of COVID-19 and the oil price war.
Published: March 2020
Above All, Stay Safe
We are entering a stressful time where rapidly changing information can make it difficult to cope with and react to. First and foremost, it is important for us to safeguard our families, friends, employees, and communities to the best of our abilities. The CDC has multiple comprehensive guides that we should all become familiar with and implement. https://www.cdc.gov/coronavirus/2019-ncov/community/index.html
Business quickly takes a backseat in situations like this, but for those of us who have already implemented preventative measures, we are providing our recommendations to help your business weather this storm.
For years now, we have been providing updates on how we expect the economy to trend over the next twelve months. We have seen economic warning signs come and go, while the U.S. consumer has continued to drive economic growth. When we encounter other opinions, the discussion eventually becomes “what’s the catalyst?” What major event shakes the consumer and weighs on markets? It appears that we have finally found it in COVID-19 and the instability within the oil market.
For a more detailed view into our thinking on this topic, please see our latest Economic Outlook, published today. No one knows how severe this situation will become, but we are detailing our initial expectations along with steps you can take to prepare your business.
How Should A Digital Shop Adapt?
Be decisive. Your ability to react quickly and appropriately to this changing business climate will directly affect how your firm handles 2020 and enters 2021.
It is becoming more and more difficult to make a compelling case for digital shops to have employees in an office from 9-5. By going remote, even temporarily, you can help insulate your firm should someone get sick. There are numerous guides for how to do this successfully, but most of them boil down to good and frequent communication. Learn to work asynchronously.
Invest in repeatable lead generation
Marketing and sales teams are your best chance to drive repeatable revenue during down times. If you have them in place already, make sure they’re ramping. If you don’t have lead gen strategies and processes, consider outsourcing this to a marketing firm. Cold outreach should be one of your best friends going forward. See our guide to repeatable revenue generation here: Repeatable Revenue Generation
Shore up cash reserves
Through our research, we have found the typical shop keeps 2-4 months’ worth of expenses in cash on hand. Regardless of your current cash position, it is time to expand those reserves. While it is unlikely that you will need it, cash provides a powerful safety net should business activity slow significantly.
Connect with key accounts often
The more advanced warning you have of turbulence at key accounts, the faster you can react in your own business. Even if your account managers are already in regular contact, now is the time to increase activity to make sure you are aware of any changes.
Now is the time to seriously evaluate your headcount and put a plan in place if a staffing reduction become necessary. This is an entirely unenjoyable project but having a plan and knowing when you need to act (based on sales pipeline) can allow you to withstand any slowdown and be in better financial shape than your peers.
Trim low-performing business
The average digital shop grew the number of service offerings from 5 to 6 services last year. Most shops tend to derive the majority of their revenue and profit from 2-3 core services. Reconsider how your firm spends its time and resources. Low growth / low margin businesses can often be paused, and the resources can be realigned as necessary.
This type of economic shock is dually challenging since it does not just affect our businesses; it affects our loved ones as well. If there was ever a time to practice empathy, now is it.
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