Uh oh. Recession rumblings got you feeling uneasy? As an agency owner, a downturn means it's time to batten down the hatches. Don't panic — get proactive with this 5-step guide to recession-proofing your business.
In this blog post, we’ll share key strategies to ensure your agency stays liquid. You’ll learn how to:
- Stockpile Cash
- Keep Revenue Flowing Even When Budgets Tighten
- Collect on Invoices
- Cut Unnecessary Expenses
Step 1: Get Liquid, Stay Liquid
Cash is king when budgets tighten up.
Aim to have a 3-6 month safety net and defer unnecessary expenses. Reduce partner payouts if needed to keep extra reserves. Secure a line of credit for a rainy day (or year).
When new biz gets rocky, cash reserves keep you confidently chugging along.
Step 2: Lock Down Recurring Revenue
Recurring retainers mean reliable revenue. Recurring retainers > Project revenue. Introduce add-on retainers for project clients and lock in annual budgets. Migrate existing clients first, then use irresistible offers to reel in new ones.
Reposition as must-have partners versus "nice to have" vendors.
Even if you can’t fully “retainer-ize,” get critical clients to commit to annual budgets. Knowing what revenue is coming will help YOU plan for what’s ahead.
Step 3: Collect What's Owed, Stat!
Follow up on aged A/R and scrutinize collectibility. Stop work for late payers - no exceptions. Your business isn’t a charity! Invoice early and often and get slow payers on payment plans.
A/R Past 90 Days? Consider It gone.
Take any “probably not” off your liquidity calculations NOW. You’ll sleep better at night knowing the real deal.
Step 4: Cut the Fat, No Regrets
Cancel unused subscriptions and eliminate excess capacity. Consolidate tools and seek concessions from vendors. Reduce team size to match demand.
Review ALL expenses with a critical eye and hack away at non-essentials.
Are long-term agreements making you nervous? See if you can redo terms for more flexibility when times get tricky.
Step 5: Plan for the Worst, Hope for the Best
Build best, worst, and "ugly" case revenue scenarios. Build revenue scenarios showing company performance if things tank 5%, 15%, and 30%+. Identify what levers you’d pull (expenses, staffing, debt, etc) at each level to stay agile.
Map minimum profitability goals to cost levers you can pull in each scenario.
Then, monitor indicators (budget updates, project performance, client check-ins) to respond quickly to changes.
Recession Resilience is Sweet When You Plan Ahead
With some savvy prepping, your agency can do more than survive recessionary times. You can smash through them and gain a competitive advantage!
But who are we kidding...even for pros like you guys, prepping isn’t easy. So here’s one more present before you go:
Stay SOLVENT out there! Stay lean. Reach out for specifics on shoring up your agency against a downturn!