In 2008, I read all of the predictions the economists made about what was coming. I listened to my Vistage peers discuss burying gold in their backyards. I watched as the housing complex in Aspen that we had invested in went belly up. And, still, I was not prepared for what was to come.
It was a really hard lesson to learn—emotionally and financially. I didn’t expect to lose nearly every client in a three-week span or to have to lay off nearly all of my 36-person staff or to sit in our very expensive downtown Chicago office all by myself with nothing to do. It was a lot and yet, I survived.
It was with some bumps and bruises and some lost relationships because of how poorly I handled it all, but I survived.
And, for those of you listening to the news or reading about a forthcoming “economic hurricane” or watching the chaotic stock market, you too, will survive. You will need to be prepared—and there are lots of things you can do to get there—but you will survive.
Prepare Yourself for a Recession
Getting a little nervous? There is reason to be nervous. Be nervous. It’s OK! But everything also is going to turn out just fine because, after reading this article, you will be prepared. It won’t be easy and there will be some bumps along the way, but you will be fine.
There are several things you can do to prepare yourself, your business, and your family:
- Remember, always, that cash is king.
- Create more than one source of revenue or income.
- Consistently demonstrate the ROI of the work you do to your bosses or to your clients.
- Ask questions of your peers, your bosses, and your clients or customers.
- Communicate clearly and honestly.
- If you own an agency, make sure your contracts are solid and protect you.
Let’s go through each of these.
Cash Is King
It sounds a bit trite, but cash is definitely king. If you run a business, make sure you have at least three months of expenses, including everyone’s salaries (and your own) in the bank. The same goes for those of you who don’t own a business—have at least three months of personal expenses in your bank account.
I actually prefer to have at least six months’ worth (we have eight months in my business right now), but you may not have time for that right now. It’s a goal to work toward in the next 18-24 months.
If you have any debt—credit cards or a line of credit—get them paid down or completely paid off. You don’t want that sitting on your balance sheet when a recession hits.
Bottom line: hoard cash right now. It will save you.
Revenue Sources
When I was caught with my tail between my legs during the Great Recession, I told myself I was never going to let that happen again—and I set a goal to create seven to 10 different sources of revenue so I was prepared for the next time.
And I was when the pandemic hit and everything shut down. We lost several clients during that time, but it wasn’t nearly as painful as it was in 2008 because we had other income outside of retainer fees.
While it took me an entire decade to create all of those sources of income, you can start to do that now.
If you own an agency, think about how to productize your intellectual property, as we’ve done with the PESO Model™. Can you create online courses? Do you have an itch to do speaking engagements? Can you charge more for strategic consulting and workshops than you do for tactical execution? There are lots of opportunities for you to create abundance.
If you don’t work for an agency, you have different opportunities. Can you make any smart investments? The time to invest in the stock market is when it’s down. Take advantage of that now. Do you have a hobby that will allow you to make some extra cash? Start an Etsy shop or sell your wares at the farmer’s markets. Are you available a couple of nights a week to do some food or grocery deliveries?
We are all time-crunched, but there are lots of ways you can earn extra income without adding more than 24 hours to your day or becoming a robot.
Demonstrate ROI
Demonstrating ROI is not an “oh crap, a recession is coming” activity. In fact, none of these things are. But if you practice it—and can point to real results that drive a business forward, you have a better chance of surviving budget cuts.
Executives don’t care about the number of placements and some arbitrary media impression number. What they do care about is what percentage of revenue your activities are driving results.
Having just finished the second quarter, we reported ROI for all of our clients and our work is ranging from 21-36% of their total revenue. That means it’s a pretty tough decision to let us go during a recession because it means at least a quarter of their revenue goes, too.
Make it really tough for them to cut your salary or your agency fees.
Ask Questions
Ask questions. We’re all reading the same news. We know what’s going on around us and we’re all thinking about how it might affect us. Start to ask questions—during staff meetings, during 1:1s, during prospect/sales meetings, and with clients.
What are they thinking? How are they planning for a potential recession? How can you all work together to create plans?
We have one client we’ve worked with to create five different plans. They all have different triggers and one of those plans (the last one) even includes letting us go. But we know what the triggers are and we’re working hard to make sure we don’t get to that point.
Put yourself in a position internally or with your clients to be an active voice in what the plans are and what you all will do about it by asking questions.
Communicate Clearly and Honestly
When or if budget cuts are coming, communicate that. During the Great Recession, the biggest mistake I made is I thought I could fix it all before my team found out. WRONG! I was pretty naive and didn’t realize it was so much bigger than me and I couldn’t sell my way out of the lost revenue.
When I let everyone go, one young professional said to me, “I don’t know why you didn’t ask for our help. We could have helped.”
That still feels like a gut punch. She was right. I should have asked for help. It probably would have saved some jobs…at least for a little bit longer.
Don’t be afraid to deliver the hard news and, just like how you should be asking questions to get clear and honest answers when you know what the plan is, start to communicate it. People will appreciate knowing what’s to come.
Contracts Need to Protect You
A few years ago, I hired an attorney I couldn’t really afford to help me recreate our contracts. One of the first things he did is put a 90-day cancellation notice in place. I remember I felt wonky about it at the time, but I left it in place. And let me tell you what. That clause has more than paid for his fees.
In my work with other agency owners, this is the biggest sticking point we have. No one wants to ask their clients to give them 90 days’ notice if they’re going to let them go. But here’s the thing: you have a business to run. You have bills to pay. You may even have payroll to make. You can’t do those things if a client emails you today and ends the relationship tomorrow.
Your job is to protect your business and that means running a professional organization that requires customers to hold up their end of the deal.
It’s always a good time to be prepared, but even more so now. These tips will help get you there, help you survive a crisis, and help you excel during non-recession years.
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