Published by: 19th March 2020at
Filed under: Uncategorised
“May you live in interesting times,” goes the Chinese curse.
Quite an understatement, don’t you think?
I came across a blog this week by Blair Inns @blairenns that really struck a chord with me. So, have taken the liberty to edit it so that it relates to built environment professional with some of my own experiences thrown in for good measure!
I’ve lived through three previous recessions, two as a business owner, our parent company went through a company voluntary arrangement (CVA) followed by administration a few years later. This gave birth to Fira, we not only survived but we thrived. However, what we are experiencing right now is not a recession or any other business hiccup—it is a full-on economic crisis. The recession is what comes next after things stabilise. For most businesses cash flow is the number one concern.
So deep breath…..
Step one is survival. After that, step two is to adjust to the new midterm reality. Step three is to prepare for the new long-term reality. I’ll walk you through each step below but first let’s talk about you.
Am I Going to Be Okay?
This is the question on many minds at this moment. The answer is No, you are not going to be okay. You are going to be spectacular.
Moments like this are why you are successful. The decisions are all yours. You cannot control the world around you but you can control how you respond, how you lead, how you lift others and—if your business survives—you may well be facing the opportunity of a lifetime as the entire world goes on sale. You became an entrepreneur in part because you wanted the freedom to call your own shots, to answer to no one. Well, it’s all you now and if you’re honest with yourself you wouldn’t have it any other way. Who else would you trust to lead you through this moment? Exactly.
So let’s just agree that the goal is not to be okay, the goal is to be a spectacular leader, entrepreneur and human being. Beyond that, don’t worry it’s out of your control. Your job is to shine. On the other side of this people are going to thank you for strong leadership at a time when it was most needed and whatever the outcome. The physiology of leadership is calm presence.
So let’s run through this in three steps.
Step One: Survival
First let me address the few of you who are reading this thinking that I am overreacting. This crisis is hitting professional services firms differently. Some are seeing only a small blip in client spend or minor inconvenience in working conditions. Some are seeing deep but random cuts. But many firms are seeing many of their clients cease all spending. There are thousands of firms out there that will not survive the next few months.
Businesses tend to die from a combination of stress and shock. The stress is an ongoing pervasive issue like poor positioning, poor management, an owner with health problems—anything that sees the firm run below par for an extended period of time. This current crisis is the shock: a quick and brutal hit at a time when the body cannot withstand it.
Your first goal is to survive the shock.
Survival starts with running different scenarios of reduced revenue and cutting costs to match the scenario. What will you do if revenue goes to X? What about .5X? If you haven’t already, make your plan for what you will do at each scenario or trigger point. When the time comes, just follow the plan. If you don’t make these decisions in advance of the trigger you will find it emotionally taxing, even debilitating to have to decide when to act. Deciding now lets you get through all the emotions quickly, in advance, so you can act when you need to.
From past experience, my advice is not to put off making cost cutting decisions, quick action is what is needed.
Securing Revenue in the Short Term
Talk to Your Clients
You need to be talking to every one of your clients. How are they doing? How can you help? Focus on the relationship ahead of the revenue. What can you do for them? Plus, if bad news is coming you want as much visibility into it as possible. Forewarned is forearmed.
Do you have a client that is about to cut spending even though they really should not? Can you help by extending them more favourable payment terms? Good clients sometimes need help and terms are an underused tool. Helping to smooth out their costs might make all the difference and the gesture itself is an investment in the relationship.
Offer Discounts for Advance Payment
Do you have new client projects that you would usually bill over time where it makes sense to offer a discount for that client to pay up front? Some clients might be as concerned about cashflow as you are, but others are unaffected or prepared for moments like this with stockpiles of cash. They have that cash for reasons like this: everything is on sale for those with cash. What deals can you offer such clients to get you through step one: survival?
The UK Government has responded by cutting interest rates to near zero and making statements of financial support for small businesses. Consider getting access to cheap credit, it can be a lifeline. But it can a be a difficult decision for those of you who operate without loans and overdrafts. Take advice, your business may be worth the investment in the longer term.
Step Two: Adjust to the New Midterm Reality
It’s looking like working from home, few public gatherings and almost no global travel will remain in place over the next 2 to 12 month period. These impediments may mean the services you provide may no longer going to be valued by the markets/sectors you served. You may need to respond to this temporarily adjusted new reality.
Explore the Options
Consider a new approach to either the services you offer or the markets/sectors you serve. It doesn’t necessarily mean abandoning either forever—they may come back—just understand that after the first few weeks of this crisis there will be a new adjusted reality for a few months and you may need to adapt your business to fit it. Start looking for adjacencies in both services and markets where opportunity may be less affected. It’s easier to offer new services to existing clients than it is to go find new clients for existing services, so your primary focus should be on how the needs of your current clients are changing. The old adage ‘love your client’ is more important than ever.
Rethink Your Value and Fee level
Many firms get locked into delivering their services a certain way or at a certain standard, even when many of their clients would prefer to accept less and save some money. Now is a good time to look at your client base and ask if you are bundling into your service offering things that drive the cost up but the client does not value, often a criticism of design professionals.
Ask your clients what they value most about what you do for them and what they value least. Scope your service more in line with what the client wants to pay for and less driven by any vain idea of “this is how we always do things”
But avoid a dash to the bottom by slashing fees without scoping your service to suit. The promise of a gold plated service at discounted fees usually ends in tears for both the client and consultant.
Be Open to a New Business Model
It’s possible you are running a business that would be better served by a different business model entirely. It maybe you operate like a graphics agency with freelancers or even a hairdresser where you ‘rent a chair’. By looking outside your silo and adjusting to what the client values most you may find there’s a better way to deliver. Flexibility allows you to make changes and adapt quickly.
Once you’re stabilized at this new equilibrium start preparing for the long term.
Step Three: Adjust to the New Long-Term Reality
Nobody knows what the new long-term reality will be after we are through this but my guess is it will look a lot like the old reality, we tend to regress back to what we are familiar with. We will resume social gatherings. We will look forward to going to work in an office and having disintermediated human interaction. We may even start travelling again, even though the planet sighs a huge relief. But hopefully we will be prepared for the next epidemic, knowing how to shut it down before it gets to a global pandemic.
New Winners and Losers
Here’s what will be different. The competitive landscape will have changed. Some of the old winners will be losers and new winners will come out of nowhere. Any person or business who went into this crisis with lots of cash will be significantly better off than they were before. What do you want to buy? Businesses? Talent? Competitors? Buildings? It is all on sale or about to go on sale. If you don’t have cash but you do secure cheap credit and you have the stomach for it you can still make calculated investments at the bottom.
If you don’t have cash and are averse to borrowing to invest, consider looking for opportunities to take equity in a competitor or partner firm in exchange for helping them ride out the rough times.
Cut Expenses, Not Investments
When you cut costs in step one did you save the expensive car or club membership and sacrifice an expensive but high calibre team member? Did you impair your ability to grow in the future? Did you alienate clients or talent through desperate, mercenary or underhanded tactics? Your place in the new reality is likely to be heavily influenced by how you handled the transition of the first two steps. Maintain your integrity and cut investments in the future last because you do not want to survive the crisis only to find yourself effectively starting over again. You want to come rocketing out of this when the economy turns good.
Decide to Win
There is always opportunity in volatility. Make it a goal to come out of this crisis and recession and into the new long-term reality positioned to win. That goal in itself will shift your mindset from defence to offense, from negative to positive. Make yourself a promise: you will be better off after this. Look further ahead than the rest of the market and make a bet on your prediction of that future.
Based on an article by Blair Inns @blairenns