It seems that prognosticators have been predicting an economic downturn for the past 3 or 4 years now, but lately such talk has been picking up steam and at some point it starts to become a self-fulfilling prophecy. Unfortunately, we all know that when revenues start to decline, the first place most companies look to cut expenses is Marketing, so downturns are especially difficult for advertising agencies. But there are steps an agency can take to minimize, or in some cases even capitalize on a downturn.
A Good Time For Housecleaning
One of the best ways an agency can prepare for a downturn is to minimize operating costs. These come in many flavors, but the easiest to act upon are:
- Infrastructure costs like software. Many agencies have multiple systems charging subscription costs across Project Management, Accounting, Media, etc. Cut those costs in half or less by consolidating those functions into one system like Advantage's AQUA Agency Management System. Thanks to the breadth of video-based training available in Advantage's Education Library, employees can learn the new system quickly and make the transition from multiple systems to one integrated solution quick and painless.
- Move on underperforming employees. This doesn't have to mean letting them go. Interview under performers to see if they'd be a better fit in another part of the agency (whether they have formal training or experience in that capacity or not). If you're unclear which employees are lagging the pack, just look at their utilization rate, billability percentage or portfolio over the past 6 months. It's common for managers to avoid making personnel moves just prior to the holidays, but with a possible downturn on the horizon, now is a good time to either find a better role for underperformers or help them find a better role someplace else.
- Automate everything you can. Today's software solutions give agencies the chance to significantly automate time-intensive tasks that nobody wants to do anyway. Advantage's AQUA agency management system enables you to automate a large number of Accounting, Project Management and Media functions that enable a few people to accomplish what teams were required for previously.
Double-down on Net New Business
Just like sharks have to continuously swim in order to breathe, agencies have to continuously grow in order to stay in business. Last year we posted about the difference between organic growth and net new business. When you're looking at the prospect of a slowdown, it's time to throw everything you have at generating net new business.
- This is a great opportunity to offer underperforming employees as a last chance. Turn them loose on prospect work for categories or clients they have a passion for. Give them a timeline and the resources they need (even if those resources are remote) and see if they can land some new logos.
- This is also a great opportunity for employees with downtime. Focus everyone on identifying leads, generating ideas and sourcing movements in the market.
- Leverage products like Winmo that identify new business opportunities and provide the contact details necessary to engage.
Downturns tend to hit smaller shops hardest because they have fewer clients and resources to lean on. One of the few benefits (depending on which side you're on) of a downturn is these smaller agencies often come available at fire sale prices. It's a rare opportunity to grow the agency's client roster, talent pool and location count by acquiring shops that are often really innovative and can even introduce new capabilities to your agency.
Not sure how to find such bargains? There is an entire industry of brokers who do nothing but help distressed agencies find willing buyers. Once you connect with one, you'll never have to look far for possible acquisitions.
Kevin O'Leary ("Mr. Wonderful" on CNBC's Shark Tank) famously said; "Downturns are the best time to start businesses, because you develop discipline that's very lean and mean in terms of how to spend money. And those habits serve you very well in good times." With the right preparation, agencies can turn downturns into opportunities to emerge stronger, leaner and more profitable than before.
Get started by scheduling a free online demo of Advantage's integrated agency management software. It's the only system purpose-built for agencies to consolidate Accounting, Project Management and even Media into one powerful operating system that gives your agency the automation, integration, insights and ability to make the most of every opportunity.