The COVID hangover was certainly more nausea-inducing than many expected with the last two years of rising interest rates and declining consumer confidence leading to a wide array of businesses feeling the pinch.
A group of businesses that have certainly felt this impact are creative agencies, and comms businesses in general, and unless you’ve been servicing a recession-proof industry (government services perhaps?) then you’ve noticed a lot of belt-tightening.
It does seem there is currently some light on the horizon, but what to do in the interim to pull yourself and your team through?
Go back to business basics
Go back to basics with the following and please note most of these will apply to any service-based business and could even include accounting firms!
- When was the last time you checked your hourly rates against the rest of the market? Test them and make adjustments if required and pay particular attention to staff on high salaries with relatively low hourly rates, these can be a killer to the bottom line.
- Are these being done with religious fervour, or mostly ignored? Without accurate time records for billable work it’s almost impossible to track the financial performance of your team or to know if your quoting is accurate. Make it a non-negotiable.
- Have you calculated what the theoretical capacity of your existing team is? The basic calculation is available hours x charge rate = billing capacity which you apply to all staff and then add it up. Is the capacity close to your budget? Or is there a large gap that needs to be closed with more work, or less staff?
- Shake the tree. How often are you and the other senior people in your business meeting with existing clients and referral partners? It might only take a few chats to bring in some more work, chats that are easy to skip when you’re busy, but become all the more important when things slow down.
- Cut the fat, carefully. I’m not a big fan of letting people go because you’ve had a few quiet months, but if you’re thinking of downsizing the team be sure to do so based on real numbers – review performance, capacity, pipeline, etc. It can be very expensive to have to rehire in a few months’ time when business picks up again so go slowly here. You can be less slow when it comes to unnecessary overheads like subscriptions and the like, cut away.
- When did you last review your budget? Now might be the time to build out a new 12 month budget which reflects the economic reality you face so you can plan ahead for any cashflow issues you might have.
- Product review. Have a look over the different services and products you’re offering, look at industry niches too whilst you’re at it, and do some analysis (timesheet data will help!) to see where you’re making your money and perhaps consider shifting your focus there. A small business can be very successful within a very small niche.
None of this is a silver bullet, but hopefully by returning to basics you’ll give your business it’s best shot at getting through this challenging time.
Want to know more about how to run a profitable creative agency?
Here’s some expert tips that might help you further.
Or get in touch, and we will help you out!
