Despite the recent budget, 2009 is going to be a difficult and unpredictable year. GDP, interest rates, tax rates, oil prices, commodity prices and exchange rates are all going to fluctuate, and this adds up to an extremely difficult environment in which to run a business. It feels like 1989, but much worse.
The most successful consultancies will be cocoons of stability, certainty, security and trust in an increasingly turbulent world. Creating a benign microclimate is the key to success when the weather outside is harsh.
Leaders need to demonstrate their principles and learn to be more socially responsible, thereby creating a fertile internal culture where staff will thrive and give their best. People will always take their lead from the top and they need to understand what motivates their leaders. Leadership is about giving hope to people. Start to share information that was previously confidential; broaden decision-making across the company; invest in your people; reduce politics; talk rather than e-mail; listen rather than preach. Most likely you will have to reduce headcount sometime during 2009 – be sure to act swiftly and in a humane and professional manner. Explain why this is happening to your remaining staff. Face-to-face communication is absolutely crucial.
Continue to raise the bar when those around you are lowering theirs; enter awards; continue to push clients; create internal markets for ideas where there are no clients; publicise your successes; and promote your most imaginative people. As well as measuring revenue and profit, devise ways of measuring the quality of what you do and reward accordingly. Be brave and weed out work and people who do not meet your high standards.
First be tough. Go through your client list and reduce it by at least 10 per cent by removing the dregs you have acquired over the years – clients that don’t appreciate good design, clients that don’t pay well, clients that drain you rather than lift you. Remember that turnover and size of fee-income are less important than profit per head. Aim to drop down ten or so places in the Top 100, but race up the efficiency league table!
Place your main emphasis with your remaining clients – treat them as friends, stay close to them and reward their trust with great ideas and great value for money. Measure the profitability of your clients by comparing fees generated to time invested – amazingly enough, most design businesses are still unable to do this.
Continue to look for new clients, but in a very focused way – stop speculative pitching and demand to be treated as a professional. But don’t assume that a super new business person is the answer to your dreams. They won’t be. Limit the number of pitches you do and start to measure your conversion rate.
An old northern client of mine would often say, ‘We need to get some more wool on our backs’ before doing this or that. He was right. Companies with large loans are no different from households with large mortgages – they live in continual fear that their masters will pull the rug out from beneath them (even more so today when the banks are running scared). Get rid of overdrafts and term loans if you can even if this means reducing salaries, liquidating assets or borrowing from your relatives.
Remember that more than 60 small businesses a day are currently going out of business in the UK – don’t be one of them.
While offline fees are dropping, online fees are increasing. Annual report businesses know this better than most as the requirement for producing printed annual reports has diminished. Businesses that can’t think digital do not deserve to survive this recession. Integrating the new way of thinking and delivering into your business will not be easy, but the rewards for those that succeed will be great. Clients are now looking for integrated solutions so you need to start delivering them before your clients look elsewhere.
The good news is that you can succeed and thrive in these difficult times – failing businesses means that there is less competition and there is far less pressure on wage inflation and expensive freelance staff.
Draw up a business plan that says what you do, who you do it for and how you do it. Go and talk to your clients and find out their plans rather than guess what they may be thinking. Talk to your staff about what they think. Only then sit down and write your plan, saying what you hope to achieve and by when. Show the plan to someone you respect and then amend it accordingly. If it involves borrowing money, then think again.
Ian Cochrane is chairman of management consultancy Ticegroup