2. Pump up new business development
You need to increase sluggish sales by landing new
clients and projects. However, you don’t want just any work—it has to be
the right kind. Again, concentrate on your strengths. Don’t panic and try
to take on anything for anybody. That would water down your brand and
take you into areas where your firm is less competitive (and probably
less competent).
To help with your new business efforts, review your
promotional tools and activities.
Do some research into current industry trends and
focus on client categories that have the most potential. Your goal in all
this is to be a leading provider of premium services in strong demand
within client industries that are expanding.
At the same time, of course, you want to nurture
ongoing relationships with the best of your existing clients. Networking
is always important, and it’s perfectly acceptable to ask for business
referrals and testimonials that you can use for marketing purposes.
3. Cut labor costs
A slump in sales must trigger a prompt reduction of
expenses. Where should you start? Look at the big-ticket items first. In
design firms, labor is by far the largest business expense. If you don’t
have enough work to keep everyone busy, immediately release any
freelancers you’re using. Then, if there’s not enough work to keep your
regular employees productive, consider trimming the workweek and
prorating compensation accordingly. For example: Cutting back the
workweek from five days to four represents a 20 percent reduction in
payroll costs. This change is a temporary measure only. If payroll
continues to be too high for you to cover, the next step has to involve
permanent layoffs.
4. Cut other costs
We’ve been discussing labor, but of course payroll
is not the entire financial picture. You have many other business
expenses as well. Some of them are directly related to active projects.
Be sure that you budget and track all project costs tightly, that all of
them can be billed back to the client, and that your invoices include
full markups. Next, sort through
non-project costs in order to establish clear priorities. Chances are
you’ll find some overhead expenses that can be eliminated entirely,
including such non-essentials as fresh flowers or free food in the
refrigerator. For things that can’t be eliminated outright, think of ways
to reduce them.
5. Manage cash
Even in good times, many design firms have trouble
with cash flow. It’s an even bigger challenge when business is bad. With
any luck, you built up some reserves in the past. They will be helpful
now when you’re on deadline to pay such things as rent and taxes. To
maintain financial health in tough times, it’s important that you don’t
operate in the dark. Prepare a detailed cash flow projection on a weekly
basis. You need to anticipate when funds will be coming in and plan
exactly how they will be used.
6. Rethink
As the old saying goes, a crisis is an opportunity
misunderstood. Perhaps it’s best for you to look at this entire situation
in another way—it may be a strategic opportunity for you to rethink and
reposition your firm. After layoffs and cost cutting have made you leaner
and meaner, it’s much easier for you to grow in a new direction. Use this
downturn to make changes and improvements—to fine-tune your internal
systems, rethink your services and resources, even reposition or
restructure your firm entirely. By doing this, you’ll be prepared to
benefit when the economy begins to expand again.
Lessons learned
Remember that this downturn is temporary. It’s part of a natural cycle. When you’re back at the
top, remember the hard lessons you’ve learned: Build reserves, diversify
clients, run credit checks and set limits, hire cautiously, constantly
update projections, and watch those business trends!
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