The global economy can be quite precarious, which PR agencies know all too well. In a robust economy, brands and organizations are eager to invest in PR and marketing agencies. However, the slightest blip on a corporate spreadsheet and brands will likely curtail those budgets.
But a full-blown recession is a double-whammy. Agencies not only have to deal with shrinking budgets from clients, but probably will have to dial back in-house, whether that means reducing headcount or holding off on purchasing digital analytics tools.
Rick Gould, partner of Gould+Partners, counsels that agencies need to meet a recession head-on.
“To effectively combat a recession takes leadership, discipline and guts—layoffs if necessary,” he said. “Recessions are usually predictable and foreseeable. Knowing what’s needed to be done not only will ensure that your firm survives, but maintains reasonable profitability.”
He added, “With very tight financial management and an inspirational and positive outlook, you will recession-proof your firm.” Below, Gould provide a checklist for how agencies can weather a recession:
> Lean on your CFO
- She should anticipate the worst
- Fiscally conservative approach
- Project financial future of the firm
- Proactively advise an impending hiccup
- Cutting staff and/or freelancers
- Defer bonuses if necessary
- Tighten T&E budgets
> Maintain two months + Labor and Overhead (Fixed Nut)
- Reserve Fund
- Line of Credit in place
- Good relationship with banker
- Good relationship with vendors
- Weekly cash flow reports
> Monitor Billing & Utilization (Billability)
- 1700 Available client hours the norm
- 90 percent+ should be billable
- Raise billing rates whenever give raises
- Transparency with clients regarding rates and fees
- Tighten collection policies and communication
What would you add to the list?
Join Anchin, Block & Anchin LLP and Gould+Partners April 27 for a roundtable discussion focusing on key issues facing the PR and Advertising industries. Some possible topics include key executive retention, sales tax audits, utilization and social media billing. The roundtable will take place at Anchin, Block & Anchin’s office in midtown Manhattan To register, please click here.