Recession-Proofing Your Firm before Recession Strikes

Although no one at this moment knows for certain it will happen, the press is actively talking about the possibility of a large downturn in the economy over the next year or so. If it occurs, it will likely be a recession, which would have a major impact on the continued success of most public relations firms.

Obviously, no one wants a recession, or anything close to it, but if one comes along firms in the know will be prepared to weather the storm. They will have refocused themselves as “recession-contrary” businesses.

Instead of putting their heads in the sand, they will continue to put investment money into their firms, hire quality staff, expand office space, maintain desirable working conditions, give generous employee benefits, and use the best technology and outside consultants.

This may seem counter-intuitive, but by doing so, these firms will use their preparedness not only to protect themselves when a downturn hits, but also to get in shape to grow even faster during the downturn and certainly as it slows and finally ends.

The common thread among these recession-contrary firms is they consistently manage by the numbers regardless of extenuating circumstances. They work with benchmarks such as Gould+Partners’ rules of thumb:

  • Keep labor costs under 50% of net revenues.
  • Keep operating expenses around 25%.
  • Keep rent between 6% and 7%.

In these unusual times, we recommend you follow suit and insulate your firm from recessionary cycles and other hard times while you can. Once a recession hits, it may be too late to do much but run for cover. Some of the things you can do now to be well-prepared:

  • Hire a top-notch PR specialist in a specialty different from your current offerings. This person will allow you to offer additional services and expand your offerings and build a new core of clients.
  • Diversify your services by investing in the new specialty. Be entrepreneurial. Take the risk, oversee it and provide guidance—but allow others in your firm to run and grow the specialty. This will provide a cushion when and if revenues slip in your primary services.
  • Let’s use law firms as an example. Those specializing in M&A transactions during boom years, when deals were infrequent, moved into restructuring and turnaround specialties. Firms looking for work when the economy started to slow, hired attorneys with bankruptcy experience because more businesses were failing and required this assistance.

10 Steps to a Recession Refit

We tell PR agency CEOs whom we counsel that if they continue to manage by benchmarking—by the numbers—they will get through the next economic crisis with minimal strain. But if the worst happens, we recommend the following 10 steps to minimize or obviate problems:

  1. Meet the recession head on with leadership, discipline and the guts to do what is best.
  2. Lay off staff if revenues fall. You can’t keep staff in the hope things will get better. Downsizing is painful, but it must be done.
  3. Cut costs wherever possible: freelancers, temporary help, entertainment, non-essential travel, furniture, office redesign, etc. Do a line-by-line analysis and make reductions accordingly. Sublet space that comes available after layoffs.
  4. Freeze hiring unless for a critical position.
  5. Tell staff they may need to work harder and longer. Staff not willing to do so should be the first to go.
  6. Give discretionary bonuses when the economy recovers to those who delivered during the rough patch.
  7. Defer other bonuses except, perhaps, for lower-level account and administrative staff who count on them, in addition to their salaries, to survive.
  8. Cut pay of top management. They received raises and bonuses when times were great; now they must share the burden until there is a turnaround.
  9. Use conference calling when possible instead of meetings that entail costly travel and hotels.
  10. Although client turnover averages 6%-10% over the years, you can’t take chances in a recessionary climate. So, manage your current and new business pipeline more intently – before, during and after the downturn. Up your prospecting game.

Now, Not Later, is Always the Time

Unfortunately, there is no crystal ball that will show us what will happen if a recession hits home, but with tight management now and a strong idea of what has to be done to be prepared, the majority of the firms will make it through and will have grown in the process. Firms that are not prepared will most likely end up merging with larger firms and their CEOs and owners will go back to being senior account executives.

Keep in mind what the 2008 recession – the worst since the Great Depression – did to the country generally and the PR business specifically. It wasn’t pretty. Let’s work to ensure that the next recessionary drop will be far less damaging and quicker to conclusion by putting on our thinking caps and taking actions now that will protect us when such an eventuality arises.



Don Bates, APR, Fellow PRSA is a Gould+Partners’ senior counselor specializing in M&A services for digital PR firms. Don is also an instructor in PR writing and management at New York University. He runs writing workshops for PR firms and corporate and nonprofit PR departments in the U.S. and in other countries.