Can you grow your agency during a recession? In this post, we’ll share 9 actionable tactics you can use right away to grow revenue and get more clients, even during a recession.
Growth during a recession?
It might sound contradictory, but it’s not impossible. The history of recessions is filled with stories of firms that thrived even when the rest of the economy was shrinking.
Marketing and creative agencies have an advantage in that their production is hardly impacted by the widespread lockdown measures in place currently. Even once the measures are lifted, your people can continue to work from home unhindered.
What you really need to grow during this time are a) good strategy, and b) actionable tactics to identify and target growth areas.
We’ve talked about surviving in a downturn in an earlier post. In this guide, we’ll dive into some actionable tactics you can adopt to grow even during a recession.
A Three-Point Recession Strategy
Should you strap in and conserve cash or expand aggressively to corner market share during a recession?
A little bit of both, according to a groundbreaking Harvard Business School study on recessions.
The study analyzed over 4,700 firms through multiple recessions. It concluded that while most businesses suffer during recessions, a small percentage – over 9% – greatly grow their profits and market share.
Moreover, the study also found that:
A conservative approach – saving cash and cutting investments – helped the firm survive the recession. However, it impacted their long-term growth prospects and eroded market share.
An aggressive approach – investing in marketing, research, and talent – often left the firm too little cash to survive a prolonged recession.
The only companies that thrived were the ones that avoided either blanket optimism or pessimism. Instead, they worked nimbly, expanding or contracting as per market conditions.
Think of this as the first rule for growing during a recession:
Be nimble and flexible. Don’t buy into either a growth or conservation strategy outright. Listen to your customers and the market, and change your approach accordingly.
But being nimble isn’t enough; you also need cash to make your moves. And for an agency, clientflow is as important as cash flow.
This gives us the other two rules of growth during a recession:
Focus on cash: Get as much cash in the bank as you can. Cut costs and limit debt – at least in the early stages of the recession. Cash will give you the space to maneuver.
Retain clients: Acquiring a new client can be up to 5x more expensive than retaining one. Even if you minimize billing, make sure that you still have the client on your books – or at the very least, an open channel of communication.
These three rules should be at the heart of your recession strategy. If you have cash in the bank, clients in CRM, and the flexibility to change your approach, it’s not impossible to grow even during a downturn.
On that note, let’s look at some actionable tactics you can adopt to grow revenues during a recession.
9 Foolproof Growth Tactics for Recessions
Let me preface this by saying that none of these tactics are magic bullets for cruising through a recession. Every business is different, as is every recession. Use these tactics as inspiration for crafting your own plan of action.
With that disclaimer out of the way, let’s look at some tactics that can help you grow during a recession:
1. Productize your services
Repetitive, low-skill work often forms a large share of revenue for many agencies. Think of work like designing logos, writing blog posts, or creating social media graphics. If you already have a strategy in place for each client, the creative production requires very little involvement.
Consider spinning off all these services as a standalone “product”. That is, instead of charging clients by the hour, you offer them a bundle of services priced like a product.
For instance, 99Designs offers customers a self-serve platform with upfront prices for different services:
For more stability in earnings, you can offer monthly subscriptions (like SaaS) for repetitive work such as creating social media content.
This helps you in two ways:
It gives smaller clients more control over their billing. They know exactly how much they’ll have to pay each month. They can also cancel anytime – a source of comfort during uncertain times.
It gives you predictability in your revenue. Instead of uncertain hourly billing, you can be sure that you’ll get at least the stated price for your service each month.
This approach works best for agencies that have a lot of small business clients and/or do a lot of repetitive work.
For instance, WebFX, which primarily serves small businesses, offers upfront pricing and deliverables bundled as monthly plans for all its services.
2. Offer more free consultations
If you’re good at something, never do it for free…
…or so the popular wisdom goes.
During recessions, however, it can be a good idea to pull out the free consultations card.
I know that free consultations can be time consuming. I also know that you get a lot of tire kickers who will just waste your time. But during a recession, clients are desperate for new ideas. Many also go through messy breakups with their current agencies.
When they want new ideas, your “free consultation” offer can come in handy.
As we wrote in an earlier article on agency pricing tactics, this tactic is mostly localized to SEO agencies.
However, content and digital marketing agencies can also benefit from it, especially if you refocus the consultation on recession issues.
At the very least, it will open up your pipeline.
3. Poach talent from heavily affected agencies
Know any agencies that primarily serve the travel industry?
Now might be a good time to approach their people with job offers.
It’s unfortunate but the current crisis isn’t going to affect every industry equally. Some sectors – and the agencies that serve them – will be more affected than others.
When – or if – such agencies choose to shelve their workers, you’ll have ready access to a high-quality talent pool. In a talent-focused industry, getting access to quality people can give you a massive advantage in the long-run.
Consider this tactic if you have substantial cash reserves and can afford to pay your new hires for the next 12-18 months. Keep an eye on your core agency metrics to know how efficiently you make use of new hires (in particular, look at your AGI: FTE ratio).
Just make sure to not go overboard with hiring – recessions can often last longer than you expect.
4. Diversify revenue channels
Crew, an app development agency, hired a photographer for a project but ended up with far more pictures than they needed. Instead of sticking the pictures in a forgotten folder on their hard drive, they made a side project – Unsplash – and gave away everything for free.
This side project is now a stock photography behemoth with over a million images and tens of thousands of users.
Agencies have a long history of creating side projects for fun and for profit. While they can’t always replace your primary income, they can help you diversify revenues – crucial for surviving in difficult times.
These side projects can be anything – apps, physical products, courses, etc. In normal circumstances, you might adopt them to learn new skills or market your agency. But now, your focus would be on monetization – while also learning something new.
5. Diversify your brand
WPP has Grey, Ogilvy, and Kantar; Omnicom has BBDO, TBWA, and DDB; Publicis has McCann and HUGE.
Some of Interpublic’s agencies (Image source)
All these holding companies operate dozens of agencies, often in the same vertical. While there are countless reasons to do so, a key one is brand diversification.
As we’ve discussed in the past, agency positioning is crucial for the success of your business. There is no “one agency fits every client”; you’ll attract different clients based on your positioning.
Having a single agency brand severely limits your flexibility in a time of crisis. You’re locked into a narrow client market. If you’ve positioned yourself as an “agency for B2B tech companies”, you’ll struggle to attract, say, fashion retailers as clients.
Counter this by building more than one agency brands. These should target two (or more) different customer segments.
Your goal is to build a client book that can survive a crisis. If one brand sees its client list eroding, you should be able to turn to the other for growth.
6. Cut out your worst customers
Cutting clients during a recession?
It might sound incongruous, but sometimes, getting rid of clients can help you make money.
Agencies often have clients that simply take up too many resources to be profitable. The reasons can be any – scope creep, delayed payments, etc.
Keeping such clients around in a recession can be a distraction. At a time when you need to go all-in on retaining your best clients and acquiring new ones, keeping unprofitable clients lingering around isn’t the smartest of moves.
To do this, you need to figure out:
Overhead rate for each client
Total profitability for each client
The first metric will tell you whether you’re over-servicing any client. The second will tell you the profitability of each client.
Tools like Workamajig can make this process much faster. For instance, Workamajig can tell you the total revenues, COGS, overhead allocation, and profit (Agency Gross Income) for each client from a single dashboard:
If you find a client that’s constantly near low or negative profitability, consider letting them go. You can use the freed-up resources for more lucrative clients.
7. Look for opportunities on platforms and marketplaces
Freelance platforms (like UpWork) and service-focused marketplaces (like CreativeMarket) can be useful sources of additional revenue during recessions. While they should never be your mainstay, they can be good for utilizing unused resources (both assets and talent).
Look for projects at the bottom end of your service offerings. Most freelance platforms tend to attract budget buyers who might not have the money for a full-fledged agency – at least not during a recession. Getting such clients on your books (even if it’s through a platform) can lead to more opportunities later.
Also look to offload existing assets on marketplaces like CreativeMarket, ThemeForest, Shutterstock, etc. If you have any pictures, landing page templates, logo designs, fonts, etc. lying about, selling them on marketplaces can be a source of side income.
Your goal isn’t to supplant your client income but to diversify it enough to be more “recession-proof”.
8. Change your pricing strategy
Hourly billing is a poor strategy for thriving during a recession. It doesn’t give you the stability of a monthly retainer, nor does it give clients the predictability of fixed bills or results.
Instead of hourly billing, try either of these two approaches:
Fixed monthly retainer that gives clients access to certain services. Clients can add-on extra services as necessary – like a SaaS subscription. This approach works best when clients are well-placed financially.
Results-oriented billing where clients pay for confirmed results. This can be anything like conversion rate, rankings, leads, etc. This helps clients settle their anxiety about spending money without getting any results.
Pay-for-performance billing can be extremely lucrative (for you as well as the client) if you are confident in your capabilities. If you know that you can bring in results within a set budget, you are free to charge a substantial premium without dealing with hourly work.
In a recession, results-oriented billing can help you attract clients who might otherwise be wary of spending money on marketing.
9. Adopt more aggressive SaaS-like sales strategies
How many agency websites do you know that have live chat?
Conversely, how many SaaS websites do you know that don’t have live chat?
While I understand that agency sales is simply different from SaaS, growing during a recession means breaking some rules. Tactics like live chat, SEO, customer contact numbers, etc. can open up new opportunities, especially if you’re targeting customers at the low to mid-end of the market.
For example, digital marketing agency WebiMax uses both live chat and dedicated phone numbers right on its homepage:
Sure, this approach might not work for every agency – it’s hard to imagine a top brand recruiting its next ad agency through a live chat tool. But if your agency serves small businesses, deals in volume, or offers repetitive, low-margin services like SEO or PPC, you can benefit from a SaaS-like sales approach.
Over to You
It’s no secret that recessions are tough, especially one fostered by extraordinary circumstances. No one knows how long the recession might last, how severe it will be, or if we will even have a recession at all.
However, if you adopt these tactics, conserve cash, and expand judiciously, you’ll be much better placed to grow in the coming few years.
One way to conserve cash is to use better software. Instead of paying for dozens of tools, choose a complete management solution like Workamajig to run your agency. You’ll get unprecedented insight into your business, manage your sales, and run your projects – all from the same dashboard.
To discover more visit: feedproxy.google.com