Well, the first two months of the year are over and, guess what, we’re
starting to catch a whiff of panic. Agencies expecting that ’04
will finally be the year they’ll put the cap on the red inkwell
are getting a little twitchy. Why isn’t this upturn hitting
the bottom line?
I think this is going to be another tough year for mid-size agencies
and here are the reasons. There will be more pressure from clients
to perform because everything’s been leaned out to the last
notch; accounts which wouldn’t even consider changing agencies
a year ago are now shopping around; the kind of fluid environment
we’re in means switches become increasingly common and there’s
almost a domino effect as more and more accounts bed-hop; and agency
staff rosters have been slashed with many good people previously
anchoring accounts gone. Just the kind of stuff you don’t
want to think about the first week of March, right?
Of course you may be at one of those lucky agencies where this
looks like the biggest year ever, but if not maybe you should think
about hedging your bets.
Take a deep breath and look hard at what you see as the first
quarter ends. If you’re projecting a loss or sense an account
disappearing soon, do whatever is necessary NOW to stop the bleeding
and maintain profit even though you’re probably nauseated
by the thought of another round of painful decisions. Peter Drucker
says the purpose of a business, any business, is to stay in business;
it’s your job to make that happen no matter how unpalatable
it is.
Steel yourself against denial. We heard an otherwise intelligent
agency principal say recently, “Our problems would be over
with one good-sized account win.” Danger, danger! That’s
a classic ‘flight’ response (as in fight or flight)
that’s code for let’s ignore reality and pretend how
great it would be to win the lottery or escape to a warm Caribbean
island. Remember, fantasy doesn’t spend like cash.
Yes, all of us at one time or another hoped the next pull on the
handle would mean hitting the jackpot. But in the black and red
business world predicating decisions on blind hope is a much bigger
gamble than playing the slots. At least when you’re gambling
recreationally you pretty much accept the odds for what they are.
And they’re probably better than watching dollars dribble
out the door while you hold your breath for one juicy account.
Don’t forget – in our business the rules for making
a profit are straightforward. An agency with say 13 employees has
to be profitable at that level; one with 300 has to be profitable
at that level. So if you’re not profitable at the size you
are, you’ve got to adjust what’s adjustable. Though
some would rather play craps.
Most entrepreneurs are high control types who get buggy about
things they can’t manage. So fix the things you CAN control.
One obvious example is cost: if your monthly numbers won’t
feed your obligations (salary load, rent...or your lifestyle needs),
rein ‘em in. No, it won’t be fun, and yes, you’ve
already done it more in the past couple of years than you did in
your first 20 years in business. But it’s still the right
thing to do.
Remember that our business is like an accordion - expanding when
there’s a lot of air and shrinking when there’s little.
It’s never the same size for long.
So as 25% of the year disappears, make sure you’re doing
everything you can to get your agency running right by controlling
what you can – the back office, systems and procedures, structure,
deploying your resources strategically, and all the other things
you can actually affect (for a quick refresher on the basics of
agency financial management see The Agency Checkbook on
our website
article page.
Because if you depend on one more pull for a big win to make your
numbers, you better have a really large pile of coins handy –
that you don’t need to keep – to feed the machine.
