Back in 2019, just months before a global pandemic forced the US into a recession, Forrester CEO Keith Johnson noted that agencies could lose up to 30% of their revenue in a recession.
The COVID-19 recession officially lasted just two months—April and May of 2020—though it was the beginning of an economic retraction that we’re still feeling today. In fact, a recent McKinsey survey revealed that a 81% of American CEOs think another recession is coming.
The signs are everywhere, including within executive board rooms and offices. Inflation is at a 40-year high. Companies like Peloton, Netflix, GAP, and Snap, Inc. have laid off employees due to slower business growth. And marketers everywhere are trimming their budgets.
Agency founders are hyper-aware of the headlines, feeling extra pressure to make changes to shield their company from an economic crisis. Preparing for another downturn and adjusting your agency business model are key to becoming recession-proof.
Prepare your agency for an economic downturn
A recession affects everyone, but agencies have unique challenges, chiefly how to retain employees and keep the business running if (or when) their clientele evaporates. Clients will more readily fire service providers than they will their employees, which threatens profits and, conversely, your own talent pool.
The good news is that recession-proofing your business is an effective growth strategy. Many of the things your agency should be doing to weather a downturn are things you should be doing anyway to modernize and future-proof your business.
Key strategies include things that might seem counterintuitive - like maintaining or increasing your advertising budget - to more obvious moves like diversifying your client list.
Seek "recession-proof" clients
While no industry or business is completely immune to downturns, layoffs, and budget cuts, some are more likely to weather a recession than others. Cater to the most ‘recession-proof’ types of clients possible, including those in healthcare, government, computers and IT, education, food & beverage, and transportation.
Ask some basic questions to help narrow down the best industries to focus on. What are their website needs? How would a recession impact their day-to-day operations? What does their landscape look like and what services are they after because of it?
Another strategy to consider: eliminate high-maintenance, low-return clients. Cut some of your underperforming customers to free resources for new clients and refocus your time and energy on your best clients.
This may seem counterintuitive (and scary!), so it's best to secure new business before ending a relationship. When you’ve confidently scored a new client, respectfully decline to renew your contract with the former one.
Look to remove clients who are consistently late with payments, have poor communication, or are over-demanding and prone to scope creep.
Foster client loyalty and inspire referrals
Keeping your best clients happy can help you maintain - and grow - your agency during a recession. This is a proactive strategy that agencies should focus on regardless, but it’s particularly important to place a premium on your agency’s user experience.
Dedicate time to check in with your clients and employees, and commit to keeping a steady stream of communication so no one feels in the dark about critical information. Remember the old adage: people don’t leave bad jobs, they leave bad leaders. The same holds true for clients and agencies.
For mid-to-large scale agencies, consider transitioning to a pod model, which assigns small teams of three to seven employees (each with a different specialization) to a single client. This fosters client loyalty by streamlining communications and allowing each pod to attend solely to one or two clients.
When you have a loyal and happy client base, they're more likely to refer you to their colleagues and partners. Create referral incentives for your clients to forge relationships with their recommendations. These people are warmer leads that have been vetted by your existing clients, and will more readily spend with your agency.
Invest in advertising and strengthen your online presence
In a downturn, businesses tend to slash their ad spend, but this is often a mistake. Maintaining a consistent pipeline of new customers helps you diversify your client portfolio and keeps your business - and brand - top of mind.
Research from Analytics Partners reveals that over half of brands that increased their paid media spend in the last recession saw a rise in incremental sales. The same research found that marketers who cut their advertising spend during a recession risk losing about 15% of their revenue.
Investing in paid media along with a strong website and social media presence can help you weather a downturn. Take pride in a well-built portfolio, focused on communicating how your agency helps businesses solve a problem. Strong SEO is the cherry on top that “shows Google you know what it’s looking for,” as Kellyann Doyle, Inbound Marketing Manager at Zoek tells us. By combining the boost in discoverability that comes with paid media with content that aligns with your audience’s search intent, you can fortify your brand’s reach, and your conversions by extension.
Use social media to amplify and share relevant industry news, blog posts, case studies, infographics - anything that will help position you as a thought leader in your field.
Double down on sales and lead generation
Generating quality leads in an uncertain economy is important for maintaining agency growth and profit. Account-based marketing is a digital marketing strategy that focuses sales and marketing efforts on high-value accounts most likely to convert, instead of casting a wider net. Nearly 90% of ABM marketers say this strategy achieves better outcomes than other approaches.
Use ABM to identify companies that are similar in makeup and industry as your top-performing clients. You can also surface high-value accounts by reaching out to people in your existing network. For example, create a list of former clients - people who you worked with on an existing account, but moved on to a new company.
Retain your core team
The natural tendency among founders during tough times is to create leaner teams and processes. But hasty moves like laying people off or cutting salaries can instantly undermine the rapport you’ve worked so hard to build with your employees.
Instead of looking to minimize expenditures - which often hurt company culture - agencies should look to maximize workflows and find new clients. That means rethinking your remote work strategy, or switching to a four-day work week, which has been shown to increase productivity.
Make sure you think about slowdowns and revenue during the hiring process too. Retaining talent can carry you through a recession because it ensures you won't come up short when you land new work. It also avoids the costs and headaches associated with scouting and hiring.
Aim for low-risk, high reward
If nothing else, the pandemic and the resulting economic downturn forced businesses to get creative. The great reshuffle not only changed the way companies got work done - namely, remotely - but it also spurred creativity in the types of work companies took on.
In a recession, focus on low-risk, high-reward projects - ones that generate the most ROI with the least amount of investment. This may mean thinking outside of your typical project scope or targeting new (and untapped) markets. Something like cross-selling SEO with web design, launching courses or paid virtual events, or bringing on a developer to take on more complex projects with higher payouts.
By taking on new projects and experimenting with new ideas, both for your team and your clients, you'll be in a much better position to survive and thrive during a downturn - and come out the other side stronger.
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