|Art Stevens and Rich Jachetti co-authored this article.|
Some PR agencies are currently in a state of freefall because of the coronavirus pandemic. This is a situation that is reminiscent of the hit PR agencies took during the 2008 financial disaster.
In that case, several agencies lost as much as 50 percent of their business. Most stood firm, however, and did what they needed to survive. And they came out far better after the disaster than before. And now, suddenly, our world has now been turned upside down because of the coronavirus.
Current preparatory measures include concepts such as quarantining, embargoes and social distancing. Theatres, restaurants, nightclubs, cruise ships, schools and many other public gathering places have been closed for the duration. We don’t know how long the world will continue to be affected by the spread of this virus and how many lives will be taken. But we do know that many public relations agencies are being hurt by this phenomenon. I talked to the head of one PR agency today who believes that she’s experiencing such a freefall that she’ll have to close her doors permanently and even declare bankruptcy.
We take the position that if you look ahead during the next four months and take the necessary steps now, you’ll survive, and that business will return to near normal. Once the virus dissipates, it will be a case of economy catch up and PR will thrive again.
If your business is eroding somewhat because of client defection and reduced budgets, take these steps now for the next four months.
Plot out a worst-case scenario for the next four months. Determine which clients will remain and which will leave or reduce budgets. If your agency is in the travel, tourism, restaurant, cruise ship or discretionary spending niches plan for the very worst.
Plan to lose 50 to 75 percent of your business and truly hope that it’s not that much. Then put together an operating budget that accommodates such a loss of business.
Be sure that the ratios of the operating costs are commensurate with the number you have determined as your revised net revenue number for each of the next four months.
Payroll must decrease. This is your largest expense and a given. But instead of mass layoffs, ask your senior managers to pitch in by taking salary cuts during the next four months. If you’re truly in freefall, you may have to reduce their salaries by the same percentage of business you’re projecting to lose. It may be up to 50 percent. But if your key employees are truly sensitive to the need to keep the business afloat, they’ll cooperate. The downside for them—should they choose to resist—is to enter a marketplace where there will be far fewer employment opportunities.
There will be many layoffs in the PR agency sector. Try to minimize yours. This is a time when agency personnel truly need the support of agency owners.
Ask your landlord to cooperate by reducing your rent by 50 percent for each of the next four months. This may be a hard sell, but it’s worth the try. The landlord may be willing to work with you on this rather than lose you as a tenant altogether.
Scrutinize your present operating costs very carefully and eliminate any that aren’t in the category of vital or necessary. Travel and entertainment, of course, would be the first to go.
Set an example for your key players by reducing your own salary—and perks—by the same percentage you’re asking them to sacrifice.
We assume that your firm has run at a profit before the onset of coronavirus. Thus, you have some wiggle room. You can bring your profits down to just below break even for the next four months to keep the business going. If you’re barely profitable now, you have a tougher road to hoe. Hopefully, you’ll have some reserves in the bank.
Be even more aggressive now about collecting receivables. Hopefully, not all your clients will be in an insolvency situation themselves.
Look into all Federal, state and municipal services that are being set up to help small businesses survive the coronavirus time period. You may be able to generate interest free loans as well as receive other vital support services. Assign someone on your team to investigate these sources thoroughly.
Anticipate which of your clients may need to reduce budgets and/or terminate altogether. Meet with them as soon as possible and bring ideas to the table which will help them through this crisis. Now is the time to be proactive and convince your clients that your services are even more important now than before. But be prepared to present affordable budgets given the circumstances.
Be sure you also focus on employee morale. You’ll need employees to make certain sacrifices, but you’ll need to earn their trust and loyalty. But be realistic and transparent. Anxiety is rampant, and your employees expect agency owners to be pillars of empathy and support.
And, finally, be proactive. If you assume a woe-is-me attitude, you’ll fail. Now is the time for you to proceed aggressively and take all these steps and others to keep your business going until we come out of this crisis. It will test your business acumen and your survival instincts. But don’t fail. We need you.
Art Stevens, APR, Fellow PRSA, is managing partner of The Stevens Group, a firm specializing in mergers and acquisition consulting and facilitating in public relations/digital marketing marketing sectors. Rich Jachetti is senior partner at The Stevens Group.