The Art of Restructuring Your Agency in Difficult Times

Since the fall of 2008, the economy is still reeling from continuous hits to the head. The slump is taking a toll on businesses of all kinds around the country. All of our clients are feeling the impact; some more than others. It seems everyone is taking a wait and see attitude.

The urban legend that the Chinese character for chaos also means opportunity is still a nice metaphor to learn from (even if it is not a fact). It is true, however, that in nature a new (revolutionary) creation comes after the old entity “dies.” A butterfly pops out of a chrysalis that the caterpillar entered. Suddenly, an entirely new species shows up from the ingredients of its former life.

Businesses can follow the same process of an entirely new creation developing from the remnants of an old concept. Take advantage of the current chaos to re-create your business model. Create ways to “recession-proof” your business. In these turbulent times, people are willing and open to accept radical change. Exploit this current mind shift. Turn lemons into lemonade and seek opportunity from the chaos.

Be the Leader

It is tough out there. Hard choices will have to be made. Having a clear vision of the “facts” is imperative. This will mean getting some input from outsiders (consultants, CPAs, board members, friends, employees, etc.) Take off the rose colored glasses and put on the green eyeshades.

Concentrate your effort on the things that are under your control. Accept, as they are, the things that are out of your control. It is a waste of time and resources to try to change or fix things you cannot control.

First, focus on the fundamentals of your business. The primary steps should be to cut expenses and maintain or increase revenue. Next, take action to develop new ways to do business. All the rules have changed. Uncertainty is the only reliable thing right now. So radical change to your business will not only be accepted, but also encouraged.

Stop the Bleeding

Do what it takes to retain your key clients, even if it means you work with them to cut costs — and your commission. They will remember your efforts because customer service leaves a lasting impression.

Now is the time to explore new areas for income. Find out what your customers need and figure out how you can deliver it. Develop value added services for which you can charge a fee. Make a real effort to cross-sell accounts. Expand into niches or program business. Create affiliations with others to offer packaged products and services.

A broader income base is needed during this economy to make a business less vulnerable. If the business is “too focused” in one area, it can suffer devastating losses. A good model is to have two or three niches or areas of focus, along with some general or miscellaneous business.

Hold Agency Brainstorming Meetings

Engage your employees to be an advisory team and get them involved. Your employees usually will have great ideas and answers to help you trim the fat in the agency and improve your business. Unfortunately, they are often the last ones asked, if ever.

Make sure the rules and goals for an advisory team are clear. This is not intended to be a complaint session, but rather a brainstorming session. It is important that owners need to be willing to incorporate (many) of the suggestions, even if it impacts them directly or just does not “seem” like something they would do. If it is a good idea that will work, use it. Otherwise, your employees will be less likely to help in the future.

Get Rid of Dead Wood

This is the time you can clean house of people that are not pulling their weight.

Many agencies have done this already. For some owners, this is very hard because they might never have fired anyone. However, it is sink or swim time.

It is always wise to consult with an HR expert or attorney. Employment laws and regulation are so intrusive now-a-days and you don’t want to make mistakes. Employees should always receive adequate reviews, and if needed, counseled for poor performance. Personnel files need to be well-documented. But, none of this should stop an owner from keeping the good employees and letting go of the under-performers.

Lower Staff Costs

If your office salaries are more than 22 percent of your revenues (after you have gotten rid of dead wood), you are probably overstaffed. If you need to cut costs in this area, be creative in your approach. A “good” employer will do what ever it takes to retain key employees.

Instead of laying off individual people, look at ways to reduce the overall work hours for your staff. Some people might be willing to accept a part-time position if they can work from home, for example. You might need to just cut the number of work hours across the board. Find out what will work best with your staff by discreetly asking a couple of trustworthy employees.

If you do reduce the number employees, it would be wise to bump up the pay to the remaining employees that take on the extra workload. This gesture is a wise step to retain the key employees. For example, you might save $40,000 if you need to cut a CSR. However, if one or two employees end up taking on that person’s workload, they should get bonus pay (not a salary increase) of perhaps $5,000 to $10,000 to handle the additional workload.

Summary

Those that are flexible and willing to adapt will survive this economy. Now is the time to re-invent your business model. Changes made to help you survive will also give you what you need to make the agency thrive when the economy turns around.