How To Run Your Firm In Uncertain Times

I'll talk with 3-4 prospective clients and 15-20 clients every week, and I like to ask them how things are going. I also try to stay in touch with larger groups, and of course this weekly email goes out to tens of thousands of you.

What I'm hearing, though, is a lot of mixed signals. Some are doing exceedingly well and can't hire fast enough. Others are in their second layoff this year alone. And the vast middle are just doing okay. Sales cycles are longer, scopes are smaller, prospects ghost you more than dates did in college, and it's just "meh" out there. It's nothing as bad as 2001 or 2008 or the first part of 2020, but we're not setting many (good) records, either. This missive is addressed to those of you in the vast middle who are doing okay, but wondering how to process it all so that it stays that way.

What's a principal to do in that environment? While you answer that for yourself, keep these two important principles in mind:

  1. Retain your options.
  2. Concentrate on what's best for the entire team.

I'm a little ashamed to say that these could be viewed as a little obvious, but sometimes the obvious is just what we need.

And against that background, then, here are some specific ideas.

  • Resist opening flood gates to unqualified clients. Subpar work might be better than no work at all, but it's also dispiriting. If you do take some of it, don't get all pissy with the client. This was your choice.
  • When things improve for you, replace those clients before you grow. In other words, when you land a new (right fit) client, swap them out for the subpar ones you accepted earlier just to bridge the gap. You are not going to turn bad clients into good ones, and it's best to keep telling yourself that.
  • Be as transparent now as you'll be when things are great. What I'm arguing against, here, is suddenly being all open-booky when things are tough and then clamp down when everything is great again. Personally, I lean on the "transparent" side, not because it matters to most of your team, but because it will always matter to some of them, and those are the people on your team in situations like this who will help you run things as if they are owners.
  • Use the rougher times to make the tougher choices you've been putting off. People usually describe this as "not letting a good crisis go to waste" and it's good advice. Rip the Band-Aid off. You don't cut a leg off one inch at a time, and so make your best guess at how deep you need to go and just do it. When you get the engine running on all cylinders again, you'll be a lean and mean machine without an extra weight.
  • Live in the present and don't borrow from the future. Specifically, I'm talking about money. Borrowing money simply defers the tough choices and extends the recovery period. Borrowed money doesn't hit your P/L as income, and paying it back doesn't hit it, either (except the interest). Most firms pay too much attention to the P/L and not enough to their balance sheet. If we're going to borrow from Nike, here, "Just Don't Do It."
  • Get your positioning right and be disciplined about marketing your firm. If you can't bring yourself to do it now, finally, just admit that you'll never do it and quit pretending. If you aren't truly differentiated and good at finding right-fit clients, there's no better time to start than now.
  • When you consider the options, never let what your peers or team or clients or public might think matter at all. Just do what's in the best interest of the firm without regard for your reputation. Some of the strongest, most well-run firms aren't immune to corrections, and strong leaders face the truth rather than paint over it.
  • Think really big. Do you need to cut a partner loose? Buy the firm back since you're hating the earnout? Change the entire business model? These can be beautiful times.
  • Don't worry about profit as much as cash. Yes, you should be aiming for a consistent >20% profit (after normalizing your compensation), but temporarily making no money is fine. What's not fine is a dwindling cash reserve, so pay more attention to that during tougher times, and then switch back to looking at profit when things improve.
  • If you do need to trim staff, don't focus on the lower rungs alone. Cut from the bottom, the middle, and maybe the top. You're more emotionally attached to the middle management...and they are the ones who do the stuff you hate, but that's not a good reason to not cut everywhere. And "last in first out" should have no bearing on your decisions.

I hope this helps. There's lot of free articles and webinars on the site if you need to explore any of this further. If you need help, just let us know.

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