For Agencies
20 min read

How Can My Agency Survive a Recession?

Post by
Yash Shah

    A couple of days ago, Bank of America announced that we are already in a Coronavirus enhanced recession.


    We thought we’d put together some thoughts on how can an Agency survive a recession. Yeap, you read that right. ‘Survive’. The goal for an agency until the recession goes away is survival and not ‘Growth’.

    Here’s the dilemma

    • During a recession, potential clients will get rid of all non-essentials. They will try to get more done with less. So, sales closures will take longer, negotiations will become difficult and all high margin services will be slashed mercilessly.
    • At the same time, your people/team members/employees, who are the building blocks of your agency business, will have the largest impact on your bottomline.

    Basically, Top-line will shrink and outflows will stay the same, at best; which will slash your bottomline. Maybe, even make it negative.

    To add to this misery, clients might not pay on-time. So, cashflows, which are jugular to your business will become unpredictable.

    Here are some steps you can take to make sure you get through this:

    Be Honest, Open and Transparent – Impact on BottomLine


    Share with your team that you will have to make cuts on non-essential items within your company. So no company retreat or no fancy devices or just inflation-equivalent-hike. If you need to reduce the salaries of everyone, start with yourself and share it with them. Explain to them the reason behind these cuts.

    One of the salary cut implementations that we did at Clientjoy in 2014 when we were going through a difficult time was that we budgeted and decided on a base salary of INR 50K/mo. and made it a ceiling. So, everyone who was drawing below that amount was unaffected but everyone who was drawing above that dropped to that ceiling. We made good with them 6 months later and paid the arrears when things went back to normal. I was super nervous at the time of introducing this but as it turned out, people stood with us and we got through.

    Arguably, your business is not built on its mission or vision. It’s built on its people. Be open and transparent about the issues your agency is facing. If you stop treating them as ‘hands and legs’, you will realize that they know about the recession too. If you stop treating them as a ‘resource’, you will realize that they can also offer suggestions and stand with you in time of need. It’s like the first time a parent treats their kid as if they are a grown-up. Remember that feeling when your father asked for your opinion before buying a car? That.

    Give your employees that feeling of inclusiveness!

    Shift from Value based Pricing to Cost based Pricing – Impact on TopLine

    cost based pricing impact

    If you have implemented Value based Pricing for your Logo design services or website design services, make a shift. You’ll take a hit, for sure, because now you will not be able to command $5K for a logo design but a grape in hand is better than a promised watermelon.

    It is very well established that potential clients do not engage into conversations about value based pricing when they have crystal clear directives of reducing their costs. The sales call will never qualify. Go ahead and offer hourly rate for the logo designer. Use the same conversation as value based pricing but offer cost based.

    The goal is survival and not growth.

    Offer free services – Impact on TopLine


    Identify Low cost high impact services and make them free. If you are into Digital Marketing Services, you can offer free SEO Audit reports. If you are into consulting, offer free 1 hour free consultations.

    Find meaningful and value driven ways to engage with potential clients and make sure you leave an impact for them. Do not save things to be shared after their payment. If you are an e-Commerce consultant, talk to them about what they should do with ‘Abandoned Cart’. Use your knowledge to close sale and not wait for sharing that until they sign a contract.

    Healthy paranoia will help in closing your sale. Make sure your value delivery, if low cost to you, starts right away.

    Identify and remove inefficiencies – Impact on BottomLine


    More often than not, you will have efficiencies. Total and complete people or processes in your organisation which are just redundant. Spend time to identify such people or processes and revamp them.

    Recessions are great for making big impactful changes. Changes that otherwise would have brought a lot of internal friction, will be implemented both smoothly and quickly. If you are running an agency of 25 people or more, speak to the people who are working on projects hands-on. Identify what could have been done better and implement that.

    Identify and stop subscribing to tools that you pay for but are not being used. Reduce approval process and make decision making faster. Offer more rights to larger group of people and trust their intentions. This will induce ownership and turn things around for the better.

    Retention over Acquisition – Impact on TopLine

    retention over acquisition

    Do NOT stop your Ads. If you are running ads, reduce your budget but keep running them. You’ll never be able to get it for cheaper.

    However, see how you can shift the focus of your sales folks on retaining a client rather than acquiring new ones. Up-sell or cross-sell your services within the client group that you already have. You may also consider shifting a part of the fixed component of a sales professional to a performance-based variable one.

    If you are looking after growth, shift gears and see if you can get into fulfillment as well. Offer more time to your existing clients and take care of them. Even if you break even, that’s fine as long as you are alive.

    Of course, this is not an exhaustive list. These are only a few steps that you can take to ensure for your agency to survive a recession. Remember. The goal is survival, not growth.

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    About Author

    Yash Shah
    Co-founder & Chief Executive

    Yash did Mechanical Engineering and worked as an Investment Banker before founding a Tech Agency that grew to 55 people team offering SaaS, FinTech and E-Commerce Web & Mobile app Development. He currently serves as Chief Executive at Clientjoy - a platform that helps 13K+ Agencies & Freelancers in 90+ Countries acquire and retain happier clients.

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