🎙️Show Notes for Episode 073 of the IC Podcast

Aug 04, 2022
 
 
In this episode, I share what you can do to prepare for a potential recession or downturn in the economy.

The impact of a recession on your independent consulting business might be the last thing you want to think about, but it’s important to take a critical look at various aspects of your business to ensure it can thrive in an economic downturn.

To help put you in the best possible scenario where you're actually able to turn a recession into a competitive advantage for yourself, I'm going to share with you several tangible strategies and tips both from my own experience running my consulting business, my coaching business, and also a software business startup during recession times so that you can apply those to your own business. 

Doing the work now will put you and your business in a really good position as we move into uncertain economic times. Press play for more details. 
  • [00:32] Today’s agenda
  • [04:38] Check out the IC Business Recession Assessment: ICAssessment.com
  • [06:07] Getting your business recession-ready
  • [06:46] The three practicalities to focus on in your IC business
    • [07:10] Visibility systems for your business financials, pipeline, and receivables 
    • [10:18] Reviewing your business financial health including receivables, cash on hand, and expenses
    • [16:52] Refocusing on your business development
  • [22:31] How to turn a recession into an opportunity for you and your business
  • [30:03] The critical success factor you need to get your business recession-ready and the seven key questions that you can ask yourself to really take the temperature of where you're at from a mindset perspective and identify your areas of opportunity in this particular critical success factor.
    • 1. How can a downturn/recession be an advantage for you?
    • 2. How can you be more nimble in what you offer & deliver?
    • 3. In what ways can you increase your impact?
    • 4. What do I need to be thinking about to feel more confident and in command?
    • 5. What do I need to stop thinking, that’s creating fear or panic?
    • 6. What is your opportunity to add/adjust to your offerings? (e.g. advisory)
    • 7. How can you stand out as a thought leader by getting in front of this topic?

 
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FULL TRANSCRIPT
 
 

**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*


00:33

Welcome to the podcast. I'm thrilled you're here, and today we're going to talk about something that might be on your mind heavily or at least running in the background, which is what's going to happen, what can I be doing to prepare for a potential recession or downturn, we're hearing from all the economists or most of the economists that there will most likely be a recession, and or at least a downturn in the economy? And so the question that you may be considering as a business owner is how to prepare for that. So that is what we're focused on today, how to recession ready your consulting business. And I'm going to share with you a lot of very tangible strategies and tips from my own experience running my consulting business, my coaching business, and a software business startup during recession times. And what I've learned from that experience, what I've helped clients take away from those experiences, so that you can apply those to your own business. And make sure that you're just putting yourself into the best possible scenario where you're able to turn this into it an advantage, a competitive advantage for yourself, versus something that needs to be creating fear or stress and worry. So that's what we're going to be focusing on today. Because you've been through recessions before, I'm sure, but it may not have been while you're running your own business. So there's that added layer of responsibility. And I want to ensure that you've got a really good playbook to put in place so that you're ready to do the work now to put yourself in a really good position as we move into uncertain economic times. So that's what we're going to be focusing on today how to recession ready your consulting business. As I mentioned, I'll be sharing a lot of practical advice with you, along with the critical success factor you might not have thought of, to help you avoid sabotaging yourself in your business. So that is our focus. Let's talk about the agenda for today. So today's agenda is focused on recession, recession, and readying your business; I titled it that way on purpose; you may hear many things about recession proofing. I don't even know what recession-proofing means. But certainly, there's no magic bullet to avoid the impacts of a recession at a macro level. But certainly, we can make our business ready for a recession and position it so that, as I said, it could turn into an advantage for you versus something you just have to weather. So, let's discuss the three key areas we will focus on today. The first is I'm going to share with you three different very specific practicalities that you want to focus on double down on in your consulting business so that you can get your house in order; you may be a bit avoiding some of these knowing that you need to do them just generally. And so today, I'll share with you what those are in three different categories and hopefully give you some motivation to prioritize this work so that you've got a stable foundation from which to run your business. You know, when and if rocky times and the economy start, start getting a little bit crazier, right? They are a little bit crazy at the moment. But if we start hitting into a specific recession, so then number two, after we talk about those business practicalities, those three business bracket practicalities, I'm going to share with you specific strategies you can use to turn this recession or this downturn into an opportunity for you and your business. So we're going to focus on that as the second topic today. And then finally, we'll wrap up with that, what is that critical


04:42

success factor that I mentioned to you? What is the critical success factor for you to recession ready your business? So stay tuned till the end because that purse is an incredibly important piece of this formula. Okay, but Before we get started, I just wanted to share with you I created an assessment. It's called the independent consultant business recession assessment. So I've been doing these assessments and getting a lot of great feedback about how in-depth the results are and how they help you to prioritize and figure out what's going to move the needle the most in your consulting business. And so right now, I made a new one for you. It's called the independent consulting business recession assessment. And it's going to walk you through the five pillars that you want to be looking at in terms of your business and ensuring it's in a really good place as we start, you know, potentially moving into a recession or at least a downturn. So you'll want to ensure that you've looked at these five pillars, you know, where your business is, relative to these five pillars. And it's critical to take a look at that. So that you can turn your business into, you have enough lead time to make sure your business is thriving in those areas or in strong in those areas. So again, you're ready for this recession. So that's my gift to you a great way to put what we're doing into practice in your business. So make sure you go and take that recession assessment; I see it at the URL. So the letters, I see assessment.com. All right, and we'll also put that link in the show notes. So with that, let's dive into getting your house in order. So we want to focus on these three key areas that I mentioned for you to get your house in order as a business owner and to make sure that these best practices are in place because, honestly, these are not anything you haven't heard before. But rienne, and things that are probably on your to-do list, they just haven't bubbled up in terms of the priority, you likely been focused on client delivery, and can and if you're like a lot of consultants, potentially kind of kicking the can down the road, as they say, on some of these areas. But it's really important now that you put a plan in place; it doesn't have to be all at once. But put a plan in place to tackle these three key areas that I'm about to share with you. So that you've got them in order, and you've got a strong foundation, you know, when and if we hit an official recession or a downturn, this is what's going to be emphasized. If you're if you don't have it, and potentially leads you into more struggle than is necessary or any necessary struggle. So with that being said, here are the three key areas of visibility. The first is you've got to get your visibility systems in place for your business. And so that means visibility into your financials. I don't like having. I don't like dealing with that whole side of the business. It's not fun, it's not exciting, it's not creative, it's not anything, you may be in the same place, or it's just something you avoid. So get into a routine where you are looking at those financials on at least a monthly basis, you know exactly where you stand financially, and you're saving the right money for taxes, you're saving the right amount for what I call a reserve. We'll talk about that a little bit more in a minute. And you've got good command on those financials. If you don't want to do it yourself, hire a bookkeeper. That's what I've done. I have a bookkeeper slash partial, fractional CFO, and we meet monthly. And I do it because it's on my calendar, and I pay him. So I make sure that it happens. If I was left to my own devices doing this, I know I wouldn't. So I've set up that amount of accountability for myself and outsourcing to ensure it happens. So for you, if you don't have a good financial system in place, and you don't want to do it yourself, or you just have to look in the mirror and say, you know what, I'm not going to do it myself. I've thought I should for a long time, then go get yourself a bookkeeper or a fractional CFO.


09:22

Make sure you have a really good line of sight into your financials so that you can make decisions based on the real data versus your guesses about where your business is at. Secondarily, your pipeline. So ensure your system is set up from a visibility perspective to know what's in your pipeline. It shouldn't be in your head. And it doesn't need to be in some sexy system unless you want one like a CRM, or it can be in Excel or a tracking task management system. It doesn't have to be fancy, but it doesn't need something where you're tracking it, you know exactly what's in your pipeline, and you know the value of what's in your pipeline based on probability. And then, you know, essentially what results in you could expect in the next three months, six months, and nine months based on those metrics. So get that in place if you don't have it yet. And the third area is receivables. Talk to so many of you who have a lot of receivables outstanding, and you're trying to figure out the best time to ask your client for the overdue money. The best time is now you ask for the overdue money, assuming you know they owe it and haven't paid it yet; you've got to have some of those challenging conversations. And it's not about you; it's about you running a business. And separating yourself from that is essential. So the first part of getting your business house in order is creating those visibility systems. The second aspect of getting your business house in order is your financials. So in your financials, let's talk about really three key strategies you can implement; I already touched on one, which is that once you get the visibility into the receivables, go get them cut, caught up, create a strategy, do the thing that feels uncomfortable, figure out how you're going to collect all of those outstanding receivables and stop, you know, avoiding the topic because it feels weird and then you insert yourself into it. They're paying you for your work and all of that mental drama. As happens for so many of us, you've got to get into a different mindset: I'm a business owner, I've done this work, and I want to ensure that my clients are caught up on their receivables. Because as we move into a potential recession, a lot of times you know, look, you've been on the business side, I'm sure you've worked in corporate, and you know what happens, someone and finance or the C suite or wherever decides we need to cut costs, we need to increase our cash on hand, whatever the goals are. And the first thing that is one of the first things that happens is renegotiating. And there's nothing off limits; clients can come to you and renegotiate the receivables that they haven't yet paid, and they can come to you and renegotiate the contracts you've already signed. I've seen it all; I'm even asking for money back from vendors, which was not amazing, but it certainly happens. So put yourself in a really strong position where you've got the cash in your bank, and you don't have to worry about potential clients trying to renegotiate or not pay. And certainly, if at least you can have a conversation about it and make a plan if they can't pay it all right now, getting a really solid plan in place so that you both know what to expect and how the money will be paid out. So that's the first part of getting your financial side of your business house in order. The next component you'll want to look at is your expenses. And this is a very important balance. Because sometimes I see consultants going to one extreme, I'm going to cut out every expense I can. I want to hoard money for the winter and/or in the winter, in this case, the recession and/or downturn. And so I'm just gonna buckle up, right? And you have to be really careful because, as a business owner, you don't want to cut off the expenses with that kind of blanket statement in your mind. You want to think about your expenses and say, You know what I've been considering, for example, work or going to a conference.


14:19

Your inclination could be, you know what, I'm not going to spend the money to fly, I'm not going to spend the money on this travel. It's not worth it right now. I should focus and prioritize keeping my cash. But at the same time, you're potentially leaving an opportunity on the table to create new relationships to advance your pipeline, especially if this is something you do once or twice a year and it fills up your pipeline for the next 12 to 18 months. You must think about whether or not you cancel something like that. It uses a scalpel, not a knife in the priority ax, right? We don't want to just go axing off all the expenses and hunker down, we want to just use a scalpel with the expenses to figure out what's going to make the most sense from an investment perspective and a return on investment, which is quite frankly, is something you probably would be should be if you're not thinking about already, this just again, highlights and enhances that convert that internal dialogue for yourself, you might decide on the other end of the spectrum, you know, what, I don't have a huge return on, I was planning to update my website, for example. Still, I don't have a very specific return on investment for that. It's something I know needs to be done; it's a little bit dated. You may put that on the back burner as a business owner, not out of fear, but out of really looking at your expenses and upcoming expenses and saying, You know what my return on investment here isn't going to make? Maybe it's not going to make as much sense right now. So I'm going to put that on hold. So think about your expenses and what the return on investment is for those and just give them a double check. Just because you decided you're going to pursue a new website doesn't necessarily mean that you have to proceed with that; you can revisit your plans. And this is a great time to do that. And then I touched on this a moment ago, but this is the time if you haven't already to ensure you have a reserve in your business. By reserve, I mean cash on hand that will support your operating expenses as a business, including when I say operating expenses. In that way, I include whatever your owner draws; however you look at that, you might look at it as your salary. You want to have a reserve in your bank account of three to six months, depending on your philosophy, so that you can pay yourself if you don't have client work. So often, this is going off on a little tangent, so I'm not going too far down this rabbit hole because I've talked about it before. And I know I'll talk about it again. But we often think that the money our client is paying us is our paycheck. The amount of money coming into our business is somehow our paycheck; it isn't your paycheck. It's money coming into your business, from which you pay yourself from what you pay your taxes from which you operate your business. If you're not saving money for those things, you're just creating a glorified paycheck for yourself, which is not why you're here. So think about this, how could you start building up if you don't have a reserve? Then how, what what what does it need to look like for you to start building that back up again? As a side note, this is helpful to discuss with your bookkeeper or your fractional CFO if you get one of those months. What does that reserve look like? What is the projection of the reserve in the next quarter? Like really thinking about that? That is the financial part of getting your business house in order. And now, let's talk about getting your house in order from a business development perspective. This is incredibly important, and you might have been avoiding it. You need a business development process for a business. How do you attract new potential clients through onboarding new clients and all the steps in between? Do you have that dialed in so that you understand the metrics, and we've talked about this in prior episodes, so I'll put a couple of links in the show notes about how to create metrics around this process? But essentially, you're going to want to make sure you know that you've got that pipeline so that it's actually set up and tracked somewhere Excel, as I said, or you know, a task management system or if you want something sexier, you can use pipe drive.


19:23

So that's the key here is getting this in your pipeline. And what that means is thinking about not only the visibility, which we've talked about, you know, a minute ago, but also thinking about what it means with a potential recession or a potential downturn to the way that I look at my pipeline. So you may consider, you know, what I need to I might start including the recession as another element in my probability calculation. So for you, for example, you might think you might have historical data or even a hypothesis that it takes about you that your close rate is around 50 percent. And so you may consider, you know what, during this recession period, during a downturn, maybe I want to look at that and say it's 30%, just to give myself a little more buffer. So think about the mechanics of your pipeline. Once you get visibility into your pipeline, think about the mechanics of your pipeline. And then how do you want to approach a potential recession or potential downturn, when you think about operating that pipeline, you might also want to just don't, you know, increase the number of flows into the pipeline, because of this, you know, potential downturn or a recession. So think about it and look at the numbers and make a purposeful decision so that you're not just making decisions for your business by default or off of fear. You also know this could be a time where look, I'm going to call you out right now, if you're like, most consultants, we don't love business developments. If you're like most consultants, you prioritize working in your business over working on your business. And you just are not carving out the time, even though you know you want to and need to; you're not carving out the time to work on your business in the way that you know would be ideal. This is the time to do that. Double down on your pipeline, create a pipeline, create activities and routines, and get yourself into a routine. This doesn't have to be monumental and perfected and perfect. And, you know, eight hours a week type of work. This means carving out 30 minutes an hour, wherever you're at, the kind of evolution of your business. Look at what's walk it, not run, and get a routine for yourself. So you know exactly what it looks like to create a pipeline, push clients through the pipeline and get them to a decision on the other end. One way or the other. This is not the time to be putting this off, which is nothing new. This is something you know already, but now we're putting some highlights on it because of a potential recession. This is great because doubling down and getting those mechanics in place. What also you want to be doing thinking about as you get your business house in order from a business development perspective, or what are the areas that are important to invest in, aside from, you know, as you work on your business, so things like relationships, getting back into touch with people


23:05

that are in your network already, whether they have a direct potential as a client or know people who could potentially be clients, or you have no idea if they have a potential impact on your business or not. But it's just doing that work weekly to maintain, cultivate, and add to your network. What you can do to be helping them doesn't have to be billable work, you know, it has to be work focused on deepening and maintaining those relationships. And in some ways, they're been hard to maintain over COVID. So just double down on that. You may also want to invest in speaking and name recognition at this time. And standing out as a thought leader for your clients' thinking and helping them like I'm doing with you today. Starting to talk to them about what they are there and what's their thinking about the recession. What is their approach, what might help them kind of get out of the weeds themselves, like we're doing here, and think about things from a bigger picture perspective versus just executing against the plan that they had made last fall probably or last winter? And they're just executing heads down sometimes, not taking that moment to take a step back and look at the bigger picture. So get that the last piece here regarding getting your business house in order is refocusing and rededicating yourself to your business development processes. This is a great time to do it. Okay, let's focus on the second topic here today: how to turn a potential recession into an opportunity for your business. So this doesn't have to be something we're running away from; we can run toward it. And so I want to share with you a little bit of a personal perspective on this because these last the last couple of big reset shins, which were in 2001, I think the.com bubble burst. And then also in 2008 2009, when the housing bubble collapsed and the in the financial markets, those are the last two biggest recessions, longest longer lasting recessions, there was a short one, if you look at the history, which I did right before this, there's there was an officially short recession with COVID. But it was only two months. So if we focus on that first couple of those, those bigger recessions, I just wanted to share with you very, a very personal perspective on this because I think it's really helpful for you to get into the mindset of what your buyers might be thinking, your consulting service buyers might be thinking, when they're hitting times like this. So let me just tell you what I'm talking about. When I was in corporate I, I was the founder of, you know, a partner, a co-founder, in a SAS software company, we happen, it's happened to start in 1999. So it started just a year or two before that first recession, the.com bubble. And we survived as an early-stage company; we survived through that particular recession. And I'll touch on how we did that here in a moment. And then we survived again through and thrived, quite frankly, in the housing bubble recession in 2008 and 2009. And the reason why I'm sharing this with you is really from two perspectives; helping to navigate the software, an early-stage SaaS software company, and through those types of economic conditions, I learned so much. That informs what I'm sharing with you here today. And second, and how we turn that into an opportunity for our business versus, you know, something that was a detriment. And then secondarily, I want to share this with you, because very specifically, the software that we built for that the company was centered around, helped, helps it still out there, helps companies manage like fortune 1000, companies manage their use of outside contractors and consultants. So if you can imagine, across the globe, we had hundreds of millions of dollars, maybe even close to a little bit over a billion dollars, in contractor and consulting fees going through our system. So we had so much access to the data, and buying trends, especially in the 2008 and 2009 recessions.


27:51

Because all of that data was going through our system, we could look and see at a macro level, a micro level, and a macro level. What is happening here, when a recession occurs, and buying trends from companies very well-known names you wouldn't recognize, as well as smaller companies that might be more niche. How do those companies, and what are they spending on the contractor and consulting work? And by far, in those recessions, companies ended up increasing their use of contractors and consultants during a recession. Because they still needed to get the work done and deliver for their clients, they still needed to protect their market and increase their market share, and they still needed to continue operating and making money. But they also were in so many, you know, so they had many goals around cost containment. And usually, one of the biggest areas is about employees and money spent on employees. And that's oftentimes so visible, right? And so what we would find is that companies would potentially lay off many people, unfortunately. Then they would replace most of them with contractors or consultants because a lot of times to be honest with you. I'm sure you've experienced this HR doesn't need to get involved with those types of, of, quote, unquote, purchases, purchases of contracting and contractors and consultants. They just get involved with its full-time employees. So there's, you know, a lot of different types of approvals that are needed and that sort of thing. So I share all this with you from the perspective of seeing what happens from a very specific data-driven approach here, which is how companies tend to react in these situations based on the data flowing through that software. That I helped to build Build and manage the team to build. And then also just, you know, as a side note here, opposite creating an operating a startup through those two really big, you know, recessions to the.com and the housing bubble, and figuring out how to become more nimble, how to essentially turn what we were doing into a differentiator for our clients. And so that's what I'm going to share with you next is really how do you create the and, and direct the dialogue that you're having with your clients, to show them that you're adding value in this situation, in this potential recession, and this potential downturn, and using this to your advantage, where you're going toward it versus, you know, trying to shirk away from it. So this is an opportunity for you very specifically to start thinking about what could be the new off consulting offers that you want to start offering to your new and or existing clients. What might you extend on your existing consulting offers related to potential recession slash downturn? What might you add on? So think about what you're doing right now as a consultant. And then think about how that gets impacted by what you're offering to your clients. So you could start thinking, well, I'm going to look at strategic planning and start offering some advisory-type services; you might be thinking, how do I infuse cost reduction into what I'm doing with my clients or increasing their profitability? How do I help them increase the productivity of their existing team? So it's one of two things you may choose to augment your consulting offers, add new ones even very specific to recession and downturn issues that your specific clients are facing. And you may also consider just repackaging what you're already doing with that, with that specific focus in mind. So it's just you looking at what's happening in the industry as you always do. And taking that into account in a lot of ways. That's not even something that's necessarily super special here. But it is special that you're going toward this topic and not avoiding it because it's kind of scary for you operating a business. So, the other thing that I want to share with you is this could also be a really important time for you to consider teaming up more seriously. Other consultants don't want to worry about business development, especially when the conditions get a little rocky or


32:54

goat, you know, build relationships with those other consultants that you may want to bring on if you've got a teaming approach in, you know, in your business plan. And so are building up the pipeline for that virtual bench; this is a great time to do it. Okay, the last topic for today is that critical success factor I've been promising you. So the critical success factor is your CEO is your business owner mindset. This is the time for you to double down on your thinking about yourself as a business owner, not as a consultant who's delivering services and might have an LLC; you're thinking about yourself as a business owner and how you are going to operate your business in this particular scenario that may be coming up, this is the time for you to be very cognizant of where your mindset is at. And your self-identity is that in terms of a business, being a business owner and a CEO so that you can operate off of confidence and certainty, versus fear and panic. So that you can operate out of being in control versus feeling at the mercy of these external circumstances. I cannot emphasize enough how important this is for you. And so this is going to be an area that's a little bit less tangible in terms of sometimes it feels a little bit less tangible versus like go, you know, go work on your business development pipeline, or let's look revisit your offer. A lot of times business mindset can feel a little bit less tangible. So today, I want to share with you seven key questions that you can ask yourself to take the temperature of where you're at from a mindset perspective and identify your areas of opportunity in this particular critical success factor. Because as you can imagine, operating your business off of fear and panic versus confidence and certainty will give you two wildly different results. And that's why this is so important. As you can imagine feeling in control versus at the mercy of your external circumstances is going to give you such a different result in your business in the pipeline, in the quality of clients, you're attracting in the amount of control you have over the revenue and profitability and in the capacity from what you're delivering. So that's why this is so important. We'll put these seven questions in the show notes. But I'm also going to give them to you here now. First, how can a downturn or recession be an advantage for you? How can you be more nimble in what you offer and deliver? Number three, how can you increase your impact on your business and on your clients? What do you need to think about to feel more confident in commands? Number five, what do you need to stop thinking that's creating this fear or panic? Number six, is there an opportunity to add or adjust your offerings? Like we were talking about? What are those? What are the opportunities for you to add or adjust to your offerings? And the last one is how you can stand out as a thought leader by getting in front of this particular topic. So those are seven key questions. There are, that's just a little sliver of what we have what I've created for you in the I see business recession assessment. And so you're gonna go want to go take that as well. Plus, it will ask you these questions. So you don't have to go write them down yourself. And answer them, you could just go online, it will ask you the questions, you can answer them. And then, it will give you a report that will give you the priorities of what to address in your business. With more resources for you to go, make it happen as easily as possible. I love giving you a jumpstart. So be sure to take that icy business recession assessment, and get yourself a playbook to prepare for a potential recession or downturn. So that's what I've got for you today. Go put what I've shared with you into action. And if you want more help refining your business operating plan, your systems, and how you're thinking about your business to increase your profitability and the joy you've got as you're running your business, reduce the overwhelm and stress. Be sure to reach out.


37:41

I've got availability on my calendar; I

think it opens up again in the next couple of weeks if you're listening to this in real-time. And so, let's talk about whether you would be a good fit for private coaching. I would love to help you if you're at a spot in your business where you know you've been wanting to put all of this into place but just haven't made the traction or the progress that you thought you would, so let's talk, and you can go to consultmelisa.com My name has one S, it's melisa.com. And grab a spot on my calendar. Alright, great to be with you again this week, and I will see you again next week. Take care.

 

 

 

 

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