I was printing my "Really Scary Budget" projection.
Manual and I went to lunch and decided that we should figure out what to do if we take a serious hit in the months ahead. After all, if the economy gets bad enough, we will see clients cutting back, cutting staff, etc. We figure our worst case scenario would be about a 30% overall reduction.
We know it won't be for March because there's a 30 day notice requirement, so we're good to go on that.
So here's what I did for hardware, software, and labor revenues:
Projecting the Big Dip
- Started with a very realistic March estimate, assuming no additional sales
- Projected we would make 95% of that in April, 95% of the April number in May, 95% of the May number in June, etc.
- That continued until September, where the estimate reached 70% of the March number
- Then projected 105% of the September number for October, 105% of the October number for November, and 105% of the November number for December
This created a year-long smack in the face.
Do I think that will happen? No.
Would I be foolish to assume it won't happen? Yes.
I live in California. We sell brackets to stabilize computer racks during earthquakes. But I live in Sacramento where we don't really have earthquakes. But I don't want to be the guy who has to explain that I didn't secure a rack in California!
This is similar. I don't want to explain to my wife that I didn't think the economy would affect OUR business.
- - - - -
Many people -- Erick and Vlad among them -- think I'm overly optimistic about the economy. I smiled my way all the way from Dow 15,000 to Dow 8,000.
But I really, honestly believe that we make a great deal of our "luck" in business.
We are 100% managed service. So we can project quite a bit.
We have stepped UP our marketing instead of stepping down. We're in the middle of a Robin Robins campaign, and we've budgeted to keep plugging all year. We're not going to do three mailings and give up.
Now comes the hard part . . .
I finished cutting back all that revenue and printed the budget projection. I did NOT adjust expenses yet. So when a technician looked at the printout, he was quite alarmed.
Of course I labeled it "Really Scary Financials 2009," so that didn't help.
In that projection, there are four months in the middle with losses on the bottom line. Luckily, it's only a few thousand dollars and I could bankroll it. But I won't.
The next step is to project reductions in expenses in order to push through the dip with black on the bottom line. That will be difficult since we run pretty lean around here.
The exercise is interesting because it raised the question of why we don't cut those expenses all the time.
- - - - -
Overall, I think we'll sign a few key clients and continue to grow this year.
One decent client (ten desktops) will dramatically ease the pain from the projected dip. Two will keep us growing. Three will make me tear up the really scary budget and just go back to the original projections.
Seth Godin has a good little book on how to recognize The Dip versus a major crisis.
I like being optimistic.
I think it helps my business.
But we also need to be prepared for the realities around us.
We're all going to go through the recession and come out the other end. We can let it happen to us or we can address it straight on and participate in our own fate.
Nothing has changed with my resolve to opt out of the recession. So far, we're not participating. It's been almost a year since we published our resolve not to participate.
But if we're affected, we need a game plan.
. . .
Now I have to get back to marketing!