Wednesday, May 06, 2020

Lessons from the 2008 Financial Crisis

The "Great" recession of 2008-2010 was a different animal. Because it started with bank failures, cash disappeared much more quickly back then. Luckily, banks may be more helpful this time around.

But Lesson #1 remains the same: Cash is King!
Okay, what does that mean to you? Well, the most important lesson is that now is NOT the time to extend credit to you clients. You are not the bank.

As a corollary: You should get paid in advance for as much as you can.

Luckily, in the last ten years, clients are used to monthly payments. This includes Office 365,, QuickBooks, . . . and your services. As long as you are important to their operation, there will be no question about paying your monthly fee.

Lesson #2: Recurring Revenue will save you.

I can't tell you how many people have told me that recurring revenue saved their business ten years ago.

Also: Don't worry about selling new recurring revenue clients. Those terms are separate from the discussion of whether to hire you.

Lesson #3: This is NOT a time to lower your rates.

(I can't believe anyone is suggesting this.) Let's look at some basic math.

Let's say you lower a client's rate by $10/desktop and they have 25 users, that only saves them $250/month. No one is going to salvage their business by saving $3,000 per year!

But what will it cost you? If you cut $10/endpoint from you income, and have 1,000 endpoints deployed, your cost will be $10,000/month. That could kill your business - while not saving your clients.

At the end of the day, no one saves their business without cutting staff. With very few exceptions, employees are the largest expense for every company. For many, rent is second. You will do more service by helping them to work remotely than by cutting your rates.

Clients will tighten belts. There's no way around that. You can help them to make good choices around this. Help them use technology appropriately, and get the most from their investment.

Lesson #4: Money will move OUT in waves, and it will move back IN in waves.

First, the money will disappear from your clients' customers. Then from your clients. Eventually it will affect you. At some point, the economy will hit bottom and begin expanding. Then, money will move back into your clients' customers. Then back into your clients. Eventually it will flow again into your company.

Remember: You never know the bottom hits . . . until after you're on the way back up.

Luckily, you have ways to track lots of "indicators" in your business. These include time in your system (tickets with time estimates), hours billed, etc. Tune in and track the time as it moves through your system. You still won't see the bottom until it's behind you, but you may be able to spot it fairly quickly.


Sherweb's YouTube channel is here:

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FTC note: I was compensated by Sherweb for the creation of this video, but received no compensation for this blog post.


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