No business is immune to economic crisis or industry changes, however, you can ensure your agency is prepared for any surprises by running it as effectively and efficiently as possible. The best advice we can offer any client is to run your company like your selling it tomorrow, and here’s why:
1) As an owner of the company, you have an obligation to run the agency in the most efficient and effective manner. History is full of examples of industries that did not make the tough decisions during the good times. The auto and steel industries are good examples. Does anyone even remember when the steel industry was a major industrial force in this country?
2) Your employees are watching. They know who is productive and skilled and who is being compensated in spite of their lack of production. Unproductive employees de-motivate the skilled and productive employees. They make it harder for the good employees to do their job well.
3) People want to work for successful businesses. There is a different buzz when the business is doing well and everyone is contributing.
4) A well run and efficient agency allows management to excel. It helps make the difficult decisions easier since management is not dealing with routine day to day issues.
5) Every company and every agency will face challenges such as the loss of a large account or a downturn in the economy. Efficient and well run companies are quick to react to these challenges.
6) Have you ever made this statement? “We have made all the cuts we can; we can’t make any additional reductions to our expenses.” If you have, you are not alone. In 100% of these situations, we have been able to identify significant additional expense reductions.
7) View your business as an outsider. If an employee resigned, would they be replaced? If you replaced an employee, would the new employee be hired at a lower salary? Would an outsider continue a product or service?
8) Try this approach: Assume you risked your own money to buy the agency. What changes would you make? Potential buyers are looking for profitable growing businesses and they examine the history to be sure it has been run the same in the past. While we are able to help clients show an improved business plan, it is easier when they have run the business at that level of profitability for a longer period of time.
9) Examine the level of contingencies. Is your level of profitability due to an exceptionally good year of profit sharing? Establish a baseline and run your business to that baseline. Anything above that level is a bonus.
10) Watch out for concentrations. Would the loss of a single account cause a serious issue at the agency? If your largest account is 2% of revenue, sleep well. If it is 20%, I’m guessing you have some anxiety during renewal dates. A buyer would be very concerned about this level of concentration and so should you.
If you would like to read more about how and why business owners should not take a relaxed approach to running their company, click here.
