Transcript

Episode 169: Preparing Your Consulting Business for a Recession—with Deb Zahn

Deb Zahn: Hi. I want to welcome you to this week's episode of the Craft of Consulting podcast. On this episode, we're going to talk about the recession. We got to talk about it. A lot of economists are saying that it's likely going to happen. We are not 100%. We don't know exactly what it's going to mean, what it's going to look like, how long it's going to last, and ultimately what the impact on your consulting business is going to be. And keep in mind, there's a whole lot of other factors that are in play at the same time, which increase the uncertainty, and that uncertainty, we don't know if it's good or bad, but we're still in the middle of the great resignation. We're still in a global pandemic.


There are all kinds of other things that are happening in the larger environment that may impact what this ultimately looks like. That said, I always think, always, always, it is a good idea to prepare and to do things that are going to either eliminate or mitigate risks for you. Now, I want to say a couple of things before I dive into this. So the first thing is, I don't believe that you can 100% recession-proof your consulting business. And I've seen a lot out there of people talking about, here's how you recession-proof it, and it makes it sound like that you're 100% guaranteed everything will be OK.


It also makes it sound like, do these things, and then whew, you don't have to worry about it anymore and you can just go about your business. So here's the thing, there are no 100% guarantees, there's still things that you're going to have to do and it's a dynamic situation. So it's not like you do a whole bunch of things at the beginning and then you're done, you have to continually pay attention, assess what's going on, gather more information, refine your strategies so that you can stay on top of whatever happens in this dynamic situation and continually make decisions and take actions that are going to help your business and help yourself and...


And by the way, not for nothing. This is exactly what your consulting clients are also going to be contending with which they're going to need your help with. So it actually does also create a potential opportunity in your market, depending on what market you're in, who you work with, they're going to be dealing with some of the same things that you are if a recession happens. So keep that in mind. Now, one other thing that I want to say is, so I have a membership, the Craft of Consulting membership, and this is where, on a daily basis, I help consultants make decisions and take actions.


So we've already started to have some conversations about the recession and about the great resignation and all the other stuff that is happening in the larger dynamic environment. And the great thing is, I'm able to get in there every day and help people think through things, make decisions, and take action. And they also get support from the other members that are in there. So if you're looking for this regular help so that you can make decisions as you go along, I do encourage you to apply for membership. I'm going to talk more about that at the end so you can get more information about how to do that, but you can go to craftofconsulting.com under membership and all the info you need is there.


And one last thing I'll say about it is, I also want to make it risk-free. So if you apply and you get accepted, you get the first 30 days for free. So you can see, is this actually going to be a fit for you? And is this going to give you the support that you need regardless of what's happening in the larger environment? Now, let's dig in. Let's say the recession hits, and for however long it lasts, what should you be doing? Now, here's the reality is, depending on your industry, companies and organizations may be pulling back on their spending generally, and that may include consultants. It doesn't automatically include consultants, it depends on what's going on for them, but often they'll pull back on the spending or they might delay work, or they might cancel work.


Now, this happened during the pandemic, I knew a whole lot of consultants who had their entire amount of work got canceled. I know other consultants like myself, who I didn't have anything canceled, but I definitely had a few things delayed. Of course, I knew other consultants who did quite well because they did things that were actually helpful during a pandemic. And I'm going to come back to that in a moment, but you can expect that there's likely going to be some changes in the market that you're going to need to respond to. So the first thing I'm going to say is don't panic and don't start making panic decisions and take panic actions.


That's not going to lead you anywhere fruitful. And I'll give an example of that. One of my members, someone I just adore, posted something in my membership with a New York Times article about the dire prediction of a recession and asked the perfectly reasonable question: What should we be doing? Should we be lowering our price? And you can imagine if you've listened to any of my podcasts, you know what I said, which is no, that is not the first step. That is not even necessarily a step I would ever take. It's not about, “Oh, and suddenly you have to switch from competing on value and now you got to compete on price because that's the only way you're going to get business.” It isn't.


What you need to do is, carefully assess, come up with a plan, and then adjust as needed as things in your market or markets start to change. So really what it's about? Instead of just rushing to, “Oh my gosh. How can I compete? Let me do that on price.” Focus on ensuring, first and foremost, that you have a solid business foundation. So this is not the time for all the backend stuff to be messy. This is not the time for your foundation to be weak. This is the time for your foundation to be strong. So if it's not there yet, that is the thing to focus on. I'm going to talk very specifically about what that foundation is. And then the other two things to focus on is, reduce your risks and increase your opportunities.


And you can definitely do that. And increase your opportunities might sound wacky, but as one of my favorite clients says all the time, a crisis is a horrible thing to waste, that she sees opportunity in crises all the time, and in consulting, there definitely is. So again, we'll talk about some of that as we go along. But let's start with that solid business foundation. I'm going to talk about that in two ways. So the first is, your financials. So Cardinal rule automatically is no the financials at any given time, you should know what financial situation, your consulting business is in. And if you're using it as you should, hopefully, some type of financial software that can run reports for you.


And if you've listened to some of my podcasts with the fabulous financial folks I've had on, you know you need to look at it on a regular basis and you need to know where you are at any given time so that it's not this, oh my gosh, something is happening. I have no idea how much money I have coming in, I have no idea how much is owed to me, I don't know any of that, oh my gosh. That's going to lead to panic. So routinely, you should be looking at your financials. If you haven't looked at them for a while now is a great time to do that and then set up dedicated time in your schedule so that you're going to do that on an ongoing basis. Right there, just having the information and knowing where you stand is going to reduce a whole bunch of panic. Even if you see things that you don't like, and you have to do something about it, at least you know, and it is absolutely essential that you know where you are.


The other thing that goes along with that is to assess and manage your pipeline of work. So again, at any given time, you should know, here are the clients I currently have, here are the clients that are at various stages of development, and here are the ones I have in the queue that I'm likely going to get the contracts with shortly. Here are the ones, way at the other end, that I'm still cultivating or leads that I'm still generating that I haven't worked yet. So you got to know at any position of your pipeline, how you're doing, and how many folks you actually have in there that you could potentially get business from.


And that's just normal. That's just normal stuff that you should be routinely doing. And I'd say at least looking at monthly. If you don't have a lot of clients, you should be looking at it more often than that. But because a potential recession is on the way, I would say now is a great time before it hits, and I know we're still feeling some financial pains out in the larger market, but before it hits, stop, take a look at your pipeline, assess and make some calculations or decisions. So I would take a look, as I have, actually myself at my pipeline. And I look at everybody who is at various stages, and I ask really critical questions. So I'll look at it and I'll say, what do I think is going to happen with this client? Do I think what we're working on is still...I've already got a contract with them. We've already started the work, I still think this is going to be relevant no matter what. I think this is not a client that's going to take a significant financial hit, so I think we're going to be fine, and I don't necessarily need to spend a lot of time worrying about them. Now, if you're unsure, those are the ones you need to pay attention to. And you might need to have some conversations with clients and ask them sort of, what they're thinking about as things are going forward, without signaling, oh yeah, you should cancel this. But think about who you have in there, look at it, and ask yourself questions, and ask yourself if there are any folks that are in there where it's kind of iffy and they might not need this.


So this is taking a look at it from their perspective and saying, “The thing I'm doing for them is actually important, but it's not necessarily going to be as important as in a recession, I think other things will be.” So that's where you might look at. If there's anybody like that in your pipeline, you might start a conversation with them and say, look, I'm happy to keep going if you want to do this, however, if this starts to hit, here's how we might want to pivot together. So you get an opportunity to show them that you are empathetic and you care about them and you care about what's going on for them and you want to keep helping them. So look at your pipeline, assess where you think everybody is and what might happen. And this is where you're going to try and come up with, what are those probabilities?


So if you think it's a high probability that something is going to be knocked off your pipeline, then you know you need to do something to fill that. If it's a medium or low probability, low probability, you might put it on your watch list, and medium, you might think about, do you need to do something now? Or if you start to see X, Y and Z, you need to do something. But this is where you want to actively engage with it and make some decisions. And then as you move forward, you keep doing that, you keep looking at it. And ultimately that enables you to manage it and to know when you need to pull the trigger and do other things when you're in a pretty good position, and for now, it's good, but you're managing it on an ongoing basis.


The other thing I'd say is, if a recession is coming and again, a lot of economists are saying probable, not 100%, then I would also take a look at expenses. So in any good business, it's revenue and it's expenses. So you want to pay attention to the revenue you have coming in, but you also want to pay attention to your expense. I'm going to get to the revenue in a moment. So this is where I would not say, panic, and, oh my gosh, just pull back on every type of expense that you can. You don't want to do anything that's going to undermine your ability to get revenue in the door. So you want to keep those absolutely essential expenses that enable you to operate a profitable, manageable business. And so don't start pulling back on things that actually help you generate revenue and keep the engines purling.


But you might look at, if you were considering doing any sort of big expenses, or you have recurring expenses that you're really not doing anything with that, then those are the types of things I would look at. So for example, if you were thinking, I haven't really done much with my website. It's OK, but I was going to do a big redo and it was going to cost thousands of dollars. You might want to pause and say, how worth it do I think that is? Is it a better use of my money to redo my LinkedIn profile? Is it a better use of my money to just do some refreshes and not do a full-scale change?


And you want to think about that from the perspective of what you truly think is going to help you generate revenue. Anything that's truly going to help you generate revenue, that's an expense you don't want to knock off if you can avoid it. But if something is nice to have, you might decide to pull back from that, just to see what's going to happen ultimately in the market. So that's the expense side. So you always got to pay attention to the expense side.


The other is the money coming in. And this is where you really want to in particular look at not just revenue that's owed to you but your cash flow. So this is actually you getting paid. I know, and I have been guilty of this, that there are a lot of consultants who send off an invoice and don't necessarily track it.


So your contract might say that it's due in 30 days, but if you're not paying attention, you have a notice, they haven't paid it and it's now 90 days, then you're going to have some cash flow problems. So if ever you were going to be on top of, the money that's actually coming in, which you always should be, this would be a really good time because you want to make sure not just that you did the work and you owed the money, but you actually have money coming in, which is going to help you during any type of financial crisis. So you want to stay on top of all of that.


The other thing I would say is, if you're able, and I know not everybody is able to do this, but if you're able, now is a good time to save a little. Sock away some money, if you can. Even if it's not a lot, just have what I call a just-in-case fund. So just in case one of your payments gets delayed, just in case something gets canceled, you got a little bit of money and now you don't have to worry. At least the money that's going to help you cover the big expenses that you have to cover.


And again, in the best of all worlds, everybody would have six to 12 months of a full income socked away and saved. And certainly, that's always something that everybody can aspire to, but I know it's not realistic for everybody. So as much as you can sock away, now is a good time to do it. So if you're cutting back on some expenses and the recession hasn't hit yet, you might take those savings and actually put them into a fund so that you've got some wiggle room if you need it.


Now, the last thing I would say might seem a little counterintuitive, which is that you’ve got to honor your relationships with your existing clients but do it in a way that's not undermining business. So that's not the controversial part. What I'm going to say now is, if your clients get strapped for money. So if the recession hits them hard, you might want to change the payment terms of them. So I am not, not, not, not, not saying change the price. What I'm saying is, you might give them some wiggle room in terms of when they pay you because you ultimately want to keep that client. And if their only other option is to cancel the engagement or delay it considerably, in which case, now you have no idea if that money's going to come in, then it's a better alternative for you to offer them some flexibility so that you know you're going to get paid, might take a little hit in the cash flow.


In the meantime, since you're accommodating their cash flow, but you ultimately know that's income that you're going to get in your hands. So that's what I mean by really... You're in this dynamic situation, if those types of things come up, that is a good time to consider getting creative with your clients so that you can keep working for them. You can keep generating revenue, even if you change the terms a bit. So that's some of the financial stuff that I think really will form that firm foundation. And at any given time, you're going to know what's going on and you're going to know when you need to do things. But now I want to talk about the foundation for getting business. So if anybody attended my masterclass on the Top 5 Things You Must Do To Get Consulting Clients, you know what some of those are. I'm going to highlight a few of them right here, but this is where you have to have focus and clarity that is going to serve your ability to get clients.


You always need that, but if it's a recession and folks are pulling back on spending, and if there's more competition for fewer dollars, you've got to have a foundation that's going to make it easier for you to get business. And so I'm going to talk about what a few of those are. First of all, you got to be crystal, crystal clear, who your buyer is. So who ultimately do you want to work with? This could be called an ideal client, sometimes it's called an avatar, where you figure out what that persona is of ultimately who you want your buyer. But if you don't know the who, then anything you do after that is going to be much harder to do. So you got to know who your buyer is because then you can also know what do they care about, and you're going to know where they are, what market they're in, what niche they're in.


You're going to know the answer to the question, why would they buy something. Forget about who they're buying it from, why would they actually buy something? What are they trying to achieve? What pains are they trying to get rid of? Why would they buy from you? And if you know those things, then you're going to be on a much stronger footing to be able to go out and get consulting business because you have clarity about who you should go talk to, what you should say to them, and the types of things that are going to get more yeses than get more nos. So that's the ideal client, your market and your niche, and ultimately your value proposition, and your value proposition, basically answers the question, why would they buy something? And why would they buy that thing from you? What is the value that you're offering to them that's going to be meaningful to them?


Now that's a basis of a strong consulting business at any given time. However, if there is a recession, and I would say, this is something you should start thinking about in assessing right now, you want to ask, what new or exacerbated pains will my buyer be experiencing? What risks are they going to be facing because it's a recession? So then you're basically answering the question, what's different now? And I did this during COVID. So in COVID when I had some business get delayed and I encouraged other people who lost business to do the same thing is to not do wild pivots where suddenly you're trying to find a market that isn't impacted by the pandemic because there wasn't anyone, and you're not trying to suddenly be this brand new thing.


But I stopped and I said, what is it that the folks that I work with that I ultimately most want to work with, who's my buyer, what are they experiencing right now? And what are the things that I could bring to the table? The value that I already possess, that I could help them with those things. And that's what enabled me to keep the business flowing in during the pandemic. The same thing happens when you're looking at any kind of financial crisis is to be able to answer those questions, where will they still need to be spending money on? What is it that they're trying to solve by spending that money on? What is it they need to accomplish by spending that money? And how, if they spend that money, can I actually help them do it? So how am I going to help them avoid or mitigate any of the pains or risks that are in front of them?

And if you're not sure what the answer to those questions are, and I would say, even if you feel sure, I would say, get out in your market and ask. Talk to folks, either clients that you've worked with before, existing clients, folks who know your market really well. I don't think you have to have a crazy exhaustive, dozens and dozens of people that you talk to, but get out there and talk to some folks, and try and find out, if a recession hits what's going to happen. And what is it that folks are most going to need help with. And generate some ideas and then go float them and see how people will actually respond to it. That's going to give you a head start to be able to think about, OK, then this is the type of thing that I should be offering that I do that's going to be helpful in this particular circumstance.


And then you can listen to their language, and, in particular, listen to their emotional language. Anything that shows how worried they are or frustrated or stressed out or anything like that. And that's the language then that you now have, not to manipulate people because you never want to do that, but you now understand your buyer much, much better. And that's the language that you can use to describe what you can help them do, what risk you can help them avoid, what things you can help them achieve because of the recession because that's the context that they're going to be in. And I would say, right now, once you have some of that intelligence, start to reach out to prospective clients, any of your existing clients or past clients, do it now before things get too bad.


So if you've gotten that intel, now is a perfect time to reach out to folks where they might be a little worried about what's coming, but it hasn't hit yet, and talk to them. Talk to them about the types of things that you think that they should be doing to prepare, regardless of what happens. Talk to them about the ways that you might be able to help them. Now is the right time to have those conversations and not when the big wave hits and everybody is being tossed around. And then, as things progress, however it is they do progress, keep them informed, reach out to them. Talk to them about risks that you see coming, talk to them about opportunities, talk to them about things that might help put them in a better position than they're currently in because of what's happening.


Now, I have seen folks also say, “Oh, you got to start doing a whole bunch of marketing.” I definitely think marketing also matters now. Outreach is really great for people that are either in your network or you can be connected to by people in your network. Marketing is often for folks who either don't know you at all, or maybe they only know you a little and you're trying to move them towards ultimately converting into a client. So I definitely think that marketing matters, but you want to think about marketing differently than if the financial situation in the larger environment was better.


So this is where I would start positioning yourself as a thought partner about the recession itself and the impacts of the recession. So if they get in trouble or they start to get worried, you want them to think of you, picture you and say, "Hey, this person seems to know what's going on. We should talk to them." And that's what you want them to think about. So that's why you start positioning yourself as that right now and not wait until things start to go south. Because by that time, by the way, a bunch of other consultants will have positioned themselves in the way that you could do right now.


And again, if there's fewer dollars and there's more consultants competing for that, then you want to make sure that you get out ahead of it. And that's where that positioning can be extremely helpful. And I'm going to give some examples. This is where you should consider putting out content that is relevant to the risks and the opportunities that crises like this typically bring. You might consider doing webinars. You might consider doing recession-ready assessments, things... Again, don't stretch beyond your ability and beyond your understanding, but if there are things that you can bring to the table that are going to help them, think about this right now and get a better understanding of what this means for them right now, that's the type of content and actions that I would be doing right now.


It's got to be relevant to what they're worrying about, it's got to be relevant to what they're considering, and what's going to be meaningful to them as they go forward. And every single time, emphasize the results that will matter to them during a recession. So if that's mitigating losses, if that's break-even, if that's still generating a profit, if that's not having more talent loss, if that's staying true to their mission, whatever types of results, very specifically you know that matter to them, those are the types of things to emphasize. So it's not just, Hey, I'll be with you if things go wrong. I'll be with you if things are wrong and these are the things I can help you achieve. And the goal is you're trying to show your value and that you're worth spending money on, especially because they're in an economic crisis.


Now, the other part of that equation is you want to double down on client experience. Value as I define it is results plus experience. So it's the things that you can actually help them achieve or the risks that you can help them voice, whatever outcomes matter to them plus making sure that they have an excellent experience and working with you.


That means if you've got any messy client touchpoints that don't create an enjoyable experience, this is now when you want to clean those up because you don't want to signal to them that working with you is going to come with fuss and it's going to come with obstacles and it's going to come with stress. You want them to want you by your side when they're dealing with the difficulties and when they're stressed out, you want to be the person who is not adding to their stress, but you are soothing, you are a relief, you are helping them solve problems and you're doing it without a lot of fuss.


So this is where you want to listen to my podcast, especially 168. My podcast, where I talk about getting rid of friction in your whole process. That's in part because that's going to help you have a really smooth, enjoyable client experience as you're leading up to getting the gig and starting the work, and then you need to keep that alive as you're working with them. So this is where again, if there are fewer dollars and there's more consultants that are competing for those dollars, one of the top ways that you can compete is to make sure that they are going to have from the moment they see anything of yours, any type of engagement, it's going to be all value and no fuss. And that's the idea.


So look, so while this recession and the impact on your business, it's not inevitable, we don't exactly know what's going to happen, as I said at the beginning, I definitely encourage you to prepare for it, so no matter what. And here's the good thing, so if you do all the things that I just said, your business is going to be strong no matter what. So let's say you did start to put out content about preparing for a recession and maybe it doesn't hit, or maybe it looks a little bit different or it doesn't last as long as we thought, that's OK because again, dynamic environment, you're going to know, this is when it makes sense for me to now switch up some of what I'm saying out in my market and how I'm showing up so that they know that I actually know what's going on. And that's going to be a thing that you constantly do.


Now, I mentioned earlier, my membership as a place where, daily, you can get advice, you can get answers, you can get them fast. So you can do your assessing and your planning and your acting and you're refining, all of the things you need to do and to figure out what actions you actually need to take as things unfold. And I mentioned that I've got members in there who are just fabulous and they're super supportive of each other and they encourage each other. They share their wisdom and their guidance about things that worked for them or didn't work for them. So you are surrounded by support that's going to help you make decisions and take actions that are going to get you the results that you want. And I'm on there, I'm not handing you off to somebody else.


I'm actually on there answering questions directly and quickly. As soon as I'm done recording this podcast, I'm going to get on and do a couple of videos that are in response to questions that people asked. And again, this is through an application process. So I'm accepting applications. If you apply and you're accepted, I want to make sure that this is actually going to be a fit for you. So you get your first 30 days for free. You get to get in there, you get to ask questions, you get to see what it's like, and if it works well for you, you just keep on enjoying it. And if it doesn't, all you have to do is cancel before the end of 30 days. And you'll be totally fine. So submit your application at https://www.craftofconsulting.com/membership. If you're on my website and you're looking at this podcast, it's down in the show notes. But love to have you apply, love to see you in there so that we can get through all this together.


Thanks so much for listening to this episode of the Craft of Consulting podcast. I want to ask you to do actually three things. If you enjoyed this episode or you've enjoyed any of my other ones, hit subscribe. I got a lot of other great guests that are coming up and a lot of other great content, and I don't want you to miss anything. But the other two things that I'm going to ask you to do is, one is, if you have any comments, so if you have any suggestions or any kind of feedback that will help make this podcast more helpful to more listeners, please include those. And then the last thing is, again, if you've gotten something out of this, share it, share it with somebody you know who's a consultant or thinking about being a consultant, and make sure that they also have access to all this great content and all the other great content that's going to be coming up. So as always, you can go and get more wonderful information and tools @craftofconsulting.com. Thanks so much. I will talk to you on the next episode. Bye-bye