Note: I initially published on March 30, 2020 via AgencyDocs, a Barrel-owned website geared towards other agency owners who’re looking for templates to help run their business. I’ve reposted here and expanded some more to include some additional developments including the receipt of our Paycheck Protection Plan loan from the US government.
As an agency, Barrel has been hit hard by the coronavirus crisis. Within a span of 2 weeks, we saw over 18 engagements–a combination of retainers and one-off projects–get canceled, postponed/paused indefinitely, or reduced. The immediate impact has been over seven figures of previously certain income now most likely gone forever.
Adding to this challenge has been the shrinking pool of opportunities on the new business side. Engagements we had put in proposals for are either canceled or postponed. The number of inbound leads has dropped sharply as well. The thing mainly keeping the business going are the retainers that haven’t canceled, the projects in progress, and small add-on work from existing clients.
We feel terrible for our clients who’ve suffered massive disruption as a result of the crisis, whether it’s from store closures or supply chain challenges or just general drop in demand. Some have already laid off staff and are fighting desperately to stay in business. We all hope this soon passes.
With this as the backdrop, we’ve been working to manage the situation as best we can by speeding up decision-making, increasing the frequency of communications with the team, and being vigilant about cutting costs and stretching every dollar.
Below are the tactics we’ve employed thus far to keep the business afloat. I believe we’re still in the early stages of this and things could get worse for the business before it gets better. However, I think sharing our experience, even if it’s not relevant for other agencies out there, could yield some useful tidbits for folks having to deal with some loss of business.
Daily cashflow projections
We have an Excel spreadsheet model that we’ve been using for nearly 14 years (with various modifications) that gives us a clear view into our day-to-day cashflow. This model is perhaps the most important tool during this time as we rely heavily on it to make decisions.
The main numbers we look for are our projected cash balances for each day and what our runway looks like. We’re able to figure out how many days we have until we’re insolvent. We then look at dips where we may have to pull our line of credit. We also play around with scenarios like cost cuts, delayed payments, and further losses in business to see how this impacts runway and dips in cash balance.
Playing these scenarios out allowed us to make the call that we needed to increase our line of credit and to institute a salary reduction across the board. It also gives us a sense of how much new work we need to invoice and receive in order to extend our runway, info we can match up with our new business pipeline to see what the shortfall might be and how we can make it up.
I can’t imagine how we would’ve operated without this model. It really is the difference between being able to see and working in the dark.
Daily debriefs with Partners
Working from home and facing unexpected changes each day, communication within the leadership team has been paramount. In addition to our Slack chats with the broader team leaders and our Telegram chat amongst the partners, we’ve found it helpful to have a 30-minute debrief video call at the end of each day to catch each other up on what’s happened.
Sometimes the calls are about critical financial decisions we need to make and at other times, it’s just a way to see each other, shake our heads collectively at what a crazy day it was, and try to keep things light with some laughter and commiseration.
Reaching out to clients
While we’ve had to react to clients reaching out to cancel or postpone engagements, we’ve tried to reach out and catch up with as many of our clients to see how they’ve been impacted.
Some of these outreaches have resulted in additional pauses and cancellations, and we’re okay with that–we’d rather be the ones to initiate that conversation versus having to be blindsided.
Others have responded positively to our outreach and some have even yielded new work. The goal of the outreach isn’t to win new work but to check in, see how our clients are doing, and see how we can be helpful. Relationships matter a great deal and during these times, it’s important for us to show our true colors as a partner that cares.
We went into aggressive cost-cutting mode as soon as the first wave of client cancellations hit. The obvious ones were the software subscriptions that were non-essential to our daily operations. Even with essential software, we were able to reach out to the companies and reduce the number of licenses we had to match our current team size vs. keeping a few extra ones on hand.
These changes didn’t move the needle as much as the cuts we made to our contractors. These were tough moves as we really value the work that our contractors do and hate that they’re also being negatively impacted. We honored existing projects that had already been pre-allocated but ended up cutting out quite a bit of retainer work and bringing those functions in-house.
Bringing contractor costs down has made a big difference but we’re also risking our future relationships with them. It’s very possible that many contractors impacted by this crisis will either try to find full-time jobs at more secure employers or shy away from working with a smaller agency like ours in the future. These are some of the unfortunate trade-offs we need to make in order to protect the full-time team.
Keeping the team in the loop
Communicating with the team has been top priority during these times. We’re only as effective as our team’s ability to focus and get work done. It’s a stressful and anxious time, and while we can’t completely alleviate this, we can, as leaders, at least keep them informed and share what we’re thinking, seeing, and doing to keep the company going.
As soon as we started losing business and felt this would be a trend, we sent out an email to the team letting them know that we’ve been hit and that we were reviewing different ways to stabilize the business. This is the email we sent (edited to remove any confidential information):
As you know, the spread of COVID-19 has had widespread impact on all aspects of life in just the past week. We wanted to take the time to update you on what’s happening to Barrel as a business, how we are being impacted, and what this may mean for us as a company.
A number of clients have been hit hard by COVID-19. Our clients with brick & mortar establishments or businesses that rely on travel, tourism, and in-person interactions have seen revenues dry up overnight and some are facing a really tough road ahead. As a result, they’ve had to cut back on budgets and for some, we’ve become an expendable expense.
On top of this, clients or prospects that were exploring new work with us are either postponing or shelving projects.It is early days, but with the uncertainty surrounding the current situation and the economy, we can expect more clients to either pause or cut back on their spending with us.There will be some difficult decisions we’ll be making in the coming days and weeks. We want to be as transparent about our thinking and share our intentions with the team.
Our first and foremost priority is to protect the employment of our core full-time team as best we can. We will do everything in our power to keep the team together during this time. This will not come without some sacrifices on the part of everyone.
The following are potential moves we’ve begun to make or may explore making in the coming days and weeks to help extend our runway:Cost controls: We’ll be doing our best to cut back on non-essential costs and to preserve cash.
Government relief: We’re exploring government relief like 0% loans and the tax holiday to shore up our cash position for the coming months.
Drawing on our cash cushion: We’ll be accessing our cash savings that we’ve put aside for emergency situations like this and it will provide us with some coverage.
Salary reductions: We may institute temporary salary reductions across the entire team to free up cash to help extend our runway.
Furloughs / reduced hours: For certain full-time roles, we may reduce weekly hours or number of days to help with costs. In some cases, we may ask certain team members to take weeks or months of unpaid time off.
Layoffs: We absolutely want to avoid this if possible, but we owe it to everyone to at least plan for the worst and have contingencies in place for severance and transition.
We are also re-forecasting our targets for revenue and profitability in 2020 in light of the new realities. To keep the business going, we may have to be more flexible on pricing with certain clients and also stretch our capabilities to deliver value. We will exercise our best judgment on the types of new work that we take on but please know that we’ll also be weighing financial considerations as well. The prospect that might have been a “maybe” might become a hard “yes, let’s try to win.”
This will be an uneasy and uncertain time for all of us. For our part, we will be as straightforward and transparent about what’s going on. We will not sugarcoat the challenges and hardships we face as a company but do our best to communicate our approach and actions.
We’ll be convening a virtual town hall on Thursday at 1PM ET/10AM PT to answer any questions and to share any new developments between now and then.
As we mentioned above, there will be sacrifices made by everyone at the company during this time. It’ll take a team-first mentality and positive attitude for us to get through this. Our various team leaders will be reaching out to everyone individually to talk about concerns and to hear how you’re all doing.
We are in the middle of a crisis that nobody could have predicted. The best we can do is focus on what we can control and support each other. This period is an opportunity for us to work more closely together than ever, to deliver value for our clients, and to be creative and resourceful in a resource-constrained environment. We appreciate each and every one of you. Let’s make it through this together.
The Partners at Barrel
We followed this up with a town hall Zoom video conference which prompted some good questions and feedback. A follow-up that came from this was a thrice-weekly update (Monday, Wednesday, and Friday) of how the team is doing in terms of any client changes that can negatively impact the business, new business wins, and and other moves we’re making.
Here’s an example of an update with sensitive info removed. In the email, we also included a link to a spreadsheet showing the full impact of all the COVID-19 related losses.
Hi Team,Happy Monday. Hope you all had a nice weekend.
Client ChangesA few more updates on this Monday from our clients:
- [Client 1]: Explanation of their biz circumstances. They’ve suspended all work with us which is at least $XX,XXX worth of work.
- [Client 2]: This was for work already done. They’ve notified that they will be unable to pay for the outstanding $XX,XXX payment due to business challenges
- [Client 3]: Their operations are halted as their main events are all canceled. We had a proposal out for branding ($XXX,XXX) and website implementation ($XXX,XX). Unfortunately, this work has been suspended indefinitely.Here’s the full list of all the COVID-19 related client cancellations/changes/deferrals: [Link]
New Business Wins
- [Client 4] has signed on to a quarterly retainer ($XX,XXX)
- [Client 5] has moved off of their retainer but has agreed to a $XX,XXX one-off project
- [Client 6] agreed to have us do some stop-motion animation for $XX,XXXInternal MovesWe’re looking closely at resourcing this week to see how the cancellations and delays have impacted staffing and if we’ll have team members who then will have reduced billable hours.
We’re hoping that the client delays and cancellation news will be slowing down. Note to Producers and Account Leads — if you haven’t had a conversation with clients about how COVID-19 has impacted their business and if they expect any changes in their engagements with us now and in the future, please let us know. It’ll help with forecasting.
The Partners at Barrel
We’re committed to being straightforward and as open with our finances as necessary to paint the picture of the company’s financial health. We know our team members will have varying degrees of concern, interest, and understanding in what we share, but we would rather err on the side of having provided too much information and too much forewarning about what might be coming than maintaining silence and blindsiding them with a sudden move.
An important benefit that’s come out of our communications effort is that it’s forced us to be on top of our business performance on a daily basis versus a once-or-twice a week review. Because each day can bring unpredictable cash flow impact, we’ve had to keep a pulse on the finances, new business activity, and the sentiment of existing clients. During the crisis, we hope this level of heightened awareness allows us to move quickly and attack issues before they become problems.
PPP Comes Through
On April 9th, we received word from Chase that our SBA Paycheck Protection Program loan had come through. The PPP is part of the $2.3 trillion CARES Act providing $349 billion in forgivable loans to qualifying businesses.
As soon as the program was announced, my co-founder Sei-Wook made it his singular goal to push our application through. From the moment guidance was delivered to our banks, Sei-Wook began poring through the text and modeling out the different scenarios to see how much we could potentially receive. He made sure to stay in close touch with our rep at Chase and also monitored Twitter and various websites to stay as up to date as possible.
There was a lot of uncertainty from Chase about when they would open things up and how applications would be processed. And when the site finally did update with some info and next steps, it kept on crashing. Sei-Wook kept trying until he was able to submit an inquiry form on Friday, April 3. On Monday, Sei-Wook checked the site all day long and was able to submit an application the moment it opened up (after a couple tries and website crashes). This was 5PM on the 6th. From then it, it was non-stop pestering of our Chase bank rep several times a day. We were told that there were no updates initially and then we were told that the application was “in review” but no time table on when it would be approved. We started hearing a trickle of folks on Twitter claiming their applications had gone through. We were nervous that because we used a PEO (professional employer organization) service in Trinet and didn’t have standard payroll tax docs requested on the application, our application might be delayed.
By Thursday afternoon, getting even more anxious, Sei-Wook was game to try anything. He read a Tweet from a business owner who mentioned that fully pulling down their line of credit from Chase seemed to lead to an approval. He thought, why not, and fully pulled down our line of credit figuring it wouldn’t cost us too much to have it pulled down for a few days or even a week. Within 2 hours, we received the approval notice.
We couldn’t confirm that the line of credit move did the trick, but the timing was fortuitous. The notice mentioned that we would be receiving the funds in 3 business days. The next morning, Friday the 10th, we saw that the funds hit our account. Incredible. It looked like our application had been approved earlier than when we had received the notice.
We breathed a deep sigh of relief and felt much better about having some additional runway to try to turn the business around.
Communicating the PPP and Next Steps
With the PPP funds in the bank, we gave the team a heads up the following Monday the 13th and held a town hall on the 14th to go over the PPP in detail and to share what this meant for the organization.
We walked the team through how the PPP money would be used on things like rent, utilities, and payroll and how we would roll every back to full salary amounts in the coming weeks.
We also explained how many days of runway the PPP funds would add to the business and how this meant we would essentially have nearly 2 months to stabilize the business by landing new work. We were able to calculate a target number for our team to book by a certain date and shared this goal during the town hall. We explained that if we were to hit this number, it would allow us to have runway in a range that would allow us to confidently keep wages at 100%. We also made it very clear that if we were not able to hit the target number, it was very possible that we would resort back to salary reductions or even worse, furloughs and layoffs. It was important for us to share this because even with the PPP funds, it’s possible that the economy doesn’t recover well and we have great difficulty landing new work.
Given that a fair number of our team participates in new business discussions on a regular basis, I think setting a goal and sharing it with everyone has had an energizing effect. We followed up by creating a tab in our team-wide spreadsheet to track our progress and show how every deal adds up to the goal. As we continue our thrice-weekly updates on company health, we’ve included an $X down $Y to go stat line to show how we’re progressing towards the goal.
Reflecting on how things have unfolded in the past few weeks, I believe that this crisis has given us the opportunity to spark business literacy and interest on a team-wide basis, something I don’t think we’d have been able to achieve as quickly or effectively during the pre-coronavirus days. A silver lining worth appreciating.
The first month of navigating this crisis has been mostly focused on the financial health of the business. With some clear goals set and the team working well together in unison, there are other aspects of the business that we’ll need to pay attention to in the coming weeks.
One of these is the wellbeing of the team and how they’re feeling about remote work as well as work-life balance. I think we can do a better job of ensuring that people are feeling connected to the team and also getting the rest and breaks to recharge and refresh.
The other piece is to think longer term and continue to innovate on what we can offer our clients to match the changing landscape of their businesses. We’ve offered scaled-down versions of our retainer packages with more flexible payment terms for clients impacted by the crisis. I think we can think bigger and be more creative in offering services that can appeal to businesses that need digital marketing and creative services in this environment. This will be a big focus for our leadership team in the coming weeks and months.
And lastly, we’re investing time to publish thought leadership pieces and be more active on social media to hopefully cut through the clutter and reach prospective clients. We’ve been fortunate to have a strong base of existing clients to give us new work during this period, but we’ll need to win work from new clients as well. The downtime has freed up some team members to help focus on writing content and strengthening our marketing assets. If we can spend time wisely now, I know we’ll reap rewards later.