I wanted to jot down and share some quick thoughts on running a small agency business during the COVID-19 (coronavirus) situation developing here in the United States.
As an agency with offices in New York City and Los Angeles, we made the call last Monday (March 9th) to have the Barrel team go fully remote. In hindsight, I think we made the right call and acted fairly quickly.
The biggest thing that I can’t emphasize enough is how lucky we are as a business that we can pretty much function at full capacity while working fully remote. Everyone was able to take their laptops home and use Zoom and Slack to fill in for the lack of in-person interactions. There will still be a period of adjustment and getting used to, but we’re still able to get our work done for our clients.
When I think about all the businesses that are impacted by COVID-19–those running events, fitness studios, restaurants, hospitality, travel, product companies impacted by supply chain issues, and countless others–I feel terrible about the hardships they’re going through and will continue to endure in the coming weeks and months. Compared to these folks as well as those in healthcare, government, and education who’re experiencing serious disruptions to their daily work, we have it easy. So this is something to keep in perspective throughout this entire ordeal. We are the lucky ones.
As a business, we’re in a decent spot. It sucks to leave two offices empty during this time while paying rent, but we’ve budgeted for these costs and hopefully won’t lose in the way of productivity. I know that in the coming weeks, certain clients will want to pull back on spend with us or put certain projects on pause. We’ve already had a handful of such conversations. This is to be expected. Some of our clients are suffering badly and we need to be flexible for them as they try to conserve cash or, at worst, fight for survival during this time. But overall, we have commitments and enough work to cover our costs for the coming months. We also have money in the bank and a line of credit. It could be a lot worse. It might get a lot worse, and if it does, we’ll be ready to make the tough decisions to keep things going.
I wrote about how 2015 was one of the worst periods in company history. We were very close to being insolvent during that time and into 2016, and the experience, while embarrassing and stressful, taught us a great deal and helped us develop some habits and systems that are coming in handy during this time. I’ve decided to share these in case other small business owners out there might find them helpful.
We’ve made it a point to be systematically efficient and persistent when it comes to collecting invoices. Part of what exacerbated our troubles in 2015 and flowing into 2016 was a weak collections process where we didn’t hound clients who were late with their payments. We invested in building out a robust process where we do our best to stay on top of our receivables and ensure we collect on time as much as possible. This has made a huge difference in managing cash flow. We lean heavily on a combination of Bill.com and our bookkeeper as well as extra nudges from our producers and account managers where necessary.
An influential book I read during the dark days of 2015 was Double Your Profits: In Six Months or Less by Bob Fifer. The book was big on the concept of cost cutting, especially if you were struggling to make money. We took this lesson to heart and started to look at our expenses closely, shedding unnecessary software subscriptions, tightening the management of our office supplies, and being smarter about how we spent money on things like team outings and meals. This past week, we went through our expenses with a fine comb again and came up with a few thousand dollars worth of savings. It’s not that cost-cutting was absolutely necessary right now, but we happily cut anything that was barely used in order to free up incremental cash.
An important source of strength for us during this time is the fact that we invested heavily into building out a robust contractor network the past few years. This allows us to scale up and down as necessary with greater flexibility as we engage most contractors on a project-by-project basis.
We have contractors all over the world working as developers, designers, marketers, and project managers for us. Many of these contractors have worked closely with us for several years, integrating pretty seamlessly with our full-time team. Working with them has also prepared our core team well for the sudden work from home situation as many of our team members have worked via Zoom and Slack with contractors on multiple projects already.
From a financial standpoint, having contractors means we’ve been able to make do with a smaller payroll. The flexibility to scale down as quickly as necessary puts a lot less pressure on our business development team to bring on new projects. This allows us to take on work that is more likely to be a better fit with our agency’s positioning and more profitable as well.
Underlying our contractor network is the infrastructure consisting of processes and documentation to support recruitment, onboarding, evaluation, and on-going relationship development with talent from all over the world. Our Director of Technology Wes Turner has done a marvelous job of building this out and refining the system over the years. We have dozens of people across four continents working on various projects and following our processes and meeting our standards. And we continue to bring new people into the fold as well.
What initially came about as a way to decrease payroll costs and to maintain an overall lower cost structure has instead become a scalable and ever-growing pipeline of fresh new talent. And I’ll emphasize again–this made it that much easier for us to be fully functional as a remote team because all of our contractors were already remote to being with.
Unquestionably the most important part of surviving during a tough time is the commitment, collaboration, and decisiveness of the leadership team. Having gone through some really rough stretches with my partners Sei-Wook, Wes, and Lucas, I’m fairly confident about our ability to take on new challenges. We’re a no-nonsense group unafraid to take swift action on hard things.
Our adherence to the Entrepreneurial Operating System–from the weekly Level 10 meetings, the quarterly/annual planning meetings, to the Rocks that force us to work “on” the business–has instilled a system of discipline and accountability to get things done. Our trust and the momentum generated by the decisions we make each week is a bedrock I feel great about whether we’re facing a tailwind or a headwind.
A side note: Sei-Wook spent nearly 5 months away in Hong Kong and then in a self-imposed quarantine for a few weeks before coming back in early March only to go mandatory work-from-home a week later. During his time away, we were able to function normally as a leadership team, continuing to make weekly decisions together and respectively working on our quarterly initiatives. This gives me hope that we’ll be just as productive in the coming weeks (if not months) as we work remotely.
A Constant Eye on the Finances
One of the scars from our troubles in 2015 that lasted through to 2016 and part of 2017 was our reluctance to closely monitor our finances. We were too busy trying to land new business or put our fires on various projects. This led to several close calls where we would be fully drawn down on our line of credit and waiting on key invoices to be paid in order to make payroll. It was also only later that we realized how terribly we had been about collections and cost management.
These days, the Barrel co-founders–myself and Sei-Wook–keep a close eye on our finances and have a handle on our cash situation, receivables & payables, operating expenses, pipeline, and the profitability of our projects on a weekly basis. We have eventual plans to build up a finance team to help manage the day-to-day, but being this close to the finances has been a blessing. We’re more intimately aware of what keeps the business going, what generates profits, and how we should be thinking about risk and downstream impact of our decisions.
We got into this business because of the creative of making websites and branding for cool brands. Nowadays, we invest our creative thinking into how we can better understand and represent our financial performance or how we can better allocate profits to grow the business. It’s been quite a shift, but one we’ve learned to embrace.
I can see why original founders of agencies often struggle to grow their business beyond a certain point because this is a tough shift to make. Some founders want to continue overseeing the work and being close to the clients. This just means they need to bring in professionals to oversee the finances and do a great job there. In our case, I think we’re close to fully shifting from loving the client work to loving the work that supports everything that makes the client work possible.
We’ve been lucky to emerge from some low points to keep the business going and to learn from our many mistakes. At the time, things sucked and I’m sure we thought how simple life would be without the problems. But having survived through the struggle, it’s somewhat positioned us well for a period of uncertainty, risk, and disruption. I truly hope that all of this passes soon and we’re able to go back to our office and resume as before. I hope for the sake of our business as well as for the business and lives of everyone else. For the time being, I’m going to count us as extremely lucky, work our butts off, and be as helpful as possible to our clients, friends, and community.