Creative entrepreneurs dread downtime. If you bill by the hour, and especially if you also have fixed staff expenses, a stretch of light work can quickly eat up profits—or sink you deep in the red.
Downtime is to Be Expected
The first lesson in dealing with downtime is that you have to expect it, and account for it. Sooner or later, everyone hits a dry spell. Opportunities go quiet. Projects get delayed. Leads dry up. Often you can trace a quiet season back to a neglect of marketing while you were busy. But sometimes dry spells just happen—even when you’ve consistently plodded along with your marketing strategy.
This is part of why you have to discount your total revenue projections to account for business overhead, including a healthy profit margin (minimally 15%), which will allow you to allocate profits to building cash reserves. Ideally, you should have six months or more of reserves so that you can weather dry spells without going under.
What Not to Do in a Dry Spell
When you face a downturn, there are a couple things you should not do. Don’t make massive compromises on the kinds of clients you take on or budgets that you accept. Bad clients who get onboarded at a discount are not going to be fine with paying your normal higher rates later. How you catch them is how you’ll have to keep them. If you take on unqualified clients, they will continue to erode your profits after things pick back up.
Tightening Expenses Where Possible
Depending on the level of your cash reserves, you’ll want to stretch them out as long as possible. But as you evaluate your spending, don’t go to extremes. Too many cuts can undermine the long term health of your business. If you’ve ever taken a look at my cash flow worksheet template, you’ll notice that I break expenses out into a few categories including “Rollover” and “Savings Rollover.” These are usually the areas you can adjust the easiest when you need to tighten your belt (in addition to your own compensation).
Speaking of your compensation, the fact that you take risks as a business owner is one the reasons why you should always be paying yourself well above what you might make in a similar role at another firm. With that extra compensation, you gain flexibility. Of course, that assumes that you don’t completely leverage yourself personally by establishing a lifestyle that matches the very top of your compensation curve.
Don’t Take on Debt in a Downturn
Lastly, under the heading of what not to do, don’t borrow to cover short falls. Don’t pretend that the low cash flow associated with a slowdown is merely a timing issue. If you load up on debt you may encumber your business so much that you can’t recover even after the work does.
So what should you do with your downtime?
Take a Breather!
First of all, take a deep breath! You work hard most of the time. You might be due for a breather. And if you’ve saved up some cash flow cushion, you don’t have to panic. After a short break you’ll want to change gears and make progress on some planned downtime projects.
Keep a List of Go To Downtime Projects
It’s always a good idea to have a few long-term internal projects on the ready when these times hit. You don’t want to have to think too hard about your priorities at the last minute. Rather, plan ahead. Maybe your practice could really use a better project management system. These can take quite a bit of time to set up. But if you have some time on your hands, an internal project like that could be the perfect way to improve things for when work ramps back up.
Downtime is also a great opportunity to go back and evaluate your time data. We’re often so busy that we never bother to learn from this treasure trove of insight. Or, if you aren’t tracking your time, use your downtime to get that set up!
Downtime in Tiny Chunks
Whatever the project, have it ready in advance. This is especially important because often downtime doesn’t hit us all at once. We may find ourselves idle for just a few hours here and there. Those times are often the ones that get filled up with unproductive activities like binge-watching cat videos. If you add all those hours up, you could be wasting entire days over the course of a year, days that could have helped you make good progress on important aspects of running your business.
Spend Time on Marketing?
I hesitate to suggest investing extra time on your marketing during a downturn. That’s because marketing needs to be a constant heartbeat, a regular habit. Creative entrepreneurs often “get serious” about marketing after they’re already in a dry spell. But marketing is a marathon, not a 100 yard dash. You can’t make up for lost time with desperate intermittent binge-marketing.
That said, if you’re already implementing a consistent marketing strategy, downtime can be used to either get ahead of the game, or perhaps work on a more advanced piece of content, perhaps a longer whitepaper, a video, or even an eBook. You might also spend a bit more time building more connections on LinkedIn, or nurturing the ones you’ve already made.
Offer Discounts to Your Best Clients
Lastly, when your work volume is light, you might reach out to some existing clients and offer them some discounted time. (Again, I would not recommend this for getting new clients.) You have to be clear that such offers are time limited—they can only be taken advantage of right away. If you do this, I would start with your best clients. And tell them so. This can be a benefit to them, building even more good will, and can help smooth out your short term cash flow.
Don’t stress out over downtime. It’s a part of the business. But do plan for it, both financially by building savings, and administratively by having a solid plan for your time when things get slow.