I’m sure you’ve received a bajillion emails this week from every provider you’ve ever used, or restaurant you’ve ever visited, about how they are preparing for COVID-19. Personally, I’d rather hear about how Netflix is adapting to computer viruses than this virus.
None of us knows how exactly this pandemic will play out health wise, but based on the emergency decisions that have already been put into effect, an economic slowdown is certain, and some long-term effects are now unavoidable. So how might this impact your creative practice?
Creative Business Lag Other Industries
The scariest part of responding to a crisis like this, from the perspective of a creative entrepreneur, is that the impact we’ll feel will lag the rest of the economy. If you owned a restaurant, you would be hurting right now. Anyone engaged in the travel, entertainment, or event-driven industries are being profoundly impacted today. But once restrictions are lifted, and the main crisis has passed, they will bounce back pretty quickly.
But while that’s happening you might be just beginning to feel the effects of the slow down. And your recovery might be much more gradual. And so you have to start making decisions today, in preparation for the impact you will feel months from now.
Watch Your New Business Pipeline
Right now today, for most creative professionals, you’re probably not impacted much—beyond short term communications delays, as your clients all figure out how to work from home. And your current projects, unless they’re connected to the industries most immediately impacted, should move forward as usual.
But whatever projects are still in your short-term pipeline are very likely to go dark. When companies face economic uncertainty, they pause most of their expenditure decisions. And marketing related decisions are the first to hit the wait-and-see list. Clients that have been talking about starting projects over the past few months, but did not formally kick them off, are highly likely to put them on hold.
And so while you might be busy this week and the next, if you’re looking at your pipeline for the weeks after that, don’t bank on it.
Managing Creative Businesses in Past Downturns
I was managing my first company when the dot.com bubble burst in the year 2000. And that was quickly followed by September 11th, 2001. After 9-11, the impact was so severe that literally every project in my pipeline went dark for over eight months. And then, only very slowly, did small projects begin to trickle in. We went from twelve employees down to five, in six months. Things didn’t really pick back up again until 2004.
After the banking and housing crisis of 2008, we felt similar shocks, but in that case it wasn’t until a year or more later that the lag caught up to our company. And it took another year after that before our profitability returned to normal levels.
Personally, I don’t think this crisis will be as bad as those. But because the economy is now stalled, and will remain so for some weeks, or maybe months—the after effects will impact you. And so you need a plan for that hit.
How You Should Plan for the Hit?
You will end up with some gaps in your production calendar. You can count on it. Exactly when has more to do with your specific client base and region, but it is coming.
Cut All Non-Critical Expenses
So the first thing you want to do is figure out how to slim down any unnecessary expenses. In entrepreneur speak, you need to preserve your financial runway. Hopefully, you’ve been operating profitably and have been able to set aside 3-4 months of operating expenses as a buffer to these kinds of unpredictable events. But even if you have, you want to be able to stretch that out for as long as possible. After 9-11 we burned through our reserves in less than three months, and ended up going into debt for the next three—before I made the hard decisions to lay off employees. Not reacting fast enough almost put us out of business. And I definitely advise not going into debt to manage a crisis!
Plan to Make the Most of Your Downtime!
There are some upsides to a painful crisis like this. One is that you will have some downtime, and if you use it well, you can take advantage of that focused time to improve your operations, your marketing strategy, and find new ways to improve efficiencies.
After 9-11 we had to learn how to survive on rare projects with budgets less than half of what we found prior. But having adapted, when the budgets returned, our profit margins were much higher than before. Profitability is a great thing, but it can also make us lazy and inefficient.
So start thinking about how you will use your downtime when it comes. Have some internal project lined up and ready to go. If you don’t plan in advance, when the time comes, you’ll more likely respond with anxiety than with productivity. And anxiety is a waste, it never helps anyone. But if you have a plan, and can make use of the time, you will come out the other side even better off.
Trials Are Never Fun, But They Can Refine Your Business
I’ve been through enough crises that I don’t fear them anymore. Don’t get me wrong, I’m not signing up for any. But having seen the positive impact they’ve always had on my business on the other side, I don’t dread these painful opportunities.
Please let me know if you need any specific advice about managing your creative practice during this crisis, I’m here to help you out!