Whiteboard

At this time of year you can’t escape ‘look back at 2009’ review programmes and features. So, in keeping with this tradition, we thought that we would reflect on the year and share some of the lessons that we take away from it.

The old hands in our business had started their careers in the troubled late 1970s and early 1980s and survived through the post-ERM mess that eventually cost the Conservatives their hold on Government.

Our younger team had never been through a recession of this magnitude before and, as the figures came in, it looked as if business conditions might yet be worse than anything experienced to date by anyone.

At the moment we are in a phoney crisis. The mega-financial meltdown seems to have been averted and Goldman Sachs is making money hand-over-fist again. But the sovereign situation is worrying.

The consensus is that the relatively benign business situation that emerged about six months ago, based on the fact that low interest rates mean that those with jobs are actually better off as the Government spends its way out of the crisis, has probably another three to six months to go before unemployment, cuts in public spending and tax and interest rate rises begin to exert downward pressure on gross consumer spending.

At the end of the year, we can reflect on the decisions Pendry White has taken, and, with the benefit of hindsight, we can see where some of the risks taken have paid off.

This is not just navel-gazing because mid-2010 may present new challenges in which extreme competition for business will be matched by commodity and input inflation, creating a different type of management problem for those small businesses like ours that survived the first storm- we are, in short, in the hurricane’s eye.

And what have we learnt?

1. If you have to make tough decisions, make them early

To prepare for an expected  decline in revenue during the first half of 2009, Pendry White decided to cut around 20% from our cost base by the end of 2008. Undertaken in a disciplined way in two tranches in the Spring and Autumn of 2008, this meant moving to a smaller office, spending less on travel and ‘entertainment’  (marketing) and levering technology to support our new ways of working.

We made a conscious decision to cut from administrative functions rather than client-side operations and we won’t hide that this created strains in the system, forcing executives to work longer hours to deal with those things that Government dumps on us for reasons best known to itself.

As expected, revenues did decline in the first quarter of 2009 and then flattened in the second (though they have taken a sharp upturn in the last six weeks of the year). Had we waited until the end of the first quarter to make this decision, we may have had to make more drastic cuts, which would have had a much bigger impact on the company and threatened client service. 

2. The importance of relationships

Pendry White has always been very relationship orientated. It is just how we are. We invest a lot of time in building relationships with clients and prospects, and keeping relationships going with former clients. We knew that many of our contacts didn’t have the budgets to spend on marketing but we kept in touch. Again, another ‘cost’ in long hours but worth it.

We found our contacts really wanted to engage with us to find out what we were doing and how we were adapting, not only to the current market conditions, but in preparing for the upturn. We, in turn, listened to the challenges they were facing and discussed the opportunities that may transpire when the market turns.

OK, so some of them were going to be flakey but the ones that weren’t will feed us in 2010. If your clients are feeling a bit scared then friendship matters.

3. Honesty really is the best policy

Sometimes telling the truth is a risk, but it is one that has earned Pendry White credibility among clients.

For example, we were recently asked to respond to a PR brief. Having more strings to our bow than just PR, we felt that a low cost PR campaign wasn’t going to deliver the company the results it was looking for even though that is why they had come to us. Some of our other services would. So, in a competitive pitch, we explained this to the company in question and suggested an alternative approach – which they liked and it won us the business. 

Last week, we declined to busk it on a ‘grey area’ where we are not so expert and where others may have done to get the cash. We did not get the business, of course, but there was an upside - we saved ourselves the necessary cash investment in an area that was ‘yesterday’ and that would have forced us to put resources into the past rather than into the future.

Having fought very hard to reposition ourselves from old-style PR to multi-service marketing in a new economy context over the last two years or so, the last thing we should have done was compromise on our vision just to get a few thousands of short term bunce!

4. Hold your nerve

No one knows what the future is going to bring. The only thing you can do is use the information that you have to make the best decisions for your business and stick to them.

By this we mean having a clear picture of what you want to achieve – of course the way in which you achieve this can change with market conditions – by being bold and driving for focused growth despite all the doom and gloom in the market.

Historically, we have avoided bank debt (oh, how wise that turned out to be!) but our worst case scenario projections suggested that we might have to go down that route. In the event we did not (we budget conservatively) but our bank was clear that we were one of the better run businesses that had crossed its desk and (for a price!), at the worst stage in the crisis, we would have had no problem getting the cash. In fact, in the process, we discovered that it was the bank that was not well run with repeated administrative breakdowns - so we switched banks!

The moral of the story is that the crisis enabled us to re-evaluate all our service suppliers and to shift to better quality on better terms. In other words, we held our nerve, did not panic on our budgets and did not grasp at whatever terms were offered.

However, the fundamentals are what counts. Costs can be cut only so far – go below a certain line and you don’t have a business. From this point on, only sales, pricing and quality control (including motivation of people) can count.

That means we have to find money to spend on marketing and human resources – end of story – and recover the effective ‘freezing’ of benefits for our team. It won’t happen over night.

Competitive conditions in 2010 will be brutal for everyone and it will be a struggle to sustain and increase prices at a level that guarantees high quality service and no mistakes. All of those lessons of 2009 will be kept in mind by us – and, we humbly suggest, they should be by you as well.

Wishing all the readers of Whiteboard a very happy New Year and a prosperous 2010.