IT and Business Insights for SMB Solution Providers

Welcome to the "Not My First" Rodeo

Like most of you, I've spent a lot of time on Zoom in the last week. And it's hard not to talk about the economy - and speculate about where it's going. Are we in a recession? Technically, no. But we will be soon.

So the big questions are: What will you do? What will your clients do? How can you stay in business without taking too much money from your clients, since you also need them to stay in business?

And so forth, and so on.

I also noticed this week that the people who owned a business that survived the last big recession have a very different approach to the uncertainty than those who don't share that experience. They don't have any more certainty, but they seem to have a lot less stress.

I had a bit of luck in the 2008-2009 recession (I had raised my rates early in 2008). I also had some bad luck due to clients downsizing or being gobbled up by their competition. I made some mistakes, and I made some good decisions.

Overall, I probably did as well as anyone else who kept their business alive at the time.

We Know Some Things

I also learned a lot in the last recession. And that knowledge helps me be a little more at ease this time. I still don't have a crystal ball, but I do have a pretty good idea of the "stages" we need to go through. That's why my last blog post encouraged you to go get all the money that's owed to you right now: The next thing that's going to happen is that some people will stop paying their bills.

After that, there will be layoffs. You might have to lay off some of your staff. Your clients will certainly have some down-sizing.

People who rely on recurring revenue will now have the best cash flow. Use it wisely. Those who trade dollars for hours will see work disappear much more quickly. As everyone begins to hoard cash, discretionary spending will decrease. If you are "discretionary spending" then your work will decrease.

Some businesses will cease to exist. Talking to other people in this industry, there's general agreement that about 25-30% of all IT service providers disappeared during the last big recession. Some closed their doors intentionally. Some sold their businesses to the competition. Some just took jobs when they could find them.

I don't know if we'll see that much drop off this time, but I'm sure we'll see some.

. . . and then one day, without any notice, things will begin to improve. Old clients will call and ask for a quote. The number of tickets in your system will creep up. Sales will slowly appear. And eventually, things will become the new normal.

There's Plenty We Don't Know

There are also plenty of unknown factors. We don't know how deep or how long the drop-off will last. I also survived the 2001 recession, which was almost entirely an implosion of an over-sold stock market. The underlying economy was still strong, and we got back on our feet very quickly.

Until February, we were in the middle of a massive mergers-and-acquisitions feeding frenzy at all levels. IT consultants were gobbling each other up. Vendors were gobbling each other up. Private equity companies were gobbling up everything they could find. THAT wasn't the case in 2008.

Some of these companies are well run, have a long-term vision, and will be partners you'll want to keep when the storm has passed. Others will focus 100% on their bottom line without regard for their "partners." You might drop them during the recession or shortly after.

Some vendors and distributors have lots of cash. That gives them lots of options. We'll see what they do with it.

Another "new" element this time is the level of information we have about our own industry. There are blogs and podcasts that call out vendor missteps and praise vendors who do the right thing. I think (I hope) this will help vendors who are on the fence to come down on the side of helping partners survive.

The Bottom Line

In the end, we all should know this: The recession will end. It will run its course. With luck, the virus will fade away and we'll all get to get together at a conference. We just don't know when right now. But it will happen.

You may have never gone through a recession as a business owner. That's okay. After all, it's not something you'll look back on fondly anyway. BUT you can rely on the advice of those who have successfully trod this path. In the natural progression of the universe, many of these survivors are now bloggers, authors, podcasters, and coaches.

Listen to their words and watch their actions. But remember that you are an economy of one. That means that you need to focus on taking the best actions for your business. Don't assume the that national economy (or world economy) is your economy. Your economy exists only inside your Profit and Loss report. Trends and the actions of people outside your business are a source of information. You still need to make the right decisions inside your business.

Each client interaction is the one opportunity you have to keep that client. Each staff interaction is the one opportunity you have to build your company culture. Each new prospect is the one opportunity you have to make a sale today.

Stay focused. Stay informed. Make good decisions.

I sincerely wish you the best luck possible in the months ahead.

:-)

About the Author

Karl W. Palachuk, is a technology consultant, author, speaker, trainer, and coach. He is the author of fifteen books. He has built several successful businesses, including two managed services companies. His books include Managed Services in a Month and The Network Documentation Workbook. Karl is a frequent trainer and speaker in the SMB Community. His popular blog can be found at SmallBizThoughts.com. He has more than twenty years experience as an I.T. professional and serves on advisory panels for several hardware and software companies.

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