Business As Unusual - Managing in a Pandemic

Blair and David address five common questions they have heard from creative entrepreneurs as they both have been helping firms navigate the economic changes being caused by the COVID-19 pandemic.

1) Should we alter our positioning?

2) Should I be firm or empathic with clients?

3) When can I return to selling without appearing tone deaf?

4) Should I borrow money?

5) How might our business models change?

Transcript

Blair Enns: David, it's Friday, March 27th. We're going to talk about managing during a pandemic. The topic of the podcast is businesses unusual. As I was saying to you before we went live, I'm getting a little bit tired of the topic. How about you?

David Baker: I am, but it's worth pushing through because I think other people are getting tired of it too, but the panic is rising a little bit. So, whatever we can do to help folks think through this. I like the topics that we have. They're helpful and they're not depressing. I think that'll be helpful. I'm tired of it, but I still think we need to plug forward as much as we can to help people.

Blair Enns: Yes, I agree. And you've been doing a lot more work on this front than I have been. How many webinars or podcasts have you done in the last two weeks?

David Baker: This is number 16.

Blair Enns: 16. So, you are into the many thousands of people that you've addressed.

David Baker: Yes. I've enjoyed it. It's been a little draining, but I like the opportunity to just efficiently let people hear the same things, and chat, and ask questions. So, it's been good.

Blair Enns: I texted you a few days ago saying, do you feel at all like an ER doctor whose been on his feet for days? And you said, "Yes. It reminds me of the time I was flying my plane and I lost power, and I had to land with no power, and afterwards, I was just immediately exhausted." I thought, leave it to David Baker to have the perfect metaphor to reach back into your rich and buried life to come up with a metaphor.

David Baker: Yes. The bad news in that story was I lost an engine, and I only had one. If I'd had two, it probably wouldn't have been so bad. I remember just crying like a baby at the end of the runway. You come to a stop, and of course, you can't pull off the runway because you don't have any powers. I remember crying. It's so exhausting. You kind of hold it together, and that's what a leader does in these days, right? The people listening to this are pretty much all leaders. They're going through the same thing.

Blair Enns: Yes. In the first couple of weeks, I was in a good and strong-- I generally don't recognize when I'm under stress in the moment, it's not till afterwards. But I was in the basement kind of rebuilding- I'm renovating everything. I'm renovating our little basement gym, and I was listening to some old music. I couldn't get over how emotional I was getting in response to this music from my youth. I realize, wait a minute, this isn't about the music. I went upstairs, and I said to my wife, "I'm actually feeling a lot of stress." We've triaged our own business, and then you spend all this time triaging other people's businesses.

I just want to say to people who are listening, if you're feeling the emotional weight of all this, man, you're not alone. We all are, and we'll all get through it. Let's talk about-- I'll just tell the people what we're going to talk about today. It's managing in a pandemic. We're going to address five different questions. The first one is, should we alter our positioning? And then, should I be firm or empathic with clients? And then, when can I return to selling without appearing tone deaf? Number four is, should I borrow money? And then finally, how might our business models change? Let's start with question number 1. Should we alter our positioning? I'll just lob that over to you.

I know a lot of us are thinking about it, right? And I have written about this. I'll weigh in as well, but do you have some basic fundamental starting advice on this question of altering our positioning?

David Baker: Yes. It's one of the probably most common questions I'm getting, and there's a different tone based on who's asking it. I've got a client that focuses entirely in the entertainment and travel industry. Obviously, they're hit very, very hard. Those are the ones that are asking these questions, right? And my sense-- This is from a couple of decades, two and a half decades of thinking and understanding how this works. What I'm telling people consistently is do not alter your positioning publicly. If you are one of the leading firms that owns a particular positioning that's in trouble right now, you are very likely to make it through this in just a short matter of months. You're competition, the ones that are not the one, two, three, four positions are probably going to be gone, and you will have solidified your future.

On the other hand, you might want to open it up, make it wider on a private basis. That to me is fine. In other words, you're not reaching out to new markets, and they've never heard of you, but you are willing to accept work that comes your way or that's within reach. What you'd want to do is just simply not tell people about it, to not water down your positioning. I want to know how strongly you feel about this? I feel so strongly about this that I think you should be willing to trim your company down as far as you need to and get a second job in order to hold on to your positioning. Now, if you made a mistake in what your positioning choice was, then of course, now is a good time to change it.

How long does it take to launch a new positioning from scratch? It's nine months at the absolute minimum, and usually, it's a couple of years. By the time this starts to show fruit, you'll wish you hadn't done it. That's a very harsh perspective, but I'm interested in what you have to say too.

Blair Enns: I think that's great advice. I would agree with that completely. You've always said positioning is, it's not about the work that you do, it's about the work that you pursue. You take this narrow value proposition to the market, and there's always people outside of that market who will find what you do interesting enough that you'll attract those people. And then people will come in completely out of the left-field with work that's just not at all related to your area of specialism. You're free to take that work. You just don't want to change your website to reflect the fact that you also do this work.

Recognize that the target isn't the market. Your positioning, your claim of expertise that's on your website and all of your materials. Your capabilities are always broader than that. Now is the time to think about, okay, well, let's- maybe we wouldn't normally take this. You'll take anything right now. It's just a matter of how you talk about it. I wrote a post last week, three steps to surviving and thriving in a crisis. The first step is just survive. The second step is deal with new midterm realities. I think the midterm realities might be with us until the end of the year, possibly. What I advised in that post for that second step is to look for service and market agencies. I think service agencies--

So services that you don't currently offer to your clients, but could easily offer, because it's easier to sell more things to existing clients than it is to go and find new clients. It's hard enough to find new clients to begin with in a good economy, isn't it?

David Baker: Right. Yes. Absolutely.

Blair Enns: But ask yourself, what else might I do for these clients? If there's something that you do in a vertical that translates into another vertical, go pursue that with direct outreach. I would support what you said, don't change your positioning on your website. If you do that, the idea that the market place is going to respond now, it's just insane.

David Baker: Yes. Absolutely. This is going to tie in to something we're going to talk about too, about when do you start selling. How would you even sell without sounding tacky or tone-deaf to a new market place that's never heard of you at this point.

Blair Enns: Yes. That's a great question, I can't wait to get to that. But let's talk about the next question on the list which is, should I be firm or empathic with clients?

David Baker: This is one you want to take, right?

Blair Enns: Yes, I'm happy to. You want to be both. It really depends on who the client is, right? First, I would say, you want to be empathic to everybody, and you're going to be firmer with some clients than with others. I think it's okay to be firm and empathic in certain situations. First of all, you have good clients, and they might need your help, and they might not be able to pay you. If you are aware of all the help without getting paid, it makes sense to help those good clients. With those best clients, it's the relationship first, because when you get through this, that goodwill is going to be worth a lot. I do want to make the distinction between good clients and bad clients is a little bit too black and white.

David Baker: Less than ideal clients, how's that?

Blair Enns: Less than ideal clients. I had a thought earlier in the week. Everybody listening to us, they all ran small businesses, or they're involved in managing small businesses. We don't either, you nor I, do a lot of work to the whole co-owned agencies. Most of your clients, I suspect, talking to the listener here, are good clients that you have good relationships with. But I know- I hear these stories all the time. I counsel people all the time on how you negotiated for a piece of new business in good faith, only to have somebody else on the client team, usually procurement, come in and just completely blind-side you with ridiculous demands. Some of those firms walk away, and some of those firms feel held hostage.

They go into those engagements feeling like they've just been kind of duped and beat up. I said I wrote down five words, insurance is cheap-goodwill. When there's no catastrophe, and there hasn't been a catastrophe for a while, we look at what we pay for insurance. We do as a society, like governments, not stocking up on these things, or us in the insurance premiums, that we think, "Well, you know. I've never been disabled before, why do I keep paying this expensive premium?" But once catastrophe hits, in comparison, insurance is really cheap. Goodwill with your clients is insurance. If you find yourself in relationships with clients who beat you up on money, who are demanding on terms, where business isn't very personal, it's very transactional.

It's really hard for me in this moment to say, "Yes, you should extend some goodwill to those clients." I wish I could address clients on this topic. There are so many clients out there. The larger ones, usually procurement-driven, where it's all transactional. It's all about getting cost down no matter what the impact is on the agencies. If you're an agency principal dealing with one of those clients right now, how are you thinking about them, and they need something from you. How are you thinking about them, versus the small business with the entrepreneur client, or the client who's just always treated you well. You know who your good clients are. Focus on the relationship first, be entirely empathic. I, in that post and other posts, have talked about how you can use terms and other ways that you can help clients.

Empathic with your good clients- sorry, this is a long answer- but there are times when you're going to need to be firm. I think if you have clients who owe you money, go and try to collect that money, be empathic, but also be firm and be direct about the fact that we're a small business, cash flow is keen always. It's really vital right now, you're overdue on a couple of invoices, you're overdue before this crisis hit. I need you to go and get that money for me today. You're not being a jerk about it, but there will be certain situations- don't apply this to every situation- there will be certain situations where you're thinking, "You know, these guys, they're always late. They don't seem to respect us, et cetera, et cetera."

Sometimes we're just apologetic about trying to collect money that's owed us. Be direct, don't be unkind, but be direct, open up, and be vulnerable, saying, "We're a small business, I need this money right now, it's owed to us. I'd like you to see if you can go and get that money for me today."

David Baker: I think it's helpful to think of the relationships that we have, that our listeners have with their clients in two ways. They have often a personal relationship with their contact at the company. Then they have a fiscal business relationship with the company itself. I'd like them to be empathetic to that person, but I think there's room to hold the line with the company itself. I think it's possible to be empathetic and firm, and very empathetic towards the person on the other side, recognizing that they have all these restrictions they have to work within. Then I would tend to advise people to be very empathetic when it comes to how you scramble and how you can reallocate labor, maybe move things up quicker, maybe give a little bit more beyond the scope, but be firmer on the terms, in terms of the pricing and the terms.

My concern is that in some cases, and this isn't always true, but in some cases when you give to apply it like that, it's sometimes very difficult to pull them back into the boat later. We have to make a distinction too between ideal clients and less than ideal clients. I'm in a slightly different place than you, I feel like we need to be pretty firm on the terms, but we communicate that to the company, and we're as empathetic as we possibly can be to the actual contact on the client side saying, "I hate to be this firm. I don't know what else to do. I know you're caught in a tough spot." Trying to combine both of those as much as possible.

Blair Enns: I think that's an important distinction between the company, the corporate entity, and the individual, so we're hard on issues and soft on people. It's a great way to think about it. Let's move on to the third one on the list.

David Baker: When can I return to selling without appearing tone-deaf? Did you see the tweet that I put up yesterday, and I referenced you because it was your language? I said something that if you have always understood that selling is helping, then it's a different way to frame that question, right? Talk to us about this one.

Blair Enns: The question I've received is, is it ethical to be selling at this time? My answer is, depends on what you see selling as. If you sell ethically in the best of times, then it's perfectly appropriate because some commerce is still happening. Some clients are still hiring agencies, and those clients are still in the marketplace spending. There is a requirement for commerce, therefore, it's perfectly appropriate to sell. But to the way you phrased the question without appearing tone-deaf, if you're reaching out to somebody, the message has to reflect the times, "Hey, I know it's insane times right now and I know a lot of industries aren't spending at all, but I also know that there's a lot of commerce going on and we have an obligation to keep moving forward. In that spirit, I'm reaching out to see if maybe we can be of assistance to you."

To your point, if you view selling as convincing, as the act of talking people into things, your sales efforts are going to blow up. If you have always viewed selling as helping, as looking for opportunities to create value for others, then you will be just fine. Just remember to use some language that acknowledges that these are difficult times, but you're proceeding forward anyway.

David Baker: What's your perception of these emails that I'm seeing from agencies, saying all the normal soft Hallmark Card stuff that you feel obligated to say, and then we just want you to know we're here for you and we're still up and running. I don't think those are necessary. I don't think we need to be sending emails like that, do you?

Blair Enns: Yes, I've been thinking about this, because you and I, a crisis hits, what do we do? We start writing. We're a guest on podcasts and webinars. I'm doing another one right after this. I don't know where the line is, but at some point, I've realized, okay, there's a little too much overcommunication going on. There are organizations that I just don't need to hear from. I don't need to hear what you're doing. I think you tweeted Philip Morgan's.

David Baker: Yes. It's about community. Now you're a part of the yarn sock community or something.

Blair Enns: It's Darn Tough, is a brand of socks, and I own some of them. They're fantastic socks, but, okay, you bought some socks from them and we're reaching out to your community. His line is, okay, so now I'm a community of wool sock wares? [laughs] Just because you have a customer base doesn't mean it's a community, is his point. I think there is a little bit of overcommunication. I say that with just a little bit of trepidation because I feel like my job in these times is to overcommunicate. Why is it my job and not somebody else's? I don't know if I can give the answer to that other than, yes, I'm in the business of giving advice around selling and growing existing accounts and pricing.

David Baker: Why would you send an email like that to 8,000 people on your list, when only 30 of them are actually your clients at the moment? It seems like your clients are the ones that need to know that information. You don't need to tell that to your prospects. Nobody thinks that if they really need you at this moment, they'll never be able to find you. I mean, I know exactly where to find you, and there's nobody not working, even from home, in firms like this. I just think we need to flip this around and see how it feels. When I get an email from somebody that I signed up for something four years ago, I've never heard from them once in that time, and then I get this email. It's overcommunicating.

Blair Enns: Three questions, why this? Why now? Why us? If you don't have a really good feeling to the answers to those three questions, don't press send. Why this? Why now? Why us?

Blair Enns: Next on the list, fourth of five issues we're addressing here in managing in a pandemic. Should I borrow money? This is a question for you. It's an interesting question because there are personal answers to this question, everybody's situation is different. Everybody's propensity for risk is different. But let's start with you've got a perspective on borrowing money in the best of times. Why don't we start there?

David Baker: I'm watching the participant count to see if it drops right at this point, because it's a very controversial view. Some people agree with me completely, most people don't, is that two big questions people are wrestling with right now is, do I need to make staff adjustments? Do I need to borrow money? Those are the two big things they're thinking about. If you don't normally borrow money at your firm, and I would say that's probably true of about half of the firms listening. You don't normally borrow money, you live within your means, you enter this any way with a pretty solid position from a business standpoint, and you decide that in an unusual situation like this, you're going to borrow money.

I would have no objection to that because you've demonstrated your ability to run a business well and you know what the risks are. That would be fine. If you haven't been running a very stable business, it's a little bit closer to the edge, and maybe you already have a line of credit that's tapped out, and an installment loan or something like that. I think it's a mistake to borrow money. Here are the two reasons why. First, it's because it can mask the pain which should prompt you to do something else. When you borrow money, you all of a sudden don't feel that pressure to make the quick adjustments which you really should be doing. I don't want anything to mask that pain.

The second reason is because when other firms begin to pull out of this, it will take you much longer to pull out of it because you cannot just look ahead, you're looking behind you and having to clean up the past as well. I'm not completely against borrowing money. I think borrowing money is a really good plan for appreciating assets, but this is not one of those. The reason people borrow money, it's all good reasons. It doesn't mean it's a good decision, but they're good reasons. I've assembled this fantastic team. I really don't want to have to put a team together down the road. I'm pretty sure, I'm hopeful, I'm confident this will turn around. Or what am I going to do? This is my firm, this is all I know what to do. I'd make the world's worst employee, so I can't do that. I understand it. I just think it's a mistake, or at least I'm just pleading with people be really, really careful about it, and just think through it really carefully and don't do it to mask the pain.

Blair Enns: I think that's good advice. Just going off on a tangent here.

David Baker: Oh, no, here we go.

Blair Enns: Do you have a sense of how long this-- I think we're in economic gridlock mode. We're still in crisis mode, but then we're going to be out of the crisis in a few weeks, whatever that means. Maybe it's four weeks, maybe it's 10 weeks, then we're going to be in recession most likely. Do you have a sense of how long that recession is going to last?

David Baker: When we look at the 2008 and 2009 thing, it took us six years in the US to replace all the jobs we lost. The recession didn't last that long at all. Recession is defined as two quarters in a row with negative growth. I don't know-- I think that firms that make it through this will start to do better the fourth quarter, that's my guess at this point. There's a study coming out, I'll tweet it and put it on LinkedIn, that the society of digital put together that shows that 30% of firms, I think it's 37% of firms, are very nervous about making through this.

That's more sobering than I expected. I was predicting that 20% to 30% of firms wouldn't make it through this, but I don't know. That's just my sense, fourth quarter.

Blair Enns: That study was done about seven to 10 days ago. It'd be interesting if it was done again in seven to 10 days, I suspect those numbers would be higher. I think we're not going to see normal economic activity this year just because we do events, you do events. We canceled our biggest event ever in April, canceled it early, we just see the trend that people are not booking new travel, and we started promoting it late. So we thought, "No, let's just get out of this now."

We've got two scheduled for the fall one in September, one in October, there on our website with the words on hold. For the life of me, I don't think there are going to be public gatherings in September or October of this year. I'll be surprised if we are gathering publicly in 2020. Therefore, I think, and this does relate to the subject of borrowing money, like you think, "Okay, we'll just borrow money and get through these four, eight or 10 weeks." I don't know. I think we need to be prepared for this mid-term reality that it could take months, maybe even up to a year.

David Baker: We need to make a distinction to between borrowing money for which you're offering a personal guarantee and otherwise.

Blair Enns: Borrow all you can unsecured debt in the corporation. Fill your [crosstalk].

David Baker: Yes, just walk away from it. But realistically, I'm working with two firms right now who are trying to do an orderly shutdown, and it's so much simpler it doesn't spill over outside that corporate veil if the debt isn't personally guaranteed. I had a thought this morning, how will people feel when things start to loosen up, and it's a little bit better environment for them. There'll be such relief about family and friends having made it through if they did, and so on. Such relief that businesses are employing people again. But I think there's going to be a lot of introspection at that point too because I look at my schedule, my schedule is like, I've got a speaking engagement in London and a TEDx down in Latin America, and that's it.

Those are way down the road and may not even happen. But there'll be some regret that we didn't use this downtime to take our business forward. That was a really interesting thought for me yesterday. It hit me about myself, and then I thought, "Oh, wow, this might be true for other people too," because it's easy- the passage of time it's just weird at this point. We don't have the normal- we don't have the game on Sunday, we don't have the difference in traffic between a weekday and a weekend.

We're not listening to certain programs like we normally would, the kids are at home, we're just all distracted and don't know how to focus on doing the right things. I hope that we can somehow get our head together and start really using this. This is a once-in-a-lifetime opportunity to really get some stuff done in your personal and your business life.

Blair Enns: I tweeted yesterday that a lot of manufacturers who are in forced shutdowns are using the time to retool their plants with new technology. They're either upgrading capacity, or they're adding new technology, and then I asked the question, what's the equivalent in your firm? I think that's a question we should all consider. We've got this downtime. Let's say we're down for four months, and then let's say we spring out of it. When we spring out of it, you're going to look back on this time, and you're going to think, "Wow, I had this incredible opportunity to do these things, to build that, et cetera," to renovate your studio, to renovate the gym in your house.

David Baker: That's our fifth question, just launched right into it. Will there be an opportunity to have any different business models? I have some definite ideas on that as well ,but just start talking about that. That's our last question. At the other end of this, will we have a different business model because of this?

Blair Enns: Some people will, for sure. I know you've seen this pattern as well. We've done some work together in seminars and events on thinking about alternative revenue models and business models. I'm fond of saying, I've seen a lot of really good business ideas crushed when their owners tried to fit them into an agency business model, or a fee-for-service model. We tend to think, okay, we're supposed to have all these people, we do this work and we send these invoices, that's the only way to deliver our expertise.

You and I have both worked with lots of different firms where they have some IP or some idea or something and we look at it and go, you should be a software company, or whatever it is. I think now is a really good time, it's part of that step two of adjusting to midterm realities. Just ask yourself the question, what if I couldn't send an invoice? What if I wasn't allowed to send time? Just all these constraint-driven exercises. And you've been hounding me for weeks to write an article on this. So I have written it, it's not going to drop for a couple of weeks yet, on constraint-driven exercises.

David Baker: I can't wait to read that.

Blair Enns: Because for years, I've played the game, I'm a Canadian who works internationally, most of my work is in the US. I have a US visa that allows me to work down there. I've played the game, what if I couldn't travel? What if I was barred from entering the US? That's the constraint exercise, it's a game we should all be playing it right now. There are other games too like what if you couldn't sell your services? What if you could only lease or license? You start thinking of all of these different business models.

I think probably, I want to take a guess, 20%, 15% of the agencies out there, if you go through these constraint-driven exercises, you'll realize that you've got something in a business that maybe just doesn't work the way you want it to, and you've got something that would be better off delivered under a different model. Or maybe you're a training company or a consulting company or a product company or a software company.

David Baker: One of the biggest changes I expect to happen is that firms as they right-size or get smaller by necessity, I'm urging them to think about retaining their role players, that's the AMs, the PMs, some strategists, the admin team, and then flex with the skill players. That would be the coders, the writers, the designers, the photographers, and so on. That's a little bit counterintuitive, but there's a lot of good science around why you would do that. A step beyond that would be this. I'm hoping that firms will start to more migrate to the Hollywood model, where they have this core team, and then they assemble hundreds of people who work together for nine or 15 months, and then they go on there are a few people that work on every project, but they assemble a team.

I have a client in LA that does that. They have six core people, and they assemble more than a 100 others for every big project. I think I would like to see some of that happen. I can't even predict what's going to happen. I'm really excited to see what some of these people come up with. Do you realize how many intelligent, resourceful creative people are even just listening to this webinar right now? The collective brainpower in these people is just amazing. I can't wait to learn from what they do and how they re-envision their businesses. It'll be exciting.

Blair Enns: There's so much talent out there that's on the market right now that's been laid off, that's unavailable. I often think you always wish you could have that like rockstar UX designer so you could build that product. That rockstar UX designer might be sitting there out of work right now. Could you do a joint venture or hire them, and could you start to do some development work on that product idea that you've been thinking about? There's a lot have talent out there that might do some foundation work for equity in an idea.

David Baker: If my business craters completely, I'm just going to turn to woodworking, if that's what you're wondering. That's my plan. What's your plan if your business craters? Are you're going to grow marijuana?

Blair Enns: I'm just going to take a bunch of mushrooms and go on a multi-year canoe trip.

[laughter]

David Baker: Have we attacked these five questions?

Blair Enns: We've attacked these five questions. The questions are, should we alter our positioning? Should I be firm or empathic with clients? When can I return to selling without appearing tone-deaf? Should I borrow money? How might our business model change? David, this has been great. I'll talk to you again soon.

David Baker: Yes, thank you.