As the Federal Reserve continues to tighten monetary policy to try to control inflation, two things could happen. If it raises interest rates too much, the Fed could throw the economy into recession, the dreaded “hard landing.” But even if it manages to engineer a “soft landing,” business activity is still likely to decline. In either event, is your business services firm prepared for slower times?
Of course, the easy way to handle a slower economy is to simply lay off any extraneous employees and try to cut other expenses. However, that’s not the most humane way of dealing with the situation. It also likely means you may not be able to adequately service your existing clients or handle any new business that may come your way. It will also make it harder and more expensive to hire people when the economy improves.
But there are steps you can take now to help you weather the expected coming storm and get a jump on the next upcycle.
First off, don’t make any hasty decisions. Recessions could help or hinder your business. On the positive side, many companies may downsize their own employees and outsource more of their back-office and other functions, such as finance and human resources, which means more work for consultants and contractors. Remember, companies hire you to do the jobs they can’t do as well or as cost-effectively as you can.
But how do you best do that, and prosper, in a slower growth environment, where your clients are likely going to ask you to do more with less?
Beef up your tech
One of the ironies we find is that many business services companies provide technology and other high-end services to their clients but often neglect what’s going on in their own shops. But in order to help your clients stay ahead of technological advancements, you need to adopt these same solutions in house. These will enable you to provide the best and most cost-efficient services to your clients, at the same time giving you a significant competitive advantage, as well as helping to future-proof your business.
If you haven’t already, and are financially healthy enough, start investing in new technologies as your needs require, including artificial intelligence, machine learning, data analysis, predictive analytics, robotics, and automation. These investments—which are generally less expensive than hiring new employees—will not only help you survive the current downturn but can pay future dividends in terms of increased productivity and enhanced service offerings when the economy inevitably rebounds. Automation software, for example, can help you perform mundane tasks while freeing up your employees to concentrate on more valuable work, while predictive analytics can help you see around the next corner.
Manage your clients better
These investments in technology can help you meet the increased demands of your clients. According to a recent survey, only about a third of professional services firms meet their clients’ expectations. And what are those expectations? More quality work. Faster turnaround times. 24-7 customer service. Those expectations are only going to increase, especially in a weaker economy when everyone will be scrambling for more work.
In today’s marketplace, business services companies must be able to provide this type of service, at a minimum. And improved technology can get you there. Here’s one example: Many clients want instant responses to their questions. That’s why more business services companies are offering 24-7 customer support, via telephone, teleconference, live chat, social media, email, and text. One way to offer that is through virtual offices and remote workers. Having workers positioned strategically around the country—if not the world—in different time zones can help you better manage your clients, while resource management tools enable your employees to share real-time data to stay on track of their projects. Having no geographic boundaries broadens both your labor pool and your client prospect list.
Charge by your value add, not your time
Clients demand value for their money, as they should, but shouldn’t you also be compensated for the value you provide rather than simply your time? Many business services companies, such as accounting firms, charge on an hourly basis. But what if you helped that client realize huge tax savings or an increased return on investment as a result of your work? Shouldn’t you be rewarded for that, rather than simply hand in an invoice for your billable hours?
That’s why more firms are adopting a value-driven approach to contract bidding and billing that recognizes the benefits you provide them. This helps their profitability but yours as well. It’s a definite win-win; your clients will appreciate it.
Explore new revenue streams
In addition to helping you improve the way you perform your existing tasks, technology can also open doors to new opportunities and revenue streams. By being more efficient, you’ll be able to complete more work in less time, freeing up your resources to do additional work.
Making these changes and investments can be a tall order, for sure. Not every business services company is able or willing to make them. So if an exit makes more sense for you, please feel free to give us a call. The M&A market remains strong, and private equity still has lots of “dry powder” it’s eager to put to work for the right opportunities.
Interested in learning more? Please contact John Grady, FOCUS Managing Director, at [email protected]