Editor’s Note: As part of Back Light, a series of articles sharing illuminating insider observations, we asked CEO of the Event Leadership Institute, the engine behind Smart U, to share his observations of how industry leaders are managing during epic COVID disruption.
Let’s set the scene. You’re the owner of an event business. (Agency, independent planner, venue sourcing company, or other supplier; take your pick.) It’s the end of December, 2019, and you’re toasting to another fantastic year. Another record year. Business is good, and it’s been good for a while now. Your biggest problem, in fact, has been keeping up with the increasing flow of RFPs and new inquiries, on top of all the repeat event work.
Fast forward to March of 2020. Everything has ground to a halt. Everything. You’ve never seen anything like this before. No one has. Sure, there are a number of wildly optimistic industry cheerleaders who continue to insist that all is well. You’re desperate to believe them, but deep down you know they’re ignoring the tsunami slamming into the industry, like the Kevin Bacon character at the end of Animal House shouting “Remain calm! All is well!” while the homecoming parade has disintegrated into chaos. A more mainstream view, however, is that this is temporary, that things will be back to normal in the summer, the fall at the latest. You hang your hopes on this view, as you stare at your revised budget projections, which now have zeros–ZEROS!–in the revenue line for the next four to six months.
How the *@^*# could this happen, you keep asking yourself. One minute you’re on top of the world, the next minute your business is on life support. The only consolation is that everyone else is in the same boat as you. How are they coping? Glad you asked.
In mid-March I pulled together a closed-door group of around two dozen owners of event agencies from across the U.S., U.K. and Canada to provide a forum to share how they were handling the pandemic, exchange ideas and resources, brainstorm solutions and generally offer peer-level support for each other. The group met weekly through the end of June, and ranged in size from small to large companies, provided diverse service offerings, and served different client types, but everyone was facing the same brutal business climate.
Here are some of the key strategies that emerged from those group calls, which business owners would be wise to embrace.
1. Big Picture: The Come-To-Jesus Moment
- The Sooner You Face Reality, the Better. Without question, business owners who accept the new reality are faring far better than those clinging to rosy but unrealistic assumptions, like predictions of a return to normal in the winter, spring, etc. If the rosy predictions turn out to be right, the worst-case scenario is you’ve tightened your belt and will emerge a leaner and more focused business. If they’re wrong, however, you’re dead in the water. You need to be brutally honest with yourself so you can plan accordingly. And the brutal truth is…
- There Will Be No ‘Return to Normal’. The event industry of 2019 is never coming back. Yes, face-to-face events will return eventually, in greater and greater numbers, but it will likely take several years, and when it does, the landscape will have been altered dramatically. The biggest transformation is that organizations have seen what they can accomplish with virtual events, and that genie is not going back in the bottle. But in-person events will also usher in significant changes, such as much shorter lead times, lower guest guarantees, smaller deposits, more client-friendly cancellation terms, to name a few. Most importantly, there will be no “all clear” signal; in-person events will return in fits and starts, as businesses adapt to the unpredictability of the pandemic.
2. Finance: Cash Is King
This has been a key tenet of business management forever, but the consequences of not having adequate cash have never been more stark than when the pandemic literally zeroed out revenue for months on end. Many small businesses have never had to weather a downturn, and a flush economy can cover up sloppy cash management. This has been especially hard on companies with challenging payment models, like venue sourcing firms who often don’t get paid for their work until months after the event, even though that work was performed months if not years prior. Business owners need to build a realistic cash cushion to weather the storm, such as 6-9 months of operating expenses, in the bank.
- Cut Expenses Early & Aggressively: Many owners tried to hold on to as many of their employees as possible, for as long as they could, only to have to shutter the company later when things didn’t improve. While this may seem compassionate and well-intentioned, it’s really not in anyone’s best interests. If the business dies, there are no jobs for anybody, now or when things recover. And it doesn’t necessarily mean firing or furloughing people; you can institute salary reductions. While labor is usually the biggest cost in our industry, owners should also be looking to renegotiate their lease—or eliminate the office altogether—which is often the second biggest expense.
- Tap Your Full Credit Line Before the Bank Can Call/Pull It. Many businesses have lines of credit that are usually not fully tapped. Most agreements allow the banks to “call” those credit lines at any time, so in a crisis like the current one, business owners should tap the full amount available to them, before the bank has a chance to change its mind, especially with interest rates being at historic lows.
- Talk to Your Clients About Better Payment Terms. Convince them to keep the money they’ve paid you as a credit for other/future services, rather than having to refund any deposits. Many client businesses are doing fine and have a vested interest in making sure a reliable vendor like yourself, who knows them well, survives.
- Cancel Your Company Credit Card. Then get a new one. This prevents vendors who have your credit card info on file from charging it without your specific approval. You don’t want to be caught in a situation where a client has cancelled an event but your vendor proceeds to charge you for services related to that event.
- Negotiate More Favorable Payment Terms with Suppliers. With little to no revenue coming in, you need to take control of outbound payments, and slow the pace of money going out the door.
3. Personnel: Leading Your Team
- Be Brutally Honest and Transparent with Your Team. Winston Churchill is famously credited with his outstanding leadership of Britain during World War II, particularly during the daily German bombings of London. His secret boils down to two parts, the first of which is frequent and honest updates with his constituents. Following this approach with the remaining team will go a long way toward easing their fears of sudden, unexpected layoffs. This is a unique situation because the entire industry is in the same boat, so it’s no reflection on your company. These are extenuating, unpredictable circumstances, not the result of mismanagement.
- But Offer Realistic Hope and Inspiration. The second part of Churchill’s brilliance was providing realistic reasons for hope, giving staff something to believe in. In a crisis, people want to be soldiers, not victims. This approach basically says, “I’m not going to sugar-coat it: we’re in for a tough fight. But we’re going to get through this together and emerge stronger. Here’s how and why.”
- Pivot: Find Out What Your Clients Need. Reimagine What You Can Provide. This is a good time to explore pivoting your business offerings, the most obvious of which is to virtual events. Most event agencies—particularly those involved in production, sponsor cultivation, attendee engagement, content development, etc.—are well-suited to migrate those services to virtual events. And meeting pros are racing to get upskilled in virtual to do just that, evidenced by the 2,000 event professionals who got certified in our Virtual Event & Meeting Management since April.
But don’t blindly follow the crowd there; make sure it fits with your core strengths. Perhaps the most underappreciated assets event businesses have are their client relationships, and you should reach out to as many as possible to see what their new needs are; you might be surprised at what you find.
A good example is Wendy Ferber and Andy Nadel’s swag business, Pride Products, which had built a loyal corporate clientele over the years, particularly with the recruiting and HR departments. When the promotional products side of the business dried up, they called over 80 clients and found a glaring need they had: team building and maintaining culture when people can’t physically be together. So they created an entirely new business: ConnectRCentral, providing a variety of virtual team building activities.
- Rebalance Your Pricing Model. Many event companies use pricing models that don’t sync up with when they perform the work. If your pricing is tied to the event budget in some way (e.g. using a markup, percent of budget, commission, etc.) and the event is cancelled, you may get nothing, or much less than the work you’ve performed to date would warrant. Much of the work being done takes place way before the event, so consider shifting to a consulting-type pricing model, where you’re compensated for the work you do, as you do it.
- Use This Time to Up-Skill Your Staff and Hone Internal Processes. Once you’ve tightened your belt and gotten your costs down to a sustainable level, now is a great time to do all the things you always wanted to do, or should’ve done, but never made time for. Things like fine-tuning your internal processes and onboarding protocols, updating your website, etc. and training and education courses to add new skills for yourself and your team, such as mastering Technical Meeting & Event Production, Venue Sales, Social Media Marketing, Accounting for Event Businesses, or Pivot Tables in Excel, to name but a few. We’ve been hearing about the need for lifelong learning in today’s economy; it’s time to go beyond lip service and put those plans into action.
Howard Givner is founder and CEO of the Event Leadership Institute and has previously owned, managed and advised a number of event agencies over the past 25 years.