Surviving The Direct Hit: Losing A Big Client

All business owners go through it – a big client relationship ends. How it ends is a tale that only that particular business and scenario can tell. But a 'cash cow' leaving the field has many levels to it, much like the tale of lovers braking up. There's remorse, confusion, anger and most of the time resolution. That's all good and great on paper and makes it sound like everything will be ok in time, just ride it out all "kumbaya" and here comes the sun.

Well the truth is it's more like when the Starship Enterprise takes a direct hit:

  • Shields go down
  • Tempers go up
  • There's lots of screaming
  • The ensuing hits take out smaller clients, increasing the sense of impending doom
  • Vendor ships flee from formation, scared they're next
  • Oxygen is quickly sucked from accounts receivable
  • Everyone panics and starts to delete files
  • People run around and start stealing the lamps from the offices of the people that got sucked out into the void of unemployment
  • There's lots of people looking for retribution both from the bridge to the families of red-shirts lost
  • And in a lot of cases, the ship goes hurling down down into the gravity of the adjacent planet only to burn up, crash or (in some very rare cases) be sucked up with a tractor beam to an adjacent competitive ship
  • Executives jump into the last of the severance-filled escape pods and try to jettison to nearby agencies

Surviving this moment takes great leadership, strength, a level-head and a bit of luck. The truth is that the first rule of business is don't put all your eggs in one basket. Just like a stock portfolio, you must diversify your clients, services and strengths. If your whole business is predicated on a single relationship, you're destined to end in said fiery ball of doom. While this is not necessarily the case with your service, you CAN indeed provide one or a niche level of practice, as long as your not doing it for one client.

Young advertising agencies often fall victim to this. Young advertising agencies start up because of that one cash cow that they managed to land. The hired someone that brought the work with them, won the dream RFP or came from that client and convinced them they were the better choice. Regardless of the how, young agencies rapidly try to ramp up to appear like the next place to be. "CONSIDER US!" Just make sure that in that time, you're still doing all the things that made that cash cow want to eat from your field.

As quickly as humanly possible, you need to put efforts toward balancing client base. This can be done in a number of ways:

  • First and most importantly, you must have all clients agree to legal contracts that protect both parties
  • Construct a board of directors that are outside of your business; diversify business types within said council
  • Within these contracts, always put a minimum of 90 days to reevaluate/close a relationship (this gives you the opportunity to make things right within that time as well)
  • Always have at least two outstanding RFP's or organic growth opportunities awaiting approval at all times
  • Don't overload a business vertical with clients
  • Within a vertical, create unique teams to support the client at the highest level and should that client collapse, it would not effect all agency members
  • Often, if seeking new directives, it's best to create a joint venture (JV) or create a company within your own to support just that directive. You see this often with interactive divisions as well as software and applicational departments
  • Make sure, even on day one that you're following a business plan, staying conservative and preparing for adversity
  • While I won't get into cash reserves for your company it's safe to say you should (in a best case scenario) have a minimum of three months for all expenses, including salary in the bank

Reality Vs. Perception
Some of the toughest things to fit after taking a direct hit is the community's perception that you're going out of business. You can soften this impact, of course, by having several large clients in queue – but the likelihood of this is probably minimal. The best thing to do is to go into a conservative front-facing message of "business as usual." Dogs can smell fear, like bees and wild hobos. The last thing you want to do is show weakness by screaming that "EVERYTHING IS FINE! THERE'S NOTHING TO SEE HERE!" It's important to note that any messaging should also be vetted by legal to make sure it's not in any conflict with said departure of cash cow. God forbid you're ever in a situation where you're fighting for your legal life, the last thing you want is someone bitching up a storm about what a pain-in-the-ass that client was and here's why...

Crisis Management
You hear this term often as it pertains to theft, weather damage, internal malice and other reasons. You don't, however, hear this term used when it comes to losing a large client, which in all cases is more likely than the former mentioned items. Therefore, it's a good idea to have a "break in case of cow death" manual. Worst case scenario for client loss, if you will. The best way to go about this document is to look to your board, and there are also countless books available that cover such subject matter. This, though, should be part of your thinking even as your build your business. Also, for a digital shop, it should go without saying that all of your primary assets are digital and that you should have redundancy for your files, concrete backup rituals and offsite hosting. But like I said, that goes without saying. ;)

Transparent Theater
It's hard when you're adversely affecting in business. People get laid off, morale goes in the shitter' and the paranoid ones start their job search that afternoon. So what's the best thing to do? Tell your team everything within reason. Disclose fiscal amounts, issues, what, why, when and where you intend to cut costs and let them ask questions. If one person asks a question, you can bet half your staff wanted to. It's important to treat your staff like the adults that they are. The disruption of this kind is so impactful that if you're secretive about it, it will only serve to do you more harm than good. You'll simply be alienating your staff and creating an "us" and "them" internally, and if that's you, stop reading my blog, you're an asshole and I loath you.

Universal Cuts With Goal Oriented Deadlines
Beyond the fact that it's illegal not to, if you must cut salaries, do so across the board. Additionally, those making the most should indeed take the largest percentage loss, followed by executives, management and then staff. Also try, if you can, to set a deadline that these cuts will be lifted. This will improve morale immediately and offer an incentive to work harder towards that day. Lastly, if you're really daring, you can even go as far as to make a promise to repay that money and convey it as somewhat of a loan that everyone is offering with this sacrifice to the greater good. Taking these steps will make a great deal of difference across all personnel.

Cultural Therapy
One thing that is imperative, especially for smaller companies, is cultural therapy. Cultural therapy is the understanding that whatever shake-up that comes from losing business, albeit lay-offs, cut backs or salary cuts, these things happen. You have to be an adult, too. Culture and morale come from the combined understanding that decisions are made for the best reasons for the company. The fact that people, clients and work you care about might be gone is a hard pill to swallow. There's always a sense of dread and self-pity that comes from these moments. You'll find that you'll most likely have people leave out of (what they perceive is) personal preservation. I should know, I've been that person. You have to let them go.

On the other hand, while it's not 'business as usual,' you cannot stay in mourning any longer than you can stop work because it's raining outside. Make your staff dive deep into their work and embrace the moment openly as a tough loss.

Social Lockdown & "Rumor Cancer"
You'll never stop people from talking. Let me repeat that – you'll NEVER stop people from talking. Before janitorial hits the lights, guaranteed every other agency within your size and discipline will know that the client's gone and have heard a dozen reasons why that is the case. "Chatter" will run it's course. "Rumor" will infect morale. Rumor will spread like wildfire. Rumor will ruin reputations.

I once worked at a .COM startup in the early 2000's and my boss at the time (ex-Microsoft executive) told me "if you can talk at a level that can be overheard, then whatever you're saying need not be said." Look I don't think any kids give a shit about what I have to say so it's just us adults reading my ramblings. Therefore, I can say to you this: you know your staff, if you don't you're a bad leader and should resign. Knowing your staff, you know who (or whos) the rumor mill is. Rumor is a cancer and unfortunately when you find it you must cut it out.

Good Karma
This is simple. If there's a layoff, do whatever you can in your power (and within reason) to support and help your former staff find work. You owe it to them.

In Closing
I used to live in NYC when it was reasonably safe, before muggings were the norm. A friend of mine told me that "if you think nothings going to happen to you, not only are you wrong but you're unprepared when it does. At least if something looks like it might, you can prepare yourself and more than likely avoid it or come out alive." There's really no difference in that statement when it applies to business.

Posted on September 13, 2010 and filed under Business, Management, Process.