| When business is slow, people often blame it on "the | | | | is facing a cash shortage due to an economic |
| economy." When I was younger, I used to think this | | | | downturn, there isn't any type of incentive that will |
| was a load of crap. How can "the economy" be | | | | result in them signing a video production contract. |
| directly responsible for why MY clients aren't hiring us | | | | They "freeze" their spending on anything that isn't |
| for more projects? | | | | directly related to the operations of their business. |
| How can "the economy" be responsible for ME losing | | | | So, you will feel like a hamster spinning the wheel |
| contract opportunities? Well, after years of fighting | | | | without getting anywhere if you attempt to find a |
| tooth and nail to have a successful video production | | | | way to get your client/prospect to move forward |
| business, I can tell you that even though I still don't | | | | with a project during this time. Embrace this fact and |
| understand exactly how it works, the state of "the | | | | start collecting nuts....it's going to be a long winter! |
| economy" definitely impacts my business. | | | | When your clients/prospects stop purchasing the |
| In this article, I'll attempt to give you a quick lesson | | | | "nice to haves" and only focus on the "must haves," |
| on how and why, and what you can do to weather | | | | YOU MUST FOLLOW SUIT IMMEDIATELY! Put off |
| the storms. | | | | the software upgrade or the expensive trip to the |
| I had an interesting conversation with a client about | | | | big industry conference you love to attend each |
| how the high price of oil impacts his business. He | | | | year. |
| owns a multi-million dollar plastics manufacturing | | | | This is also the time to put off personal vacations |
| company...I mean MULTI-MILLION dollar business! | | | | and the kitchen renovation. If you don't preserve |
| This guy is big time and I'm doing everything I can to | | | | your cash, you will be caught in the worst part of |
| quickly learn how to replicate his success. The odds | | | | the storm without a lot of options for survival. |
| are good that I won't reach that level with my video | | | | When the economy is bad, banks don't like to lend |
| production business, but perhaps the collective | | | | money to people who actually need it and since you |
| efforts of all my business endeavors will resemble an | | | | will be going to them because you are out of cash, |
| inkling of what he has accomplished some day. | | | | they won't consider you a good risk. It's a messed |
| In a moment of ignorance, I asked him why the price | | | | up system but learning to embrace it will result in a |
| of oil was making such a difference to his profit | | | | healthier life and a more successful video production |
| margins and he proceeded to instruct me in Business | | | | business. |
| Economics 101. He mass produces products like | | | | It will be difficult to do this in the middle of a bad |
| medical waste trash bags, bags designed to keep | | | | economy but a few ways you can help to off-set |
| frozen foods fresh for so many weeks/months, the | | | | some of the impact include: |
| liners of helium balloons, etc. which are made from | | | | 1. Focus your marketing efforts on industries that |
| plastic raw materials. These plastic raw materials are | | | | aren't impacted as heavily when the economy is |
| derived from oil. | | | | experiencing a downturn. |
| Since oil is a lot more expensive these days, his raw | | | | Some of these industries include health care (people |
| materials cost a lot more which means that in order | | | | are going to be sick no matter what the economy is |
| to maintain profit margins, he has to raise prices. Well, | | | | doing), higher education (people go to college no |
| this isn't fairing well because he has been successful | | | | matter what the economy is doing), local/state |
| due to his reputation of being the best quality at the | | | | federal government (the only entities that seem to |
| lowest price. | | | | not be impacted at all by the economy), and church |
| Now that he is having to raise his prices, he is merely | | | | ministries (the larger churches I work with seem to |
| the best quality at an average price. Part of his | | | | always have cash tucked away no matter what's |
| frustration is that his competitors aren't raising their | | | | going on the business world). |
| prices to protect their margins. Instead, they are | | | | These industries won't necessarily thrive in a bad |
| consciously losing money by keeping their prices the | | | | economy but they fare better than most which |
| same. | | | | means you won't be bone dry when the usual |
| So, as of right now, he can either join his | | | | corporate clients close their checkbooks. |
| competitors by not raising his prices and lose money | | | | 2. Find ways to improve your cash flow when the |
| or he can raise his prices to protect his profit margins | | | | economy is good. |
| but get less volume. | | | | This is when banks will loan money or refinance loans |
| At this point in the conversation, I realized that I was | | | | for ANYONE! Use this to your advantage to reduce |
| running late for another meeting so we broke it off | | | | your monthly payments on equipment, vehicles, etc. |
| and I hauled tail out of there. Regardless of what he | | | | And remember not to take on any unnecessary |
| decides, I'm sure it will be a decision that continues to | | | | expenses that will either eat a large portion of your |
| make him wealthier down the road. He didn't get | | | | cash or will tie you in to monthly payments. You'll |
| where he is by not understanding how to maneuver | | | | need the cash when the economy gets bad and you |
| through good and bad economies. | | | | won't want extra monthly payments when your |
| So, how does the example I gave above regarding | | | | revenue drops. |
| economic downturn impact us as videographers? | | | | 3. Make hay while the sun is shining! |
| It's pretty simple. Let's say that this plastics | | | | I know this is a cliche and one I've used in other |
| manufacturer was a client of yours. If the high price | | | | articles, but, it's true in this case as well. When the |
| of oil is leading him to raise prices which results in less | | | | economy is great and people are buying things left |
| sales volume, then it's safe to assume that he will | | | | and right, you MUST SELL LIKE THERE IS NO |
| tighten up the purse strings when it comes to the | | | | TOMORROW! |
| "nice to have" services (videos, websites, breakfast | | | | I'm serious. Spend all day marketing/selling and |
| in the middle of the Serengeti with 50 armed guards | | | | produce the videos at night or on weekends. Or, |
| to keep the animals away...true story) and will only | | | | relax your client's delivery expectations when possible |
| spend money on the "must have" services (raw | | | | so you can spend more time selling when everyone is |
| materials, paper, pens, maintenance on his machines, | | | | buying. |
| etc.) | | | | 4. Then, when you have a stack of cash and are |
| If he is a customer that does repeat business with | | | | trying to figure out how you want to spend |
| you but hasn't called in a while, this is most likely the | | | | it....REMEMBER....another storm will be coming soon! |
| reason. Or, if you submitted a proposal a few weeks | | | | Always has and always will. You can't deny it. To do |
| months ago and he hasn't responded, this again could | | | | so will spell disaster for your video production |
| be the problem. | | | | business. |
| You have to keep in mind that when a business | | | | In conclusion, the economy is a force that is much |
| owner (or decision maker) is in survival mode, they | | | | stronger than you, me and even the largest |
| aren't thinking about anything else but how to get | | | | businesses in the world. In order to make it through |
| through this economic downturn. They know that if | | | | the downturns, you must do everything you can to |
| they can just get through the storm, great things will | | | | prepare for them when the economy is strong. |
| be on the other side when the economy bounces | | | | Sell more, spend less and make smart financial |
| back. | | | | decisions when it comes to refinancing your |
| As a service provider, YOU MUST RESPECT THIS! | | | | long-term and short-term loans. Eventually, the |
| To not will result in extreme frustration for both you | | | | positive things you do in great economies will outrun |
| and the client/prospect. Plus, your client/prospect is | | | | the worst that bad economies can dish out. This is |
| giving you signs that the economic downturn is | | | | when your video production business gets stronger |
| coming your way as well. If high oil prices impacts | | | | and you start to experience true wealth. |
| your clients' profit, they won't have extra money to | | | | As for my client, his personal wealth is already far |
| spend on your services, which, you guessed it, | | | | greater than the value of his multi-million dollar |
| means that you too will soon face a crisis. | | | | business. So, in reality, it doesn't matter what |
| So now that you've "seen on the news that the | | | | happens during this particular economic downturn. |
| hurricane is coming," what do you do? | | | | In the worst possible case, his business shuts down |
| You start boarding up your house and potentially | | | | for a few months (with all employees continuing to |
| think about leaving town. | | | | receive paychecks) while he goes on a few lavish |
| I'm not suggesting you leave town but you should | | | | vacations. Then, when the economy bounces back, |
| definitely start thinking about how you will weather | | | | he turns the lights back on and they go back to |
| the economic storm that will soon hit you like a ton | | | | being the best-quality/lowest price provider of |
| of bricks. | | | | plastics products that will continue to make him |
| What are your options? | | | | millions of dollars each year. |
| My experience has been that when a client/prospect | | | | Wouldn't we all like a piece of that action? |