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Is business slowing down for agencies in 2023?

Chip and Gini get asked frequently about the state of the economy, the prospects of a recession, and what it means for agency owners. Not just now in 2023, but all the time. For years.

But what is the state of things right now, in Q2 of 2023?

The co-hosts explore what they’re hearing and seeing from agencies that they’re talking to. If prospects are being more cautious and more risk-averse, what does that mean for the length of agency sales cycles and the types of projects that are more likely to succeed?

How can you find opportunity in the mix and what can you do to protect yourself?

Key takeaways

  • Chip Griffin: “Even in the worst economic times, there are still agencies that will do well because they’re working with clients who are continuing to be willing to spend.”
  • Gini Dietrich: “If you can show flexibility and willingness to work with clients, they are going to remember that when times are good and they’re ready to rehire.”
  • Chip Griffin: “Just get out there and start talking to people.”
  • Gini Dietrich: “Don’t make decisions or do things out of fear.”

Related

The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.

Chip Griffin: Hello and welcome to the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: O…M…G.

Chip Griffin: The topic today naturally is are things slowing down just like I was right after this.

Perhaps one of my worst, worst openings yet. But hey.

Gini Dietrich: Oh, actually, I was gonna say the best part about your openings is I never know what’s coming, so

Chip Griffin: neither do i. I mean,

Gini Dietrich: when you did that, I was like, what’s happening right now?

Chip Griffin: I was just thinking in my head, slow down. How can I, oh, I can just speak slowly.

Gini Dietrich: There we go.

Chip Griffin: There you go. So in the moment,

Gini Dietrich: I love it. I love it.

Chip Griffin: This, this gives listeners a window into how my mind works and mm-hmm. It’s pretty disturbing at times.

Gini Dietrich: It’s, it is, but that’s okay. That’s why we love you.

Chip Griffin: In any case, we are gonna talk about whether or not things are starting to slow down for agencies, because I mean, we’ve been being asked this question since before the pandemic, during the pandemic, after the pandemic.

And it’s, but it’s picking up steam yet again. More and more people are asking about it. I think we saw, or you saw a tweet about it recently that spurred us to think, well, maybe this is a topic worth considering. Are things slowing down?

Gini Dietrich: You know, I read an article last week or in the last couple of weeks that said economists really expect that we’re not gonna escape 2023 without a recession.

Everything points to one. I mean, we have inflation, we have the war continues in Europe. They’ve cut oil production costs, like all of this stuff is happening and. Eventually consumer spending is going to slow, which means the rest of, of, of spending slows too. And we had all those tech layoffs, I think.

I think everything definitely points to a recession. And according to this article I read in the journal last week, the economists say, yeah, 2023 is the year.

Chip Griffin: Well, I think one of the challenges is the last couple of years, by and large for agencies has been pretty good. Yeah. O’Dwyer’s in their annual report came out and said that 2022 growth on average was 18% for PR agencies.

That’s a pretty strong average growth across the board. Yeah. And so when you, you know, part of it is that’s just not sustainable generally for long periods of time for any kind of business, right. That just you don’t have that kind of organic growth just on a, a routine basis. So you’re gonna have some pullback.

Probably regardless of what the macroeconomic conditions are, whether or not there’s a recession or anything like that. But I think, you know, the, the real question to me is not is there gonna be a recession, because that’s largely irrelevant. It’s, it’s what is the behavior of agency clients and prospects?

Because I think what I’m seeing is that particularly in certain sectors, like tech, clients are becoming far more cautious mm-hmm. With their spending. Yes. And so even though the indicators are that we clearly are not currently in a recession, the behavior is still acting out of some degree of, of fear concern.

Yep. Risk mitigation on the, on the part of clients. And that’s really what matters to an agency, not what the macroeconomic conditions are, not what, you know, some economist comes out and tells you, is, is true or false. It’s, it’s what are you seeing with your own prospects?

Gini Dietrich: There was a chief executive survey of chief marketing officers, and I’m not gonna get the numbers exactly right cause I don’t have it in front of me, but essentially it was like 70 something percent of marketers said, yeah.

We’re, we’re seeing budget constraints. We’re seeing, we’re having our CEOs ask us to do more with less. We’re having to pivot some of our things, you know, on things that we were testing out or taking a little bit of risk on. We’ve been asked to pull back on. So it, you know, it was, I think it was at least three quarters of chief marketing officers said, yeah, this is, we, things are starting to slow down for sure.

Chip Griffin: And, and I can tell you based on the conversations that I’m having with agency owners, anyone who is, who is in the tech space, for example, they are absolutely seeing Oh yeah, for sure. It, you know a slowdown across the board I think we’re generally seeing longer sales cycles. So even for those agencies that, that haven’t lost business or aren’t seeing a decrease in their pipeline, the pipeline is taking longer to close.

So there, there is some degree of general pullback, but as, as I’ve said repeatedly, It really does depend on who you’re serving, because even in the worst economic times, there are still agencies that will do well because there are, they’re working with clients who continue to need and are continuing to be willing to spend.

And I, I think right now, for example, I’m seeing that agencies who are doing things where it involves people being outside of the home or the office are generally doing better than others. So if you’re an agency that’s focused on events or focused on you know, travel or fashion or things like, anything that, that is not video camera related and not mm-hmm.

You know, work from home related, those are tending to do better because there is still three years on this desire for people to spend more time out and about and mm-hmm. Mm-hmm. And I think particularly as we’ve seen you know, the, the health emergency completely removed nationally here in the US that’s, that is causing more people to say, Hey, yeah, let’s, let’s start traveling again.

Let’s do more things. And so agencies that are serving those spaces are more likely to continue to see business flowing. And that’s certainly what I’m observing.

Gini Dietrich: Yeah. And then on the flip side, I will tell you, you know what we are, what we’re facing as my agency is facing is we have in the past six or seven weeks, we’ve probably helped five clients message layoffs appropriately.

So clients are doing layoffs. I was on the phone with a VP of sales from one of our clients last week, and he was like, man, things have slowed down big time here. So, you know, when you combine all that stuff, it hasn’t hit us as an agency yet. But when I, when I look at that and I say, okay, we’ve helped, we’ve helped message, and we’ve helped, you know, do some layoffs and make sure that that was all done appropriately.

And then other clients are saying things have really slowed down. It’s coming. And we’re just, you know, I don’t know when the shoe’s gonna drop, but the shoe will drop.

Chip Griffin: Yeah. I mean, I, but again, I, and we’ve said this before, people need to be careful not to overreact. Yeah. And so, you know, you need to be flexible.

You need to be nimble, you need to be listening. But, but don’t go and make your own decisions out of fear. Right. Because Right, right, right. Yeah. Because part of the problem here is that businesses are, are making decisions based on what they think might happen. Mm-hmm. But that then turns it into that self-fulfilling prophecy.

Right. Because if, if we all pull back and we all cut back on our spending, because we think that something bad’s gonna happen, we’ve essentially caused that bad thing to happen. Absolutely. So, I mean, you, you gotta be careful. You don’t want to stick your head in the sand and wait too long to make changes and, and all of that, but at the same time, observe what’s really happening around you and make decisions based on that.

Not based on some, you know, not imaginary, but some theoretical fear that, that you could have a problem down the road.

Gini Dietrich: Yeah. And one of the things I always say to our clients is, let’s do some crisis planning. Let’s do some, you know, if this, then that. So right. If, if you lose one client, what happens? If you lose two clients what happens? Like, let’s do some of those. That kind of planning to understand what the triggers are for you to have to make some changes on your own. If, if you are helping message layoffs and a couple of clients are talking about how slow it is for them, but nothing has affected you yet. You know, pay attention, right?

So that’s your, if this, then that scenario there. But if the five clients that have made layoffs now want to reduce your budget, okay, then there’s something that you’re gonna have to do some tightening. I mean, like, we are gonna have to tighten our belts so we, you know, do that scenario planning so that you’re prepared.

But to your point, don’t make decisions or, or do things out of fear just because you think it’s going to happen.

Chip Griffin: And, you know, since this is a recurring topic, it’s, I, I, I will give the same advice that I always give, which is also look for opportunity. Yeah. Don’t look at these things as just, oh my God, my clients are cutting back.

Instead, think about it. How can you better position yourself to deliver the services that your target market does need, does want, is willing to pay for? How do you make it so that it’s a much more compelling value proposition? For them. These are things that will serve you well, regardless of what happens in the, the broader economy.

But they are also things that will help you short term if you’re starting to, to spot those things. Things like, you know, if an organization has had layoffs, can you do things to help them bridge their resource gap because they still have things that need to be done, even if they’re shorter staffed.

How do you make sure that you’re positioning yourself so that you are not viewed as a threat by the internal employees who remain? Yep. You don’t want to be in a position where people are think, well, if I hire them, they’re just gonna take over what I do, and so therefore I’m not going to have a job.

Right. And, and so you need to be realistic about the, the, the way that people view all of these things. Everybody views it through a lens as far as what does it mean for me? And that’s true of individuals within companies. It’s true of the brands collectively based on the people who are running them.

It’s true for you and your team too. And so think about those selfish motivations that exist and how you can try to position yourself to better navigate that world rather than the ideal one you think you ought to live in.

Gini Dietrich: And you know, we talked last week about project work, so there might be opportunities for you to do that kind of thing too, where you say, okay, I understand that you can’t, that we have to pull back on budget because, and we can’t keep, continue with our retainer.

Here’s some things we think we can help you with. And they have a beginning, a middle, and an end. So, right. You know, think of be, be flexible and creative in those kinds of opportunities as well.

Chip Griffin: And if you’ve got clients who are looking at things in terms of, geez, I need to pull back because of the risk of a recession, how can you de-risk things for them?

And project-based work is a great way, yes to de-risk. Also not insisting on long-term contracts can be a good way to de-risk. Yep. And so now maybe if your, if your general mindset is, I always wanna do one year deals, maybe now is where you back off from that a little bit. Yep. And you’re willing to, to be flexible on that.

Not on, don’t be flexible on how much you charge for the work you do. You don’t want to use this as something where you’re like, oh, I’ll, I’ll just keep cutting back my profit margin. Just No, no. To keep business. Don’t do that. Don’t, don’t do that. Now you’ve just, you’ve set yourself further back. But you can look at other portions of the deal to de-risk it.

And that can be the length of the term, it can be the size of the project, as long as you’re maintaining margin and when you cut your price, you’re also cutting the work that you do commensurately, you can be in a much better place over time and you can be more appealing than some of the other agencies that maybe are not as willing to be flexible like that.

Gini Dietrich: Yeah. In fact, when I, when the pandemic hit, I had several clients say, oh, the terms on the, on your contracts kind of scare us. Because at the time they were year long contracts and you know, I mean we were all in a fluster at that point. And I was like, listen, let’s, let’s not worry about that. Like if you have to go your separate, we have to go our separate ways or we have to take a break or whatever happens to be that it is what it is.

And because of that, We did lose a couple of clients, but they came back because of that flexibility. And they, the two that came back said, we came back because you were so willing to work with us during a really rough time. I mean, it was, you know, so granted it was rough for everybody, but it, I think if you can show that kind of flexibility and willingness to work with clients, they are going to remember that and they’re going to remember that when times are good and they’re ready to rehire for certain things.

Chip Griffin: Right. Right. And I mean this is also the, the, the time where when it comes to de-risking things, you may want to think about things that have more short-term value versus long-term value. It doesn’t mean you should ignore the long-term, but we all know that a lot of the work that we do in agency land can take a long time to really pay off.

Sure. And so we may want to think of ways that we can get more quick wins for clients. Even. Even, I mean, we don’t want to neglect the long term and we don’t want to do things that are penny wise, pound foolish, that help us today, but hurt us tomorrow. But if you can lead with the things that have those short term victories, that’s gonna be much more appealing to a client who is in a low risk, you know, husband my resources mode versus mm-hmm.

Someone who’s like, yeah, sure, let’s spend everything.

Gini Dietrich: I would really like those clients.

Chip Griffin: Which, which does happen sometimes. I mean, you know, there are frothy times for agencies where people are like, yeah, let’s just, let’s, let’s give it a flyer. Let’s try that. Let’s do all these different things. I don’t think it’s the smartest move either, but you know, nor do I, there’s a happy move.

Sounds amazing. But, but, but when a, when a client comes to me and wants to do that, I’ve never said no. I mean Right. I’ll say, oh no, I’m sorry. I will not take your money.

Gini Dietrich: No. Sorry. Keep your money. Don’t want it.

Chip Griffin: Right, right. Yeah. So, so look for, you know, look for those opportunities if you are seeing things slow down. Because there’s, there’s no reason why slowing down has to be something that just kind of continues. You can arrest that slow down if you are being thoughtful about how you manage your own business.

Gini Dietrich: That’s right. And if you’re having conversations like I did with the VP of sales last week, I have that conversation every week with him and he’s really open and honest with me about, you know, how the work that we’re doing is affecting his work and, and how we’re partnering.

I mean, we have a great relationship from that perspective. And when we have those kinds of conversations, it’s easier for me and my team to go. Okay, well we’ve been wanting to do X, Y, and Z and we just haven’t had the time or the budget. What if we scaled back on the things that we’re doing on a couple of things here, because we know that’s gonna help them progress the way that they need to right now.

And it allows us to, to continue to work with that client without having to, to worry about budget constraints.

Chip Griffin: Right. Absolutely. And. You know, it’s, it, if you are actually out there and listening to people and you’re actually looking at how your business is performing, this can actually be an opportunity for you to, to try new things.

It can be something that lights a fire underneath you to do things that you know, you probably should have been doing. Yep. Anyway. Yes. You know, I’ve talked with a number of agency owners who are like, Hey, you know, my clients are pulling back, you know, I, I guess I really need to be getting out there and having more conversations with, with folks perhaps to perhaps Yes.

Yeah. Now you should do those things when times are good too, correct. So that you’re not going forward from a standing start. But look, if that’s what it takes to, to, to light that fire underneath you gets you moving forward, do it. Just, you know, don’t, don’t sit there and wallow, sit there and and say, okay, what’s my plan?

What am I gonna do tomorrow? What am I gonna do today that will help move the ball forward? And a lot of that is just having as many conversations with as many people as possible, because you don’t know where that next opportunity is going to come from. And if you spend all your time trying to plan and target and figure out exactly who to talk to, just get started.

Just get out there and start talking to people. 1, 2, 3 new people every day.

Gini Dietrich: And which will happen to, to that point, you know, I’m a, as we know, I’m a big proponent of passive income. And people say to me all the time, oh, I need to create some sort of passive income. I need to do it. I need to do it. I need to do it.

And finally, when something like this happens and things slow down, first of all, you have time, but secondly, it becomes an emergency, right? So now you can take this opportunity to say, okay. I have a little bit of extra time because we don’t have as much, much client work to do. I’m going to create my passive income opportunities. Right, because those are the kinds of things that will save you during downturns every time.

They’ll save you.

Chip Griffin: Yes. The, the one thing that I will say is those passive income opportunities are not your short-term solution. No. One of the mistakes that I see folks make is they say, oh, my core business is, is slowing down. Let me go work on this new initiative. Let me go. Yeah. No, it’s not a short term.

Get your core business in good shape before you start looking at adding other things. Yes. There’s nothing worse than trying to work on two things that are struggling at the same time. Have one that’s firing on all cylinders, throwing off good cash, you’re happy with how it is, and then spend your time working on those other things.

So if you don’t already have them in place, they’re probably not your 2023 solution. Doesn’t mean you shouldn’t devote some resources to them if things are going well for you. Yep. But if you’ve already started to see that pull back, don’t spend your time on that. Spend your time on the core business and get that ship shaped first.

Gini Dietrich: Yeah, you’re right. It will not save you. Which is why I always say to people like, You should have started this three years ago, four years ago.

Chip Griffin: Right? And it can be really appealing to say, okay, my core business, let me, let me go work on this other thing. Yep. But the problem is that almost all of those other things take time to ramp up.

And if you’re worried about the core and you’re worried about getting that to ramp up at the same time, it increases your stress, it increases your team’s stress, it leads to really bad decision making because at some point you say, oh God, I really should have paid attention to the core. Now I need to just get revenue in.

And I don’t even care what revenue is. I don’t care whether it’s profitable or not. I don’t care if it’s a good fit client, we’re just taking it on anyway. Yeah. So be smart in your decision making. Be smart today and always.

Gini Dietrich: Yes, do your scenario planning. Really think about if this happens, then we’re gonna do this.

And, you know, think about it and think about, you know, tiny things that can happen and think about catastrophic things that can happen. So, and, and be prepared for those things.

Chip Griffin: Right. And we know you’re making smart decisions because you chose to listen to this episode of the Agency Leadership Podcast. That’s all the way to the end here. And so that will draw this episode to a close. I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich.

Chip Griffin: And it depends.

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The Hosts

Chip Griffin is the founder of the Small Agency Growth Alliance (SAGA) where he helps PR & marketing agency owners build the businesses that they want to own. He brings more than two decades of experience as an agency executive and entrepreneur to share the wisdom of his success and lessons of his failures. Follow him on Twitter at @ChipGriffin.

 

Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, the lead blogger at Spin Sucks, and the host of Spin Sucks the podcast. She also is co-author of Marketing in the Round and co-host of Inside PR. Follow her on Twitter at @GiniDietrich.

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