Times are tough for everyone – the little ones have small problems, the big ones have big problems or, at least, that’s how it should be. Given that small digital marketing agencies are in deeper trouble at the time of the coronavirus pandemic, they will be our focus in this text.
People are the most important resource of every company and therefore, we should pay attention to them first, and only then to the clients because they are the ones who bring money for employees.
At the time when a state of emergency was declared in many countries, which was mostly in March, some digital agencies immediately announced that their services had been canceled by 30% -40% of clients. This industry and the activities performed within it were, of course, among the most affected.
The second cancellation of services followed as early as at the beginning of April, where again one-third of clients canceled, which means that now marketing companies have on average only 20% -30% of clients who need to cover 100% of costs.
Is this possible? Well, of course, not…
Reduction of Costs
Precisely because it’s not possible to cover all the costs of the agency with a reduced number of clients, it’s necessary to reduce them.
Let’s go first of the measures introduced by some of the competent institutions – a moratorium on loans. This means that the agency that has the loans can relax while the current situation lasts, i.e. 3 months minimum. Of course, interest will be charged from the bank, but that amount is negligible.
There are costs of renting business premises (office space or apartment) and utilities. No digital marketing agency now needs business premises because employees work from home, so we have two options:
- The first option is to cancel the rental and move the office furniture to a warehouse or garage where the rent and utilities are much lower. Or better yet, if you have a place of your own to store them, then there’s no such cost.
- The option No.2 is to negotiate with the owner of the premises and try to agree not to pay rent while the state of emergency lasts, but only utilities. This agreement is a win-win because in that case, you don’t have to pay for the removal of office furniture to a warehouse or a garage if you don’t have a place to store it. Many owners will accept this option, considering that in that case they don’t have income from rent, but they also don’t have the cost of utilities, while they are truly aware that it will be difficult to rent business space during the time of coronavirus.
There’s also the problem of canceling all additional online tools, subscriptions, your marketing, and the like. Since most of your clients cancel your service, you have to cancel others as well, because all this is a chain reaction.
One of the services you could have the urge to cancel is the hosting of your website. Think twice, because it won’t be such a smart decision. Regardless of the necessity of reducing costs, the online presence of your website should always be visible or you’ll lose the possibility of acquiring new clients if some of them have a desire to hire you. And that’s possible because not all clients will have financial issues.
For instance – MySQL hosting is the one that you definitely shouldn’t get rid of just like that. It includes affordable plans that are tested and rated on this link, traditional hardware, operating system, and administration plus backups and account management. One more reason to keep paying for MySQL hosting is that MySQL clusters, who are distributed databases providing high availability for your MySQL database management system, can be easily created with your desired configurations.
Postponing the Payment of Taxes
Unfortunately, as things stand now, you can hardly postpone the payment of taxes on salaries and contributions, advance payments of profit tax, and other expenses for March. And yet, on the other hand, you worked “normally“ until the middle of March, so we hope that many will be able to cover all the costs from that month.
In April, the situation was a little different, because some countries have approved the postponement of taxes on salaries and contributions and the payment of advance income tax for the second quarter, so those who decide to use this measure will be able to postpone everything until the beginning of 2021.
Digital agencies that won’t be able to settle everything by the beginning of 2021, have the possibility of further postponing the payment of all the above costs from 12 to 24 months, without being obligated to pay interest, at the request of the taxpayer.
The costs of the basic needs of the employees in the office don’t exist now because they work from home. The remaining costs are the bookkeeper’s with whom you can also arrange a win-win, and that’s the price reduction, because there will be fewer bills and the like in April, but there will be the salary calculations.
Deferring the VAT liability is generally not possible or can only be deferred by the companies that donate, so this is a cost that you can’t avoid. But, the VAT item shouldn’t be a problem because marketing companies charge for the services at the price they want to add + the percentage of VAT.
Employee Salaries – Cost or Investment
Although the salaries of employees in the balance sheets of each agency are on the side of costs, in practice this isn’t the case because people are the most important resource. Therefore, they aren’t an expense but an investment that we need to keep.
It’s necessary to pay the full amount of salary for March, while for April you can “expect some kind of help from the government“ or the payment of minimum wage for each employee during the state of emergency – provided that the company didn’t lay off more than a certain percentage of employees, which is determined differently in each country.
The salaries of employees in agencies are higher than the minimum wages, so it’s necessary to negotiate with employees about salary reduction. It sounds bad, but it’s a reality… Don’t think this step is a bad move. All companies in the world are forced to negotiate because otherwise, they’re threatened with bankruptcy.
The volume of work of all employees has decreased, so it’s somehow logical to accept a certain reduction in salaries that will enable longer liquidity of the agency. And that, on the other hand, will be in favor of the employees because they will keep their jobs and wait for the situation on the market to stabilize. Otherwise, they would have to look for a new job, which will definitely not be easy in a situation when all companies in this niche are fighting “for breath“.
An Employee Who Doesn’t Want to Negotiate Shouldn’t Be Your Employee
In this case, the agency mustn’t fire the employee because there’s no help from the government, but it can hire those who refuse to negotiate on salary reduction to work 100% of the time, while those who are ready for an agreement can do “nothing“ and receive a reduced salary. But, those who don’t want to negotiate, shouldn’t be your employees in the future.
If the agency is totally left without clients on a monthly level and employees without work tasks, it can expect a minimum on the basis of government aid and thus, keep the job while the agency will be able to defer taxes and contributions. The goal in this period is actually to keep the jobs and liquidity of the agency.
We think that no agency will be left without all clients because certain businesses work. With difficulties, but they work. Actually, one-third of the industry has an increase in demand, another third works with certain oscillations, and the last third has no demand at all.
There will always be a smaller number of specific clients with whom you can continue to work. Based on this, we can conclude that it’s necessary to have funds in the liquidity account of, at least, 2 to 3 months in order for a digital marketing agency to survive the time of coronavirus.
If you believe in the work of your agency and the people with whom you develop it, consider liquidity loans because, at the moment, when you need finance – bank loans are one of the ways.
One of the measures being prepared to support the economy includes favorable special-purpose loans for liquidity and working capital with an interest rate of, for example, 1% for which companies will be able to apply by the end of 2020. The grace period for their repayment will be on average12 months and, in some countries, a year. However, this should be the last of all options for marketing agency owners…
Work on Yourself and Do Everything You Wouldn’t Otherwise Because of Too Much Work
You won’t show weakness if you say that you lack motivation a little, but there’s no place to give up. Arrange with employees to correct any deficiencies you’ve noticed in the work of the last few months.
You can solve problems in communication, reporting, mode of operation, etc. Also, you can educate yourself, transfer knowledge, but also learn in a huge number of courses that are now free. Analyze what has been made and done, find anomalies, and use them in the future to be even better than you are.
Try to start your “own project“ within an agency that will be able to provide you with potential income. Be creative, turn a problem into an opportunity, and be different. Since you know how to develop a business for others, then you should know that for yourself, right?