A few days ago I wrote a post over on the Discosloth blog about Shakeup 2.0, and what it’s going to mean to agencies.
I like to prophesy, and like all contemporary prophecies everyone else should take them with a fat grain of salt.
In this case, my musings were about the state of digital marketing agencies. I created a list of 5 things that would be the make/break factors of survival in an economic downturn. For an agency, the winning factors are:
- diversification of their client base
- high value for their cost
- low overhead & margins
- medium/high volume client portfolio
- sales process with little/no reliance on advertising
The losing factors for an agency are:
- specialized/niched down in the wrong industries
- high cost services
- high overhead & margins
- low volume “whale” clients
- sales process with high reliance on outbound marketing
But the thing is, those can readily be translated into principles for any business – or even any individual. For an individual, the winning factors would be translated as:
- multiple sources of income
- having valuable skills
- being frugal & not having debt
- being highly productive & diligent
- having a good network
The losing factors would be:
- a specialization in the wrong industry
- overpaid roles that will be the first to get laid off
- expensive lifestyle and personal debt
- only one means of income
- being poorly networked
Some of these may be quite “duh” factors, but when combined I think that it says a lot about how years of forethought and planning – or at the least, some last-moment frantic pivots – could possibly save you from some major stress.
Take two hypothetical 30-year-old people.
One is a senior product manager at a burgeoning tech startup in Seattle in the travel industry. He makes $150,000 a year, maxes out his 401(k), and has a comfortable lifestyle. Easy job, 10am to 4pm type of gig. He has a Tesla, rents a $2500 condo, takes a few international trips a year, but has around $50,000 in debt and only $10,000 in cash.
The other is a landscaping guy in flyover country. He makes $50,000 a year, drives an older truck, works all hours, but has no debt besides the mortgage on his modest house and has saved up $25,000 in cash.
By any normal external appearance, the tech guy is more successful. He’s fancy. The Tesla, condo, and trips are very cool. But he’s leveraged out the wazoo. And a product manager at a travel startup is the first person in the world to get laid off in Spring 2020.
Six months later, the landscaping guy likely still has a business, has a year or two of runway even if he loses it, has very little living expenses besides his mortgage, and some hard skills and useful equipment.
The product manager doesn’t have a job, doesn’t really have actual hard skills, no special equipment, no longer has a Tesla, and has spent the last of his money in the bank.
The difference at this point, between the two, is not logarithmic. It is exponential. The product manager will reset – he’ll find a job, get back on his feet, and start the churn once again. But in between (during that year of uncertainty) the landscaping guy has maintained his trajectory, hired some help, preserved the entirety of his net worth, gotten a few new landscaping contracts, and is now making/saving double the cash.
Of course this is all hypothetical. There are over-leveraged landscapers just like there are prudent product managers. But the point remains that sometimes proactive decisions are better than reactive decisions.
When you extrapolate a series of very small decisions over the course of a career, fast forward to the age of 60 years and you can have a highly-paid product manager scraping by on Social Security, and a landscaper retired in a beachfront home in Florida.
That’s not hyperbole. That’s very real.