In the dynamic world of global business, economic downturns can have deep and lasting impacts on small and large businesses alike. As CFO for York Solutions, a leading technology solutions firm, we have been around for nearly 30 years to understand this rollercoaster. In this article, I’ll explore how to analyze the situation, prepare internally, and adapt to changing client needs while maintaining strong client relationships.
Understanding the First Trigger
The first step in managing client budgets is to understand the reasons behind them. When clients request rate reductions or project freezes, it’s crucial to delve into the ‘why’ behind these decisions. This can be achieved through a market analysis and an understanding of how other clients in similar industries or regions are affected.
By identifying common trends and client pain points, businesses can tailor their responses effectively and align with client expectations.
Internal Preparation
Once the reasons behind the client hold are clear, it’s time to prepare internally.
This involves close collaboration across all departments within the organization to analyze spending and prioritize expenses. I like to have each expense categorized into three key groups: ‘need,’ ‘nice to have,’ and ‘want.’
It is also prime time to continue communication with the client. We utilize the hold time to work internally with the stakeholders of the client to truly understand their business and help develop a plan for when the freeze lifts. That puts us in a better position to assist the client when they are ready to fill the much-needed gaps within their teams.
At York, we intentionally use a distinctive consulting approach that begins with a deep understanding of our client’s unique challenges and business initiatives. From there, we craft solutions precisely tailored to the client, ensuring predictable outcomes within their budget.
If clients have a budget hold, believe me, they are as disappointed as you are. Keep that open line of communication and let them know you are still that trusted partner ready to adapt to the project as their initiatives are reprioritized.
Creating a Tiered Approach
Internally, one of the things I like to do is to create a structured approach to forecasting and budgeting. Businesses can develop tiered plans for cost reduction within each department and business line, such as 10%, 15%, and 20% reductions. These plans provide a clear framework for decision-making and guide departments in making necessary adjustments.
Identifying Hidden Costs
Often, during the internal budget review process, companies discover hidden costs that can be eliminated without compromising the quality of services. For example, a thorough examination might reveal that the business was paying for certain website costs that were unnecessary. I looked at every expense, not just the large items. Several small expenses can add up to large savings. By identifying such hidden expenses and eliminating them, companies can achieve substantial savings.
One case in point is the decision to take down our corporate card program, resulting in a 35% reduction in expenses. This not only saved money but also reduced the complexity of expense management.
Adapting to the New Normal
The COVID-19 pandemic has reshaped the way businesses operate, with a significant shift towards remote work and virtual meetings. While business travel is still essential in some cases, it is no longer as prominent as it once was. Companies have scaled back on travel expenses and adapted to conduct a substantial portion of their business activities over Zoom and other online platforms.
Conclusion
Navigating budget holds from global clients requires a strategic and collaborative approach. And, as the late Jack Welch said, “Never miss out on an opportunity like a good recession.”
Every day, there is an opportunity for businesses to strengthen their relationships with their clients and employees.
In times of market volatility, seizing the opportunity to fortify relationships can position your business as a strategic partner, both internally and externally.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.