Lessons
from the 2008 Crash.
What’s
a crash really like?
You see the early signs like we’re seeing now and you start
forecasting variance analysis. The what ifs. And it all looks okay today! Yes! Some
small cuts, nothing too serious and you file that spreadsheet, job done. Until
that is, tomorrow.
Tomorrow, it’s changed again, how did that happen? So more forecasts,
another spreadsheet for the fire and now it looks heavier, the cuts deeper. What
has just happened?
The Client you were sure would go ahead with the campaign,
doesn’t. Billing looks dodgier. Forecasts bleaker and as the crash/virus goes
on, but for how long? Months? And what after?
The virus of uncertainty spreads in your head.
Then you think the time lag of Clients advertising again, whenever
that is, and the traditional Summer quiet of June/July/August are never
good, but they’ll be worse now.
Serious decisions loom and each day, it gets more and more serious.
Bleaker and bleaker. You have to make the cuts that you don’t want to, and you
have to make them now! Everyone says it….
And you don’t, you can’t, because you don’t see spreadsheet numbers,
you see people. Friends, Families, people who’ve been with you for 20 years,
whom you like.
I can’t, I’ll wait. And it gets worse. Oh my God!
What
shape do you get in?
Hell on Earth.
What happens in the blur of a crisis, is that you go from being a
reasonably controlled leader, to a head lighted rabbit. And quickly.
It isn’t just emotional stress wreckage, but it manifests itself
physically too. Expect damage.
People are at you for this and that, the family are in crisis
crying, the banks are on, the phone is attached
surgically to your ear, the creditors are calling and it’s all down to you. Me? It’s not my fault! But it is
you, the buck stops. And there’s always the normal stuff to do too, because the
business is still running.
You think just weeks ago I was sharp and on the ball and now look
at me. I can barely walk. I could lose a lifetime of everything I have, in
what, days?
And people will know. My god, people will know…..and I have kids!
Now you’re in the depths of a crisis and you’re not functioning. Mental
anguish, physical hurt.
You’ll drink the two bottles of wine tonight but you’ll realise
the problems are still there tomorrow. So you stop drinking and work 24 hours
for 7 days a week. Forget the weekends, this is way more important right now.
And you go home, to darkness.
So
what do you do?
You make some cuts but not enough. Don’t take that road. Don’t kid
yourself.
You should start with zero, and then you move to a break even and
see what that looks like. Then you take another -20% off.
You look at today’s costs (overhead) and defer what you can. Who
can I pay later who’ll agree to it? Chip away.
Media Owners were our big creditors, so you try and defer them but
you do it with their agreement, you don’t ignore it. They don’t need your
bad debt and they’ve families and businesses too, so they need to hear from
you. You depend far more on them, than they do on you.
Not paying Creditors has real consequences (it will close you as
quick) so consent is the only way around it.
But you have reserves (our cash position was very strong at the
start, millions) But for how long? They quickly deplete before your eyes as you
put off the dreaded decisions.
“We can trade out of it”, you think. But you can’t.
The phone calls come in and you must take them. You must. All of
them.
No one ever called me
and didn’t get a call back at any time. But it’s hard to handle and that starts
as an hour a day of calls and then by day 3, it’s the full day.
You try and sweat the creditors, keep the cash but they’re persistent
too. Fair enough, but they too, talk to each other…...
5 calls day one, quickly becomes 25 creditor calls day three, they
just keep coming as they talk to each other. “We heard you’re in trouble”. So
is everyone else and they know.
So it shouldn’t be you that deals with this, it should be
someone else or you’ll get stuck in that mire. And that’s a big lesson from the
outset.
Other overheads you do your best with and try. The landlord, the
pension scheme, the this and the that.
But now people can see it in you, they hear it in gossipy Adland
who love a bad story. Even staff, whom you’re desperately trying to protect,
knows and they tell people. Human nature, but they make it worse. They
shouldn’t, but they will and now you’ll have a run on the bank.
I remember the first ‘Chemistry Advertising’ staff meeting
recently for example, where staff were privately being advised helpfully, of stress
issues. I knew about their problems within an hour of that meeting and so did
you. Advertising is gossip and it doesn’t help. Staff are talking themselves
out of their own jobs because it puts a run on the Bank. That fundamentally, is
what happened to us.
Like the peasants in Lambe’s essay, we know not how to roast pork
other than to burn the house down.
You simply can’t pay everyone now, but if you don’t, you
have the consequences. You try to balance. You part pay some.
So
you communicate?
As little as you can. Don’t call your Bank, you’ll terrify them
and they’ll respond, badly. Trust me.
Don’t call a receiver, solvency expert, or even your trusted
Auditor, because they’ll bring you down a road that suits them, not you. You’ll
add to your problems. Don’t do it, there’ll be time enough.
Clients you call, but only to re-assure them that the crisis is
everywhere (and this virus is) and you’re doing your best, like everyone else.
Confidence, re-assurance, but if you’re doing it all, you’re a mess and they’ll
know. They can hear it, so do it when you’re prepared.
And
staff?
No, sorry, no. You need to get a plan in place quickly. A dramatic
plan (to break even and then take -20% off) and do it, now. We didn’t, we kept
waiting for brighter days that will never come.
It shouldn’t be you. It should be someone outside the business who is disassociated from it and just
gets the things done. You’re the pilot, keep going, but you must let someone
else deal with these things because you can’t and you’re the wrong person to do
it. You’re just too close to it all. I’ve said that twice, deliberately
And
what happens?
In our case it was different than today. A Competitor bought the
Agency from the Bank through a pre-pack receivership, over our heads. I wasn’t
party to it, even though I owned it 90% and I still have never seen the sale
purchase agreement to this day. So you can lose control, it can go out of your
hands, over your head. Shockingly.
To keep everyone calm and appeased, you agree to things that you
shouldn’t that will facilitate smiling vultures. Don’t.
When you’re asked to agree to something, think why are they? Think,
what’s their move here? And be ruthlessly belligerent. Say no for now, as a
standard. You’re swimming with sharks that smell opportunity. They were there
in 2008 and they’re here now. The ambulance chasers. Trust me.
In the virus, the only joy is every business, bar a few, are in
that same boat. There’s a different ‘understanding’ and you can work with that.
It’s not as secretive but that doesn’t help if you’re going down. Keep it
close, do your thing quickly and quietly. With people at home now, it’s better.
Is
there a way out, an end game?
Always.
Look at a scenario of zero income and the cash bleed. Look at a
bare break-even minimum and realistically
see what’s really there in income terms and work back from that. You’re going
to be a smaller business for a while again and get over it.
Then you’ll have cuts to make. Get someone independent who knows
the business and make them.
Tell nobody and get on with it. Look at replacing services with
automation – that ‘Digital Transformation’ you’ve been telling yourself (and
others) about. It’ll replace overheads and give you an edge. Like Twitter and
Facebook and LinkedIn have.
That’s us by the way. Agencies and Media Owners should have
Admatic Self-Op online booking engines. It’s 2020 (!) and you’re behind the
curve that the digital duopoly has stolen.
I can buy a Twitter Ad now from my kitchen and be live in 5
minutes, but not a Press Ad, a Radio Spot, a Poster, a TV spot?
Work every day 9 to 9 and sleep properly. You can’t go out
socially now, so don’t do anything that deflects. You’re in a fight.
Communicate when you’re clear. Definitive action.
And keep watching. Keep on top of it. The job is never done until
there’s some real sense of normality. Get into shape and look at other options.
Is there a merger on the cards? We did 5 of them. They work.
Is there a part Sale? Maybe a division?
Is there a really low cost life ring you could throw to another
Agency and get some volume back in?
Is there a loss-making division you could close?
Is there an element of the business you can automate now? Admatic
has that solution.
And remember, this is not going to be the last virus lockdown. Of
that, be certain.
And
the other end game?
You collapse. The tiredness, oh the tiredness, means you
eventually give up. I’m done. And you’ll regret that.
Don’t give up, keep going. You’re fighting and you’re going to fight
until you’re killed, not before. That’s my big regret, I didn’t have the
stomach anymore, but I didn’t expect it nor understand it. I really felt I’d
been beaten with a baseball bat for weeks.
It happens like a blur, hour by hour and so fast - but if I was
back there now, I know it would be different. I know I’d have done better
because the lessons are learnt and the downfall is horrible.
People do cross the road when they see you, that is actually true,
like you have the virus. Hero to zero. Staff you loved, blame you. Family life
changes. People point at you. Court appearances. People say untrue things about
you. Newspapers call you and you dread tomorrow’s ink. The man in the petrol
station says, I’m sorry to hear that and you die again. But time heals.
You have to dust yourself off and start all over again – which you
do. Thankfully, it worked out but I’m much tougher now and it’s a long time ago
(April 16th 2000 in fact, I won’t forget). Ironically, Admatic
benefits from the downturn as automation comes into play. Ironically, but so be
it.
But even recalling this, it sends shivers up my spine to think
about my Advertising Media friends and what they’re going through right now. But
maybe they’ll understand, although I so wish they never had to.
There are these lessons, use them.
If you want to call me, just don’t hesitate. Do not.
But I say this to my friends here……
Never, ever, give up.
Keep going.
Get someone else in.
A cool head in a loose pants.
Stu
Fogarty is a former President and Fellow of The Advertising Institute (IAPI);
Board Member and Fellow of The Marketing Institute; Chairman of The Advertising
Press Club; Board member of The Publicity Club; former Ad Agency CEO and Owner
of Ireland’s largest Ad Agency AFAO’Meara/McConnell’s; Founder of Club Internet
(floated Nasdaq March 2000 as Via Net Works); founder of ICAN; Founding
Director Realex payments; Founder Member of Core Media.
He
currently runs Admatic Ireland, AFAO’Meara Advertising and Streamabout The
Video Agency.
www.Admatic.ie
www.
Streamabout.com
