The Recession Fire Drill for Agencies
Remember doing firedrills in school? You probably fell into one of two camps: the kids who enjoyed any excuse to escape class or those who appreciated the structured chaos as a chance to prepare for a worst-case scenario. And for the record, I really did think I’d have to stop, drop, and roll at some point in my life.
Regardless of which camp you were in, now is the time to be the one who values preparation. I’m not making any dramatic economic predictions because frankly, the usual playbook seems to have been thrown out the window. But what I am saying is this:
It’s time to prepare for uncertainty. It’s time for your recession fire drill.
When I launched An Agency Story podcast, I heard so many remarkable stories from agency owners navigating the pandemic. Innovation. Grit. Tenacity. Those stories have faded from daily conversation, but the lessons they carry are worth revisiting.
The pandemic was a fast-forward version of a recession. For those who haven’t led a business through one yet, think of economic pressure during the early days of the pandemic but stretched out over 1–2 years of struggle, followed by 1–2 years of slow rebuilding.
This guide offers five moves you can make today to prepare for rough waters ahead. Even if a recession never comes, you’ll be stronger for doing them.
1. Build Your Safety Net
You’ll need to be your own PPP. Just like any good financial advisor would recommend for your personal life, your business needs six months of operating expenses set aside with no other intended use.
Also, get a line of credit. If you already have one, ask your bank about increasing it. Debt isn’t something to lean on long-term, but in rare, short-term situations, it can be your buffer. Having access to capital doesn’t mean you need to use it. It’s insurance, not a crutch.
Businesses that survive hard times have runway.
Tips for Building Your Net:
- Use a local bank. Smaller institutions often have more flexibility, especially if your P&L isn’t the strongest. Your accountant can help you prepare and refer.
- Treat saving like a debt. Automate transfers. Loan the cash to the business. Create urgency. Make it a “have to” not a “nice if I do”
- Don’t overthink returns. Until you’ve saved over $20K, don’t worry about interest rates, just keep the money separate and slightly inconvenient to access.
2. Know Who You Serve
You could call it positioning, but during a downturn, it becomes survival. A recession will capsize a fair amount of generic and undifferentiated agencies. The market becomes more discerning. Clients will scrutinize who can help and what it’s worth.
Agencies that thrived through the pandemic didn’t just ride it out, they pivoted quickly. They were able to do that because they had clarity:
They knew who their customer was, and what they needed most.
If you can’t fill in the blanks below with certainty and simplicity, it’s time to get focused:
We are a [Type of Company] that serves [Ideal Customer] through [Greatest Benefit] by [What You Do].
Clarity breeds confidence. A clear positioning statement should bring a specific name to mind when someone hears it. In the aftermath of the 2008 recession, getting our positioning dialed in is what helped my agency grow out of the recession and the extensive success that followed.
3. Focus on Value, Not Volume
Ask this about every asset, client, and expense: “What have you done for me lately?”
Most agencies only have one big lever for cost reduction: headcount. But the real value opportunity is being honest in micro opportunities about what’s actually working and what’s just activity without impact.
Common Agency Profitability Pitfalls:
- Too many low-margin services or clients – They keep you busy but not profitable.
- Outdated or undervalued pricing – Rates haven’t kept up with rising scope or costs.
- Misaligned team costs – Roles aren’t tied to revenue or scalable systems.
- Lack of financial visibility – You can’t fix what you can’t see.
- Subsidizing inefficiencies – Bigger engagements masking losses on small projects.
- Emotion-driven decisions – Holding on to clients, services, or staff out of fear or guilt.
Now is the time to fix what’s broken…before you’re forced to.
If you don’t have a forward-looking financial projection for your agency, that’s Business 101. Create one. Updated and review monthly at a minimum. Here’s a basic template you can use.
4. Create Your Contingency Plan
Unlike the pandemic, a recession doesn’t hit overnight, it creeps in. And that’s exactly what makes it dangerous.
Our brains are wired to adjust gradually to discomfort. We reset emotionally with every small drop. That makes it harder to recognize when a slow bleed becomes a real crisis.
On the other hand, if you’re someone who overreacts to uncertainty, you risk pulling back too quickly and missing opportunities.
A Good Plan Includes:
- Thresholds and triggers (e.g., % revenue drops, client churn, A/R aging)
- A decision-making matrix for what changes at each threshold
- “What if” scenarios and high-level responses – you can be creative and fun with this.
Be ready to act, not just react.
5. Invest Wisely
Warren Buffett said it best: “Be fearful when others are greedy, be greedy when others are fearful.”
Preserving cash isn’t just for survival, it’s for strategic reinvestment. Downturns create opportunity:
- It’s the B2B equivalent of buy low, sell high.
- Make internal improvements.
- Create meaningful, valuable lead generation systems.
- Become your own best client.
You might even acquire new business. In 2020, we absorbed nearly $1M in top-line revenue and hired two team members from a folding agency, no cost other than salary.
And in 2008, we created marketing assets to boost our SEO that paid dividends for years.
Recessions are when the best agencies quietly separate themselves from the rest.
Final Thought
When it comes to macroeconomic turmoil, there is literally nothing you can do. You can’t control it, wish it away, or even yell at it. All you can do is prepare and keep your focus on doing the best you can absolutely do for your clients, team, prospects, and yourself. You have a finite amount of resources and energy, apply them where you can make an impact.
Even if the economy holds steady, these steps will make your business stronger, smarter, and more resilient. Don’t wait for the sirens, start the fire drill now.
What do you need to focus on first?
Sincerely,
Russel
“The Backboard”
Hi, I’m Russel. I’m a business coach that specifically focuses on digital marketing agencies to create their most ideal business by helping them attract better clients and build scalable systems, processes, and teams to create their most ideal agency. Ready to take your agency to the next level? Schedule an introductory call to discuss how I can help you create your ideal agency.
