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How to thrive in an economic downturn

May 26, 2020 in Business Strategy



How to thrive in an economic downturn

Analysts predict that COVID-19 will cause a bigger recession than what followed on from the 2008 global financial crisis. Many companies who had grand plans for expansion are now hoping that they can survive until the world is back to business as usual.

While telcos and managed service providers (MSPs) experienced an uptick in demand in the initial months of the pandemic, many are anticipating a slowdown in business. There are two main reasons for this:

  • IT budgets are often one of the first items where CFO’s will be looking to make cuts. In Gartner’s 2020 CFO Survey, over 15% of respondents said that they have already reduced IT spend by more than 10%. In some industries, this was as high as 45%. Companies with high exposure to hard-hit industries like hospitality, retail, travel and tourism are already seeing their client’s looking to cut costs and disengage from suppliers wherever possible.
  • While the COVID-19 Pandemic has meant that demand for voice and data services is stronger than ever, household spending is likely to decrease which means that consumers will be more likely to shop around for better value deals on their internet and phone plans.

It’s not all doom and gloom – in times of uncertainty, there are often opportunities for those who know where to look. Here is what we recommend doing to maintain cash flow during this period, and come out of the COVID-19 pandemic in a position to grow and thrive.

Focus on where you are spending your money

During a financial downturn, companies need to be mindful of where their money is being spent. Here are some areas where most businesses will be able to find some savings:

Fees and charges

For retail service providers (RSPs) with high volumes of relatively small transactions, the fees collected by some payment gateways can be astronomical.

Emersion integrates to multiple payment gateways. This gives our clients the ability to select from multiple payment gateways for different transaction types. For instance, with most billing platforms all payments are routed through a single payment gateway. Consider the following scenario:

  • Payment Gateway A‘ charges a fee of 1% per transaction for both credit card and EFT payments
  • Payment Gateway B’ charges a fee of 1.3% for credit card transactions but only 0.7% for EFT payments

With most billing platforms, you would have to decide between ‘Payment Gateway A’ or ‘Payment Gateway B’.

This would involve careful consideration of your customers preferred billing method. In Emersion, however, you can get the best possible deal at all times by using ‘Payment Gateway A’ for credit card transactions and ‘Payment Gateway B ‘for EFT payments.

Furthermore, if ‘Payment Gateway A decided that they were going to increase their fees and charged to 1.5% you can easily move all of those transactions to ‘Payment Gateway B” without worrying about calling every customer to re-capture their credit card details.

Staff costs

When was the last time that you stopped to think about how many of the tasks that your employees undertake on a day to day basis could be automated?

Emersion can help companies to automate many of these tasks, including data entry between multiple systems, payment processing and collections, service changes, data analysis and provisioning. This will save most small to medium businesses at least 40 hours of work per month. 

Automating these tasks leads to better resource allocation. It means that your team is better placed to both bring in more customers and more effectively look after them.

Vendors and Suppliers

Make a list of all of the vendors and suppliers that you work with, and reach out to them to see if they are offering support or deferred payment options in the coming months.

We also recommend auditing the usage that your suppliers are charging for against actual usage. Usage-based billing can be quite complex, and it is not uncommon to see suppliers making mistakes.

Emersion has comprehensive audit reports that were built for exactly this purpose and can save most businesses hundreds (and in some cases thousands) of dollars every year.

Software

Many enterprise software providers are offering incentives and discounts companies struggling with cash flow due to the COVID-19 pandemic (Engagebay have put together a comprehensive list of who is offering what)

It may also be worthwhile to ask your staff what software they use, and take this time as an opportunity to renegotiate licence terms and even cancel the licences to unnecessary and underutilised software completely. 

Rent

Remote teams can be successful teams. Industry behemoths (including TwitterSquare and Facebook) have announced that even after the COVID-19 Pandemic ends, their staff will be able to continue working from home. Many other companies are anticipating reduced demand in for office space.

This has led to predictions of up to a 20% fall in rent for office space in the coming months. Companies should be re-assessing just how much space they need. If your lease is coming up for renewal soon then you should be speaking with your landlord to negotiate a better deal.

Re-evaluate your sales and marketing efforts

Consumer behaviour has changed due to the pandemic. People are at home for the majority of the day, and both individuals and businesses are looking to conserve money where possible. Companies should re-evaluate most aspects of their sales and marketing efforts from spending through to messaging and even the products that they are taking to market.

Change your messaging

When writing about how consumer behaviour has changed during the pandemic Forbes author Kian Bakhtiari stated that “From a marketing perspective, most brands will need to rip up their marketing playbook and radically update their customer personas and communication strategy.” (Read the full article here).

One of the worst things that brands can do is to continue as if nothing has happened. Go back to square one, and think about what your customers want in this time of uncertainty. If you aren’t sure then ask them.

Try not to be opportunistic, and try to add value by supporting your customers in any way possible.

Build your war chest

Once you have re-evaluated your marketing strategy it’s time to make sure that you have the right content to reach, nurture and convert your customers. Many marketing agencies and software providers are running very insightful webinars on how best to do this.

Some low-cost, high impact opportunities that most MSPs and Telcos could take advantage of include:

  • Testimonials
  • Case studies
  • Webinars
  • Whitepapers

Reallocate marketing spend

Many of our clients would regularly attend or exhibit at major industry events. Most of these events have now either been cancelled or have gone virtual. It is definitely worth re-evaluating where you are spending money.

If you are still considering exhibiting at virtual events, make sure that you are getting value for money. Ask probing questions to find out how they will be promoting your business to attendees.

Consider branching out into other forms of advertising as well. For instance, Pay-Per-Click (PPC) advertising was used by less than half of the MSP 501, despite the fact that it can be a very effective marketing method.

Upsell to existing customers

It is much easier to sell to your existing customer base than to find new customers. For B2B customers, one way to do this is to report on the products and services each of your customers are using. This is easy to do with Emersion and will help you to build an account management plan.

For B2C customers, consider advertising on transactional communications like invoices. According to IBM’s ‘2018 Marketing Benchmark Report’ report, transactional communications are nearly twice as likely to be opened by your customers than non-transactional communications (22.6% compared to 44.7%).

Clients of Emersion can easily do this with our range of smart invoice templates. 

Sell through existing customers

Another way that companies can improve their cash flow is to start operating as a wholesaler. This may seem complex but is easy when you have the right tools and guidance.

Emersion supports multi-tiered billing and has a range of modules designed to help wholesalers be successful. This includes white-label-billing and agents and commissions modules. Talk to one of our consultants today if you are interested in learning more about Emersion’s wholesale functionality. 

Diversify into new markets

If you don’t already sell voice and data services like VoIP, internet and mobile phone plans then you should. It increases your share of wallet, and also means that you start to be seen to offer more value to them as you aren’t just meeting their IT needs, you are meeting their communication needs as well.

Emersion integrates to many commonly used carriers in Australia, New Zealand and Singapore. We have world-class provisioning workflows that make it easy to start selling voice and data services at a profit.

Another area of opportunity is to start selling Managed Security Services. ConnectWise talked about this topic in great detail at the Q1 IT Nation Evolve + Share Event. We’ve summarised some of their tips for MSPs who want to diversify into MSSPs here. 

Account Management

Many companies will be looking to cut costs wherever they can. Here are some account management strategies that companies should employ to try to retain their customers.

Reach out to the silent majority

Most MSPs and B2B telco service providers focus the majority of their attention on larger accounts. They will also be in regular contact with the ‘squeaky wheels’ – the customers who will jump up and down until they get what they want every time.

But how often are you reaching out to the rest of your customers? These are your silent majority and while they aren’t expressing that they wan’t to leave, it doesn’t mean they aren’t thinking about it. Only 1 in 26 customers will actually complain about a negative experience.

Now is the time to check in with your silent majority, and see if there is anything that you can be doing to help them get through the COVID-19 Pandemic.

Make customer experience a competitive advantage

The telco industry is notorious for providing bad customer experiences. This is one area where you can differentiate yourself from your competitors.

Customer portals are one of the easiest ways to get started with this. 70% of customers expect businesses to have self-service portals

It gives them control over their account, and means can resolve a large number of issues without having to involve your team. Not only does this provide better customer experience, but it means that you’ll have more resources available to resolve issues that do require human intervention. 

Emersion features a variety of pre-built customer portals that can be customised to match the look and feel of your brand. Clients of Emersion with specialised needs can also build bespoke portals by connecting to Emersion’s API.

Payments and collections

We’ve been through some of the ways that MSPs and telcos can reduce the amount of money that is coming out of their accounts, decrease customer churn, bring in new customers and increase the share of their existing customer’s wallets.

It’s also worth spending some time focusing on how companies can improve their cash flow by focusing on their billing operations.

Make sure your invoices are going out on time

Traditional, batch based billing means that if there is a mistake on a single invoice then the entire bill run has to be delayed until that mistake is rectified.

With a real time billing system like Emersion, you can hold back the affected invoice while sending out the rest of your invoices on time. This takes a lot of the pressure off of your finance team and also helps to improve cash flow.

Additionally, you can send both subscription and ad-hoc bills to your clients. This means you don’t have to delay charging for additional, one-off services until the end of your billing cycle.

Charge for the full amount of usage every time

Many companies, particularly MSPs dive headfirst into selling voice and data products. They often fail to anticipate the complexities of selling these products like complying with IPND and data retention requirements. 

They also don’t anticipate how complicated usage-based billing can become. We’ve spoken with many companies who spend days every month manually calculating usage. We’ve also spoken with customers where billing for services like VoIP falls into the ‘too-hard’ basket, and they either write off any potential usage charges as a cost of doing business or charge a flat monthly fee which in many cases they lose money on. 

Emersion was built to handle subscription and usage-based billing. This means that subscription billing (even for usage-based services) is set and forget.

If customers make changes to their services, pro-rata charges are automatically calculated and applied to their next invoice. This means that the full amount of usage will be charged for and collected from your customers every single time.

The five-step plan to thrive in an economic downturn

At Emersion, we’ve seen our clients face challenging times before. Companies who proactively managed their cash flow and looked at the crisis as a way of improving their business and setting themselves up for future success tend to emerge from these situations in a much better position than those that don’t.

Emersion will be running a webinar on Thursday the 18th of June to talk about how companies like yours can maintain cash flow in an economic downturn. This webinar is for both existing clients of Emersion as well as prospective new clients.

You can sign up for the webinar by filling in the form below.