Current Issue:

Cover Story

Exit Strategy

His Turn

Green

Internet

Online

Book Review

Women to Watch

News | Events

Biz Connect

Issue Archives

That year, the company was running strong, with over 90 employees and revenues of over $6 million. Business was good, customers were plentiful, and the company was growing rapidly. Our client roster was a Who’s Who of high-tech Fortune 1000 companies, including Cisco Systems, Microsoft, and Enron (who knew?). Our biggest challenge was finding experienced talent to keep up with our clients’ demands.

I was excited by the Internet’s potential and corresponding opportunities for the company. When an opportunity to purchase the company came up, I secured private investment and bought out the founders.

Within eight months of the purchase the economy went south. And there I was, the new owner of a high-tech agency, facing a very different economic climate than I had anticipated.

Our clients began slashing their marketing budgets, halting projects mid-course, and taking their marketing and advertising projects in-house. The company lost 40 percent of its business in less then 30 days—all due to economic pressures.

I am a CPA, and in the investment world cash is always king. I actively believe that you do not pay today’s bills with tomorrow’s dollars. Shrinking revenues meant we needed to reduce our costs—just as our clients were doing.

Our challenge was reducing our expenses quickly enough to offset declining revenues and to minimize the impact to ongoing cash flow. We were fortunate to have established strong relationships with banks who believed in me and the company, and who were willing to put in the necessary effort to understand our relatively new industry. Even so, we still had to navigate significant cash flow issues. Because I was initially optimistic that our sales pipe would recover quickly, and that our customer base was sufficiently strong, I was slow to implement any head count reduction. This single delayed decision ended up increasing the company’s overall recovery time by an additional year. It is a lesson I do not forget.

Once I committed to this necessary step, I took a hard look at where the company was strongest and decided to reorganize to strongly focus on our core capabilities and to reduce expenses that didn’t support that core. Painfully, my managers and I evaluated our employees, reviewing their billables, their versatility, and their commitment. We let approximately 30 percent of the staff go, which, in addition to reducing cash outlay, gave us some room to add staff in core areas. The remaining staff agreed to work at a reduced salary until revenues stabilized.

After “right sizing” cash flow and profitability, I assessed our sales efforts. Before the downturn, all we had to do was ask someone if they needed a Web site, and the business was ours. Afterwards, it was evident we needed a strong selling proposition. So we narrowed our sales efforts to vertical industries in which we excelled, and pared down our service offerings. Our clients were under pressure to account for their marketing investments, so we focused on strengthening our analytics and measurement capabilities. They were being asked to do less with more, so we looked for opportunities to offer value-added services. We evolved our best practices to a flexible framework that would meet and exceed the needs of Fortune 500 and 1000 clients but that could easily adapt to mid-market and smaller niche players in our targeted industries.

Concurrent with a focus on our core capabilities, we invested in more highly targeted lead generation, but with fewer resources. And because sales cycles were now longer, we put more resources into converting warm leads. I also knew that the tighter market meant we had to get our name in front of prospects and build our reputation, so we upped our public relations efforts.

Slowly, new customers began knocking on our door, and our long-time customers began to spend more. Today, this strategy has resulted in over 35 new clients in 2005 alone. Eighty percent of these clients are meeting and/or exceeding our targeted annual customer value.

This experience has made me a stronger business leader. I am tougher and more confident. I better anticipate conditions that may affect the company’s profitability, growth and stability, and do not procrastinate making changes, no matter how difficult.

Most importantly, I have learned to surround myself with trusted advisors who round out my knowledge and provide objective guidance. Their counsel has been essential to my professional development, my job satisfaction, and in many ways, the survival of White Horse. I advise all entrepreneurs to seek out similar support as early and often as possible. Be aware of your individual entrepreneurial tendencies, and make sure that your advisors are people you respect, admire, and work well with. You will notice immediate results. You will continuously learn.

For White Horse and for me, the economic downturn in 2000 was a crisis that created great opportunity. We are a stronger, more focused company with much more to offer our clients, and I am a more confident, intuitive, and fair leader.

Lessons Learned

• Cash is always king.
• Have a great bank; work with them to understand your business.
• Focus on customer service; assure clients that internal changes will not affect service levels.
• Keep the promises you make and make promises you can keep—first to yourself, then to your clients, and then to your employees.
• Don’t procrastinate on any decision, no matter how difficult.
• Focus on core capabilities; don’t invest in non-core activities.
• Surround yourself with trusted and experienced counsel.
• Be open, responsible, and honest with employees.
• Never stop learning.

Jennifer Modarelli-DeVoe is the owner and principal of White Horse, the largest privately held, woman-owned interactive marketing agency in the Pacific Northwest. She can be reached at sales@whitehorse.com.