A client approached me with a typical request: they wanted to transform their IT organization to...
How Professional Services Leaders handle “The Dreaded Email”
The Dreaded Email
It’s the email nobody wants to receive: “We’re under intense pressure to reduce costs, and unfortunately…"
By the time you get this email, it’s probably too late: the decision has been made, and it’s part of a substantial effort on the part of your client to reduce costs. They’re probably not happy about it either, as the project probably had a substantial ROI or otherwise reduced their challenges. While it’s not always avoidable, let’s discuss five ways to help manage the situation, from the initial deal negotiation on forward.
1. Get paid up front
File this suggestion under “things I’ll remember the next time:” while contractors typically get paid as work is performed, consultants typically get paid up front. For any of the services you offer that are truly consultative in nature (i.e., you’re advising on the work, not delivering the work), your fee schedule should be front-loaded. Even if you’re delivering labor, you can offer a discount for upfront payment that eventually will pay for itself in smoother cash flow for your business. Many larger clients have told me they prefer this arrangement, as it insures their project will continue when budgets eventually get cut.
2. Create maximum value
During the 2008 financial crisis, I was working as an independent contractor at a major US bank. It was a nerve-wracking time, and nobody knew if our project was going to be cut (including the leaders we worked with). In the end, the bank ended up taking over another large bank that had failed, and those of us who could put in the extra time were on the project the longest and were able to put in overtime to help support the integration of the new company.
Whenever possible, make sure your team is delivering the highest-value, highest-visibility work they possibly can. If what you’re delivering is truly mission-critical, it will be funded until the mission is over, and if not, client will move your people just to keep them around.
3. Hope for the best; plan for the worst
Get together with your team and discuss some different outcomes, and sort them by how likely you think they are to occur. Pick the top three and discuss how your company will react when they happen. Will you cut staff, renegotiate pay, or take on debt? How will you rank talent when that happens? Will you need to move people around, or cut certain programs?
Going through this exercise as a team before it happens lets you work on the tough questions while emotions are low. After you get The Dreaded Email it becomes a lot harder.
4. Stay in touch
There’s no reason not to keep putting energy into the relationship once it’s started. Throughout the delivery of an engagement, maintain regular meetings with your client, and confront the issue by asking, “Is there anything that could put the project in jeopardy?” A “yes” answer isn’t going to feel great, but it’s certainly better to know sooner rather than later. Start negotiating the gentlest possible exit (see step 4).
You may not have too many options left, but that’s no reason give up and leave a solution unexplored. Can you help your client get through a cash flow crunch with new terms? Could they keep some people on, or can you accept a rate cut? Ask some questions, get to know your client’s financial position, and see if you can make a deal that’s acceptable to both sides. Some creative problem-solving can help both parties succeed, and burnish your reputation as a trusted partner. If you’d like some help with this one, please ask! There’s no substitute for experience.
What are your firm’s plans for heading off The Dreaded Email?
- Would you like some help in renegotiating terms with a client, or coming up with a plan to manage a downturn?
- Leave a comment below, or contact me directly for a consultation.