Welcome to Press This, the WordPress community podcast from WMR. Each episode features guests from around the community and discussions of the largest issues facing WordPress developers. The following is a transcription of the original recording.
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Doc Pop: You’re listening to Press This, a WordPress community podcast on WMR. Each week, we spotlight members of the WordPress community. I’m your host, Doc Pop, I support the WordPress community through my role at WP Engine and my contributions over on TorqueMag.io. You can subscribe to Press This on Red Circle, iTunes, Spotify, or you can download episodes directly at wmr.fm.
In the United States, the National Bureau of Economic Research is the organization that formally declares when a recession occurs, and by their definition a recession is a significant decline in economic activity spread across the economy, lasting more than a few months.
As of recording, the NBER has not said the US is officially in a recession. Though many economists believe we may be in for some difficult economic times ahead. So our guest today, Nev Harris is a former agency owner who now helps other agencies grow their revenue by better understanding their finances.
Nev is gonna talk to us about how to recession proof your agency. Nev, how are you doing today?
Nev Harris: I’m doing fantastic.
DP: Can we start off, I just ask this with everyone, what is your WordPress origin story? What’s your backstory here?
NH: Yes. I had a direct email magazine and a marketing consultant company, and I had a great designer. And we would give these marketing plans to people to go and design their own websites, to do their own things and basically screw them up. So I said one day, Why don’t we just do everything. I said do you think you could design websites? And he said, Sure. How hard could it be? Right? [Laughter] Famous last words.
And so we had a couple clients, we built a couple websites for ’em, screwed around a little bit, found WordPress, and then it was all great from there. So that led me eight years later to doing this kind of stuff.
DP: Yeah. And you have a podcast. Let’s do a quick plug for your podcast while we’re here.
NH: Yes it’s called the Profit and Impact Podcast. So we’re starting season three, coming up here with a slightly different format, so it’s gonna be shorter and to the point. Trying to do something a little different. So it should be exciting. Should be a lot of great snippets coming up.
DP: I started off the show with a kind of Econ 101 definition of a recession. Let’s hear from you. What are you thinking when we’re talking about recession proofing your business? What are we talking about when we talk about a recession?
NH: Alright, so you hit the absolute technical definition of a recession on the head. And if you’re an economist, we would clap for that. But here’s the thing, really, it’s true but that definition is pretty useless to the small business owner, the small agency owner, the SaaS company owner.
That is a backwards looking metric that’s saying what’s happened in the past. Now, let’s say, okay, being everything that’s happened in the past, we’ve been in a recession, or we had a recession, it’s over by now. So we need to be a little bit forward looking so that we can prepare for having a recession.
And in that case, there’s another definition that’s used before, which is looking at two straight quarters down in GDP. But again, way too confusing. It’s like we could feel when our customers aren’t green lighting projects as soon. When new clients are harder to find and everything like that. And there tends to be a little bit more fear in the economy, like kind of what we have right now and that should be a warning sign to maybe take some steps to prepare for things that are gonna be coming in the future.
DP: Have you heard that clients are already spending less on marketing and websites as a result of fears of a recession?
NH: I would say it’s across the board at this point. For every client, for every person in the community I talk to, they’re saying they’re cutting back, and then there’s others that say things are going well.
I’ve talked to some friends that own SaaS’s and they’re like, “Yeah, we’re seeing people canceling.”
Some people are saying they’re having great times. But here’s the thing, we’ve had a great expansion phase where things are going really well, businesses are growing, everything like that. We’ve had a really great long time phase like that.
I could avoid breaking my leg by not doing stupid stuff, but I can never avoid a recession completely. Economic cycles happen. We have good times and we have bad times. It’s just how it goes. And so it’s always smart at this point to start thinking when there is talk about a recession, when it’s pretty likely, to start doing some preparation for it.
I always like to think about it like when I was a kid I used to love to swim. And I’d be in the pool and then the lifeguard would blow the whistle. And we all had to get outta the pool because there was thunder, you know? And thunder meant lightning. And if you’re in the pool and lightning struck the pool, you would get electrocuted. Half the time there was never any lightning. It was just thunder at a distance, but we had to sit out of the pool for 20 minutes. When you were a kid, 20 minutes was forever.
But it was just a safety measure. I like to think of it like that. Let’s prepare ourselves a little bit more for the recession that might come next month. You know, some economists are saying it’s gonna come in nine months. So that’s how I like to think about it.
DP: So let’s talk a little bit before the break. Let’s talk about some of the first steps you can do to prepare. To get out of the pool and just play safe. What are some of the steps to prepare?
NH: So, first thing that is always a good thing to have is to start a reserve fund for your business. Now, I always think it’s a good thing to have six months of expenses in the bank. Like cash available. And that helps you ride out any rough times because you could go for six months with having no real new business come in because you can meet your expenses.
I did a long article on this for Business Insider, back when Covid first happened that I break down a way to do a stress test on your business to really determine how much reserves you needed and how long you could actually last on the money you have. So that’s always a great thing to do. That would be step one.
DP: Do you have kind of like a ballpark when you’re talking about this reserve fund for your business? Is it like three months worth of pay for your employees or is there like some sort of number that you use for determining that?
NH: Yeah, you wanna have six months of your expenses in the bank. The quick and easy formula I explain on the podcast is you could take the cash you have available right now, and then you take your monthly expenses and then the difference between those two and then you multiply monthly. You do this times six for six months. And then the difference between the cash and what that number is for your monthly expenses for six months, that’s how much money you have to create for a reserve account.
DP: That’s really interesting. I don’t wanna jump around cause I know you have some more tips that you wanna offer, but I kind of wanna stick to this, what we’re talking about now with reserve funds.
It has me kind of thinking, if you do get new clients now and you’re worried about upcoming economic changes, should you be outsourcing for the labor that you need? Or should you be continuing to hire as normal? What’s the plan there?
NH: So hiring is interesting. What you have here is we come off a period of really low unemployment when it was really hard to get people. So people are going to be psychologically less likely to let people go. And to cut those types of expenses because you’ve just gone through three years of not being able to find the right people to fill the right roles.
So, going into the future though, we would have to make some tough choices. I would say, you know, people are your most valuable asset, so you should cut them last. They’re one of the easiest cause they’re a big expense to cut. But you could also start working on other minor things to cut back on before you start cutting back on people.
I always think if you’re outsourcing, you only have so much time yourself. Okay so you need to be going after new business. You need to be doing the work only the business owner could do the strategic thinking, the planning, the worrying about that kind of stuff. And then doing the deep work for the clients, that is your specialty.
Being that that’s the most critical part of your business, then you start outsourcing the other stuff. So I’m a big fan of outsourcing a lot of the more routine development tasks, more of the stuff that you could systematize and then outsource to people because then you’re maximizing your ability to spend your energy on the stuff that matters.
DP: Awesome. Well, we’re gonna take a quick break and when we come back we’ll be chatting with Nev Harris about how to recession proof your WordPress agency stay tuned.
DP: You’re listening to Press This a WordPress Community Podcast. Today I’m talking with Nev Harris, who’s talking about getting ready for possible hard economic times ahead and what your WordPress agency should be doing to prepare for that. And before the break, we talked about one of your tips, which was making sure you had reserve funds for your business. Making sure that you’re just kind of ready in case anything comes up.
And we also talked about outsourcing. I’m sure a lot of people are worried about losing the workers they do have. they definitely wanna try to keep this on because you were mentioning it’s been hard to find folks.
What are some other tips that you have for getting ready for a possible recession?
NH: Now I’m gonna tell you something and people at first are gonna be like, “Ooh, Nev, I don’t know about that. I can’t do that.” But here’s the thing, I’m gonna tell a story first.
So we all know golf even if we find it extremely boring. The one thing a professional golfer does not do when he’s playing golf in a tournament, is think about his swing.
So when he goes up to hit that ball, the last thing he’s thinking about is his swing. Why? Cause he’s already thought about it. He’s already practiced it. He might be thinking about what he wants a shot to look like. He might be worried about winning the tournament if he’s really close or something like that. But he’s not thinking about his swing.
And it’s the same thing with a baseball player, a basketball player. They’re not thinking mechanics when they have to react. So I’m gonna tell you what I call the “10/20 Exercise.”
First start thinking about your business, start thinking about cutting. Like if you lost 10% of your revenue in your business, 10% of your sales in your business, you had to run your business with 10% less. Now, at first you’re gonna say, “Impossible. I can’t do this.” There is no way it could be possible. But while you’re thinking about this, over the next couple weeks, couple months, you’re gonna be coming up with ideas to actually be able to run your business with 10% less.
And then the next challenge is to think about running your business with 20% less. And then you think about this. You think about this, you think about this and you think about this. No matter how impossible you think it is you’ll have thought through a lot of this stuff.
Most economists are predicting a recession in six to eight months. Okay. So we have time. You might be feeling recession right now, like bits of it, but pretty much have some time to prepare for this. So now that we’ve thought about 10 and 20%, now when it comes time when things do get rough, if they do get rough for you, you’ll have thought through a lot of all this.
Then you could say to yourself, “You know what, you won’t be like, okay, now what am I supposed to do with my hands when I make this golf shot? Is my wrist supposed to be cocked? Is it not supposed to be cocked? Am I supposed to be shifting my weight?” You’re not gonna be thinking about any of that stuff because you, your mind’s gonna be like, I already thought about stuff.
I have some tough decisions to make, but I’ve already rolled out a hundred bad decisions and I know I have ten, not likable things, things I don’t wanna do, but ten things I figured out that I can do if I need to cut expenses.
DP: You know, I’m kind of wondering, since this is a WordPress podcast, I’m kind of wondering how WordPress could help agencies cut those costs.
Things that come to mind is there’s lots of free plugins out there that agencies can integrate instead of building custom stuff. Is there anything that comes to mind for you about how WordPress can help you save money in the future?
NH: So here’s what I love about WordPress is we have an amazing community. We have really supportive people out there. We have people making great products. Maybe it’s like this would be a great project right now, but I just don’t have the staff to fully pull it off. Like I need to do this integration, and I don’t really have somebody to do integrations right now on my team, and I don’t wanna hire the person because I’m trying to be a little bit more frugal right now going into a recession, or if we’re in the middle of the recession.
But because we have such a great community and we’re all working around the same product and stuff like that with WordPress, there’s a lot of people out there that might be able to help you pull that off.
So you’re kind of sharing the wealth with somebody else, partnering with somebody, another type of agency that could do that better. Maybe in the past you’d be like, You know what, I’m gonna hire this person because I might get five more projects like this in the future, but right now you’re like, Hey, you know, if I make it a little bit less right on the top number of this project, I’m not adding an additional monthly expense by having somebody that I’ve hired and now I have to pay full time for.
I think that’s the power of having an industry built around an open source software like WordPress is the fact that we have such a strong community that could come together in times of, I don’t wanna say crisis, but in times when things are a little bit tougher.
DP: Yeah I’m also wondering about, I feel like we’re talking largely about reacting to changes, reacting to changes from your clients or reacting to economic changes. I’m wondering is there anything proactively that agencies can do to educate their clients.
Like don’t cut your marketing yet. You’re gonna wanna have that SEO, you’re gonna wanna have that website functioning during the hard times. Is there something that we can do to be more proactive right now?
NH: Now, you hit the nail on the head again. I think that’s exactly what we need to be, is proactive with our clients, talking to our clients, reaching out to our clients, understanding the pains our clients have right now.
Because there were two types of agencies when we had our first mini recession back with Covid. There were agencies that got scared of their clients who were like, They’re just gonna cancel. I’m gonna hide. I’m not gonna say anything and I’m gonna hope they don’t fire me.
And then there’s ones that got ahead of it and said, “Hey look, we’re going in the quarantine. People still need your service. Let’s develop your online presence a little bit more.” And those are the agencies when everything was looking gloom and doom. I was running my agency at that time, we lost $34,000 of revenue in March, Okay?
But by the time May came around, people were doing really well, and by the time the end of 2020 came around, a lot of agencies had their best year. Those agencies that had their best year were reaching out to their clients, figuring out what their clients need, covering their clients. Going from “I build your websites,” to “Hey, look, I’m in business too. I could play a little consulting role for you and figure out how we could take advantage of these things.”
Because that’s the bright side about recessions, they always provide opportunity. So you just have to know where to look for it. So if you’re on your client’s side and your client thinks that they could rely on you, depend on you.
And like you said, “Hey there’s fear out there. I know you’re worried, but I have a plan for this. This is why your SEO is gonna help you through this recession, and not be an expense during this recession.”
DP: Yeah, absolutely. and it takes time to build that SEO. If there is a recession ahead and it clears up they’ll be glad that they’re on top and ready with that SEO and with their site ready.
They’re gonna have more regrets about not being ready than I think being cautious, especially with the low cost of maintaining their website and stuff like that.
NH: I think the value of hosting and say like a managed hosting product, that it’s just that they don’t understand everything you’re actually providing for them in a managed hosting product.
I’ve had clients leave our agency, even though I’ve tried to talk them out of it, then like within six months they’re coming back because they went to a really plain, basic hosting program. And they’re like, “Well where’s my backup? You know, where’s my updates? Everything’s not working. It says I need this plugin renewal, I don’t even know what a plugin is.”
And I think we do a bad job in the good times of explaining to clients all the value they’re getting. The clients don’t complain because they’re doing well, because the economy’s doing well.
So they’re not looking to cut cost because everything is going so well. They have other things to worry about, but when things start going bad, they start looking for things that they feel are necessary. So the more we educate them on the value we’re bringing, the lower on the list we’re gonna be of things for them to cut.
DP: Well, stay tuned. We are talking with Nev Harris about recession proofing your business. Stay tuned after this break, we will talk more.
You’re listening to Press This, a WordPress Community podcast on WMR. My name is Doc and I’m talking with Nev Harris today about recession proofing your WordPress agency. Nev before this break, you mentioned something about being optimistic and kind of taking advantage of some of the changes.
There’s definitely hard times that come with recessions, but there are opportunities. Can you talk a little bit more about those opportunities?
NH: Sure. So think of one of the most devastating things that happens in our world is a fire, say like a forest fire. Fires are devastating. They wreak all sorts of havoc and you could say it’s kind of what recessions do to businesses.
But what happens after the end of a forest fire? It creates all sorts of fertile new soil that all sorts of vegetation and plant life and everything grows out of. It’s this regenerative cycle that we have amazing new things that grow out of forest fires. And you could think about that as what happens with a recession. So it’s like there’s something that’s not good, but it creates all sorts of opportunities for the people that prepared for it.
So if you’ve taken the steps that we’ve talked about earlier in this podcast, now you’re prepared to go into the recession. So you’re coming out in a position of strength instead of just limping through, hopefully getting through it, you know you’re prepared to get through it, you know you’re gonna get through it.
Because the average recession will only last for 10 months. They’re predicting this one that’s coming up on average will last for eight months. So, you get through these eight months, that four or five months into it, it’s gonna start presenting opportunities. Now we don’t know what those opportunities are right now, but every single recession has produced some of the biggest companies we know. Airbnb, Slack, Instagram, WhatsApp, all came out of the 2008 recession. Plus a bunch more. Google Ventures, that invests in a whole bunch of tech companies. They started in 2008 because they saw so much opportunity when everybody thought the world was ending.
Here’s the biggest one. The biggest luxury spend, the biggest, “I have extra money I’m gonna spend” company, is probably Disney. It costs a fortune to go to Disney. It’s an amazing experience and you only go to Disney when you have extra money. That company started in the midst of the Great Depression and look what it’s become.
So if we prepare ourselves, and we’re in a position to take advantage of the opportunities that we don’t know right now. But again, we’re talking to our clients, we’re keeping our eyes out for stuff, and we’re in a position to do it. Then recessions can end up providing us with great things.
So telehealth and food delivery and online shopping, these Zoom calls we’re on right now are all things that came about from the last mini recession we had in 2020. What is gonna be the next thing that’s gonna propel business forward next year? That’s what we wanna be able to take care of.
DP: So what I’m hearing is I should be getting ready to open my own animation studio. [Laughter] I’m ready for this, Nev. Let’s bring it, you know, 80 years from now, everything will be Doc Pop, everything.
NH: You’ll be cryogenically frozen, like Walt Disney. Just chilling waiting for science to catch up with you.
DP: The last thing I wanna ask you, Nev, before we wrap up is, this is a tough one, how does an agency know when it’s time to cut their rates?
NH: Lower their prices?
DP: Yeah. How do they know when it’s time for them to lower what they’re charging?
NH: Well, I would take the exact opposite approach on that. When is it time for you to raise your prices? I’m not one of those people that say, raise your prices all the time, because if your business has a bunch of other problems, and you get more business in all you’re doing is causing more problems.
But, I think especially with the inflationary environment, which we were talking about recessions but you have the other other thing with inflation going on. It’s really brutal because it’s eating away at your profits and your business, but then your personal life is more expensive so it’s costing you twice.
I don’t think we should be thinking about lowering our prices. I think we should be thinking about keeping our prices at least the same, if not raising them. We’re not going into a depression. We’re not even going into a recession like we had in 2008.
They project unemployment to stay at relatively low levels throughout the whole recession. If anything, if you’re thinking you need to start lowering your prices, I think you need to start looking for a different market. To niching down differently and then becoming viewed as an expert.
Here’s what happens, everybody wants to lower their prices because it’s the first thing you think to do. I’ll lower my prices, I’ll get more business. So I always say in the website building business, there’s a whole ton of people doing cheap websites, okay?
So all you do when you lower your prices is increase your competition. I would think most people listening to your podcast right now are professionals. They’re not the hobbyist doing it on the weekend that has two other jobs.
They’re professional or they have another job and, but they wanna become a professional. So what you want to do is double down on your authority and double down on your prices. So the bottom of the market, the low price website market is super, super crowded. It’s because people are scared to raise their prices. They’re scared to get into the level where they’re charging $8, $10, $12,000 for a website. Cause they don’t think anybody will buy. But there’s tons of businesses out there that are buying those types of websites, but there’s only a handful of people that are brave enough to try to serve them.
So I think if we lower our prices, we’re just increasing our competition, which is lowering our profits, which is causing us to lower our prices even more, which is lowering our profits. It just becomes like a self-defeating cycle.
DP: Well, Nev I really appreciate your time today.
It’s been really informative chatting with you. If listeners out there would like to learn more about Nev, you can follow him on Twitter @thenevharris, and we’ll also drop links to his website in the description. You’re listening to Press This, a WordPress Community podcast on WMR.
Upcoming episodes of Press This we’re going to be talking to Nev Harris next week to talk about how to recession proof your WordPress agency. Thanks for listening to Press This WordPress community podcast on WMR. You can follow my adventures with Torque magazine over on Twitter @thetorquemag or you can go to torquemag.io where we contribute tutorials and videos and interviews like this every day. So check out torquemag.io or follow us on Twitter. You can subscribe to Press This on Red Circle, iTunes, Spotify, or you can download it directly at wmr.fm each week. I’m your host Doctor Popular I support the WordPress community through my role at WP Engine. And I love to spotlight members of the community each and every week on Press This.