How are planners and other meeting professionals preparing for a potential recession? They are tightening contracts, establishing advance payments, exploring new skills, and keeping up with their networks.
The global economy is faltering — Covid is not over, the war in Ukraine continues, inflation is a worldwide issue, energy prices are soaring, and there is a labor shortage. As a result, a recession is a real possibility, and it’s essential to put measures in place to protect your business.
Companies everywhere are bracing for a downturn. This is unwelcome news. No one wants another economic blow, particularly the events sector, which is just getting its footing back after the Covid shutdown. The reality is that event professionals need to prepare for even more price increases and supply chain disruptions.
“Following the pandemic, financial hurt, and the realization that working from home produced better than anticipated results, many corporates have reassessed their approach to events,” said Roger Harrop, CEO of CEO Experts. As a result, CEOs increasingly demand that every event be justified with “planned outcomes, meticulous structuring, and a means of measuring returns,” he said.
While this may sound like business as usual, he points out that heightened expectations will mean only the best event service providers will be up to the job.
Harrop predicts that corporations can seek to enmesh measured event outcomes into contracts. That is likely to include performance penalties, as is already common in other industry sectors such as construction.
“It is better to focus on outcomes and what it costs to get those outcomes,” said Heather Mason, CEO of Caspian Agency. “Or postpone the event altogether.” She recommends that agencies focus on value and avoid the trap of downward price spirals.
Mason’s advice may sound harsh for businesses that need to bring clients in, pay staff, and keep creditors happy. But economic reality means tough decisions need to be made quickly. Spending too much time on a client with unrealistic expectations or delaying payments could be fatal for a business in a recession.
One way to overcome the tricky cash flow issue is to charge an initial deposit before starting work. Or to only commence work once you have been issued a Purchase Order number and have agreed on a payment plan. This is usual practice for many event service suppliers.
“More than ever, all parties need to protect themselves in a recession,” said Ryan Majchrowski, founder of audiovisual company MMG Events. “Time is money, and more than ever, we cannot expend this without certainty.”
In addition to carefully considered contracts, businesses can also be protected with insurance. Beware, in times of recession, insurance is one of those expenses that is put under the microscope. Avoid a lapse in essential policies, such as professional indemnity, legal liability, and property coverage.
At the onset of a recession, it may seem counterintuitive to spend more, but now could be a good time to look at additional insurance. Trade credit insurance helps protect the financial health of organizations. For example, it typically covers receivables due within a specified period against unexpected commercial and political risks such as customer bankruptcy and import and export regulations changes.
“Insurance is only part of your recession proofing, though,” said Tina Jolliffe, project director at UK-based insurance broker Consort Insurance. She has seen heightened demand for this coverage. “It is always best to act as though you are uninsured, as that way you can be sure to have rigor in your contracts and business practices.”
Rigor in contracting is something that we will see more of, said Susan Arslan, regional director at HelmsBriscoe. “I’m already looking for ‘hard terms’ to apply for the core elements of the event and more flexible terms to apply to enable me to trim,” said Arslan.
Resilience Will Go a Long Way
The key to business success in uncertain times is flexibility. Be prepared to adjust and align with clients to navigate the shifting sands.
More challenging times may be on the horizon, but an entrepreneurial mindset will help you inject resilience into your event business. In addition, a few new lessons will go a long way.