Like most, I know many people who have been directly impacted by the coronavirus pandemic.  People who have been sick with it. People who have lost their jobs because of it. People who are on the frontlines of the fight against it.  

So let me start this by saying that Brick Factory has been really lucky so far.  As a digital firm that was already a remote company, we can continue doing our jobs more or less as we did before.  And while we have certainly had conversations with clients who are concerned about the impact of the pandemic on their budgets, as a company we have not yet been impacted financially in the way the hospitality industry has.  So far, from a business standpoint, things have felt very normal.  

I know this is the calm before the storm.  If, at the beginning of the year, I was thinking about growing top line revenue and improving profit margin, now I’m thinking about surviving.  The only financial priority I have for the rest of the year is keeping the people who work at Brick Factory employed so they can provide for their families. That is it.  

On the chance it is useful to others, I wanted to share my thoughts on how we expect the pandemic to affect our revenue and the steps we are taking to protect our business.  

Economic Impact

At Brick Factory, our revenue is split roughly 50/50 between retainer work from existing clients and project work we sell to existing and new clients.  This model means that at the start of every year we have to sell new project work to meet our revenue projections and pay our expenses. If we aren’t able to sell new project work, we are in trouble.

The other thing to note is that billings for project work will lag when we close on the project.  The billings I have during the pandemic months of March and April are for work I sold in December and January.  We had a good end of 2019 and beginning of 2020. So while the overall economy tanked in March and April, our billings in those months were healthy. 

However, there is obviously trouble ahead.  Depending on how long and deep the coronavirus induced recession is, I expect some existing clients will be forced to revisit their retainer relationships.  More troubling, it is clear that the sales environment for new project work is going to be tough. Many clients just aren’t going to green light new projects during this period of uncertainty.  They are thinking about how to work without an office and protect the jobs of their own staff, not website redesigns.

So while things look good now, we expect to start taking a financial hit beginning in May, as the flow of new projects slows, and people get more and more nervous about the economy.  We have to prepare for the worst and hope for the best.  

What We Are Doing

We have always been very conservative economically.  We went 100% remote earlier in the year, which helped reduce our office expenses.  We are careful to only spend money on things we need. By far our biggest expense is payroll and employee benefits.  

As a result of our fiscal conservatism, we have some rainy day cash saved up and access to additional capital should we need it.  While I would like to be in an even stronger place, we are pretty well-positioned to weather the storm.

With that caveat, in mid-March we threw out our 2020 budget and started over from the assumption that some challenges lie ahead.  These are the immediate steps we took when reworking the budget:

• Freeze salaries.  In our budgeting for 2020 we had planned raises for staff.  These plans have been put on hold.
• Cancel all travel.  While we are a Washington, DC-based company, we have team members around the country and globe.  We had planned to get together as a team in April and September. We canceled these trips along with all conference attendance for the year.
• Pause any non-essential purchases.  In our 2020 budget, we had money allotted for things like new computers, online advertising campaigns, and company dinners/happy hours.  We put all these activities on hold and only plan to spend money if we absolutely have to.
• Participate in government programs.  Like every other small business in the country, we applied for help through the Paycheck Protection Program (PPP).  And like most other small businesses, we are still patiently waiting to hear if we have been accepted.

We have other contingency plans in place depending on what happens with our sales the next few months and our PPP application.  If it comes to it, our plan is to focus on salary cuts as opposed to layoffs. As mentioned, my only financial priority for 2020 is to make it through the year with our team intact. If we are able to do that I’ll celebrate that with much more gusto than I would a 20% profit margin.  

In addition to financial planning, we are focused 100% on providing our clients with all the support we can.  The only reason we exist is because of our clients, and the only way we will make it through this is with their support.  We are in this with them.