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Rallying the Team for a Recovery How encouraging employees to come up with ideas helped one company get creative in serving its clients.

By Kelly K. Spors

Opinions expressed by Entrepreneur contributors are their own.

Small Business Comebacks

Editor's note: Small-Business Comebacks is a new series about resilient entrepreneurs and their strategies for rebounding from the recession.

For Suzanne Bates, the financial meltdown on Wall Street in 2008 had a quick and painful impact. Bates Communications, her small executive-coaching firm based in Wellesley, Mass., depended heavily on large, multinational companies. But many of those mammoth companies were ravaged by the market crash, and suddenly nervous about paying for comprehensive leadership coaching services. By late 2008, a few big clients signaled they would delay or cancel their coaching plans altogether. The company braced for at least $600,000 in lost revenue in 2009 -- a major scare for a small company that had seen steady 25% annual growth since its 2000 founding.

"It was a rude awakening for us," says Bates, 55-year-old founder and chief executive of the 10-employee company. "I knew things were bad, but I didn't realize these companies would pull back as much as they did."

A Low Point
Problems didn't stop there. The company's new business manager uncovered bookkeeping errors that Bates says were caused by her outside accounting firm. It turned out her company had $100,000 less cash than she thought and a meager safety net for weathering the economic downturn.

Bates remained cautiously optimistic that business would pick up again by early- to mid-2009. But by February it was clear that wouldn't happen. Corporations still weren't spending and the company was so short on cash that it was difficult even to manage monthly lease payments.

"As CEO, you're lying awake because you have a payroll and you have people who are depending on you," she says.

The Turnaround
Step one was to quickly cost cuts. In early 2009, her staff took 10% to 15% pay cuts in exchange for no layoffs. The company couldn't afford its lease payments, so Bates negotiated with the landlord to temporarily stop payments for a few months in exchange for tacking the accumulated amount onto future lease payments, plus interest.

Next, she cut the company's marketing budget and examined every expense -- even little things like offering free coffee for employees hit the chopping block.

Your Reality Check
Bates had to answer tough questions to turn the company around. Consider how these may apply to your business:

• How can you provide the greatest value for clients in a changing business environment?

• In what ways can you be more creative and flexible in meeting clients' needs?

• How can you inspire and encourage employees to share their ideas for growing the business?

Despite all the bad news, Bates mustered the strength to rally her employees to be part of the solution. She began thinking about how the company could better reposition itself to help cost-conscious clients weather the bad economy themselves. In regular staff meetings, they discussed how to make their coaching services more relevant and keep current clients engaged in the business. Bates' coaches stepped up efforts to stay in closer touch with clients, ranging from a quick email once a week to grabbing lunch to sending them an article about leadership. The idea wasn't so much to sell them on coaching immediately but rather to gather "insight and intelligence about where they were in terms of training and development."

"We really figured out what was working and what wasn't," she says.

As it turned out, many big clients needed leadership training more than ever -- they just weren't in a position to pay a high price for it. So the company rolled out lower-priced options, including $25 teleseminars on topics such as jumpstarting sales in the bad economy. Some clients were also more receptive to group coaching sessions that can cost "a fraction" of ongoing one-on-one coaching, Bates says. For instance, one West Coast client that had previously paid for Bates employees to travel for one-on-one coaching on site switched to a more affordable group-training session via video conference.

On top of efforts to keep current clients, Bates began to expand its market by pitching leadership training to smaller companies, and even some non-profits, that saw the recession as an opportunity to gain market share. Bates coaches started using LinkedIn to make client connections and the company launched a Twitter and Facebook page, where it posted updates and thoughts on leadership topics.

By early 2010, the company had added several new midsize clients, while bigger corporate clients were improving financially and bringing back more of their business. Though annual revenues fell to $1.3 million in 2009 from about $1.8 million the previous year, Bates rebounded to $2.3 million in 2010 and the company is on track to hit $3 million this year.

Lessons Learned
Reinforcing client relationships in rough times -- though not an immediate cash cow -- allowed the company to identify other revenue-generating opportunities. Through social media and face-to-face meetings, the company's coaches also developed much deeper relationships with their clients.

"There isn't any aspect of our business that wasn't touched by the experience," Bates says. "We've come out of it a much more focused company."

Kelly K. Spors is a freelance writer in St. Louis Park, Minn.

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