The Agency Owner’s
Guide to Inflation
So, if you’re anything like me (and I bet you are, at least a little bit), you had a childhood that was full to the brim with books. And as you got older, the books got a little better—but probably a little weirder, too.
Like millions of other dedicated fans, I picked up a copy of Douglas Adams’ The Hitchhiker’s Guide to the Galaxy in my teenage reading phase. The book has an international cult following that’s lasted 40+ years for a reason; it’s even translated into over thirty languages. If you haven’t read it, let me assure you that it’s a) definitely worth it and b) never too late.
Because The Hitchhiker’s Guide is a book that evolves with the human experience, no matter when, or how old, we are when we read it.
As teenagers, we can read the book and appreciate it for a never-ending parade of weirdness, of fantastical creatures and space technology. We think of the main character, Arthur Dent, as the intersection of “loser” and “bumbling idiot”, and we pay him only as much attention as the storyline demands.
When we get older, however, we appreciate the fact that there’s a little bit of Arthur Dent in all of us.
The book is a collection of priceless insights and life lessons delivered in dry, quippy British humor, set in the background of outer space. It’s essential from time to time to face those tough questions of life in a way that’s digestible, relatable, and funny.
If you have read this classic, you’ll know that the book, and the guide, are two different things. In fact, the novel is a story about a galactic guidebook containing all of the knowledge of the universe. And it was definitely a smart decision to top the “cover” of that guide with the phrase, “Don’t Panic”.
Now, whether the phrase did any good to keep human readers from automatically panicking at the guide or not, we can appreciate the thought behind the decision. As Ford Prefect explains to Arthur, when humans come across something that looks really complicated and a bit scary, their first instinct is to panic.
To be honest, he’s not wrong.
After all, a lot of us in the digital agency owner world are going through a similar situation right now, are we not?
Unparalleled inflation, questions of profits, and more can have us tied up in knots over the future of our agencies, and of “what lies beyond” the current financial situation. Pretty scary. Pretty uncomfortable. No one would blame you or think it out of the ordinary if you panicked right now, but it’s probably not going to lead to the best results.
I hope you can see where I’m going with this.
Instead of panicking at the outset, we need to channel and build The Agency’s Owner’s Guide to Inflation.
- Inflation, even high inflation, is not a “new” phenomenon.
The world has been hit with unprecedented levels of inflation—for the first time in 40 years.
That’s right: This feels like something that we’ve absolutely never experienced before, but it’s really not.
As unpredictable as they seem, economic cycles are pretty easy to spot. The economy is a living, breathing organism, but it doesn’t really vary too much in its patterns. You can graph out every single big spike and plunge that we’ve seen over the past 150 years or so and recognize that it looks a little bit like a children’s drawing of waves at the beach. (I’d be happy to show you, if you’d like—see below.)
Assuming that you were at least semi-conscious in 2008 (though I warmly welcome all child prodigies to the NevHarris.com blog), you’ll remember the recession that took place alongside the burst of the housing bubble. If you’re a little bit older, you’ll remember the recession of 1981.
The point I’m trying to make is that these things happen. Inflation happens. Recessions happen. This is just something that our economy does.
Does that make it less annoying or frustrating? No. Does it make me annoyed? Duh, nobody likes to spend more money than they had to last week.
But recognizing that this type of inflation has happened before and will happen again is the first step to making rational decisions, instead of panicking.
- The speed of business just went “ham” on the fast forward button.
If you want to boil the effects of inflation down to the most obvious, take a look at a dollar. It may look like your plain-old, ordinary dollar, but it can be more—or less—than meets YOUR eye, depending on where your time machine has landed.
In 1970, the US dollar was lifting weights. Bulking up. It could carry you pretty far. You’d be surprised though, that you and/or your older relatives probably found yourself complaining about how little it did.This was because they were comparing it to earlier days, when a dollar meant even more.
They might have felt this change gradually, looking back over a long period of time (say, 10-15 years) and noticing the increased prices. After all, (almost) no one is charting the daily price of a gallon of milk, nor do they even want to know.
But what can a dollar do now? In some places, it can’t even buy you a pack of gum.
In the past, you were like a lobster being cooked in gradually-heated water. You probably only noticed a major difference in prices when it was too late. The reason that inflation feels so acutely awful right now is that we actively, and quickly, experience the lightness of our wallets. Whether it’s buying a pack of gum, getting your hair cut, or balancing a metaphorical agency checkbook, you can see it, and you can feel it.
Just like Arthur Dent says, “‘Funny’ […], ‘that just when you think that life can’t possibly get any worse, it does.’”
Maybe that’s a little bit overly-dramatic when it comes to your attitudes regarding inflation, especially if you’re trying not to panic. But what does that mean for you and your agency?
Well, it certainly means that neither of you can be on autopilot—but we’ll talk about that more next week.
You’re the captain, and your agency is the ship. Maybe it’s a rowboat, maybe it’s a cruise liner, or maybe it’s a spaceship—but it doesn’t matter. Whatever you’re in, you’ve got to be the one driving and making the calls as they come.
The fast-forward button has been locked in the “on” position, at least for now. What are you going to do about it, calmly and rationally?
- Inflation has a direct impact on your profits (and even more so if you don’t react).
We just talked about what it means for your money to lose strength over time, but even more so, and more quickly, when inflation seems like it’s on the Hyperspace Bypass.
The presence of inflation doesn’t mean that it’s a time to panic, nor is it a time to sit around and mope—even if it is a Thursday.
You already know that taking in the same amount of money for the services you offer will mean less and less over time. It will pay fewer of your bills, and it will cover fewer of your contractors’ services. On top of that, your clients are feeling the same strains that you are. There’s no guarantee that you’ll see a huge renewal of contracts or new leads right now.
So, with the dollars you earn paying fewer of your bills, and with the possible threat of clients pausing their services, can you really afford to not pay attention to your profits?
Keeping a rational, active eye—and hand—on what you’re charging, and how it affects your accounts at the end of the month, is imperative. You have to maintain steady profits so that you can keep your back off of the wall and keep yourself from making panicked decisions.
And if anyone says otherwise, it’s not a question of being a good or bad person or trying to “take advantage” of the inflation wave. You’re doing what you have to so that you can keep your lights on and your team paid. You’re being fair to your agency, and to yourself, and giving both a fighting chance at survival.
I mean, come on. It’s not like you’re blowing up Earth or anything.
So, just like the Hitchhiker’s Guide says, we can’t allow ourselves to panic. Instead, we need a mindset to match what seems like madness.
And here’s where we’re going to put our mental efforts, to make sure that our physical and financial efforts match:
Next year is going to be different.
Now, let’s be clear: I am not saying that inflation will resolve itself within a year, so don’t misquote me on that. No one can truly predict how long it will take for us to achieve equilibrium again, so don’t think that any changes you make are going to function like a crash diet for a special event.
But next year is going to be different. Your agency will change, in some form. And I hate to be the one to give you tough love, but if you panic—or even worse, don’t do anything—next year will be different in a way that you’re really not going to like.
It’s not all bad news, though, especially if you’re proactive, and you follow the “Guide”. You can stay on top of rising costs by adjusting your pricing levels, among other techniques, to avoid getting blindsided by these and other profit “invaders”.
Don’t panic. Know where your towel is. And let’s keep cruising on this journey through inflation.
If you’d like to take a little bit of a closer look at the way our economic cycle has moved over the years, send me a message—I’d love to send you a FREE video and explain a little bit more about what’s going on right now.
And if you feel like you’re struggling a little bit already, let’s talk about ways that we can help your business get ahead of inflation troubles, right out of the gate.