An economic crisis is likely to come. How do we deal with it as well as the uncertainty caused by this coronavirus pandemic?
We (like almost every company), too, have been affected by the covid protective measures. Some of our clients have halved our team allocations, projects that were nearly ready to launch are postponed indefinitely because of circumstances outside our control, other projects have been postponed by the stakeholder in order to focus on their own health…
In short, for us as an agency, this situation may seem devastating but we have responded by creating a multi-level crisis plan.
Begun at the first indications of a weakening of our clients’ will to move things forward.
Hope for the best, prepare for the worst
Fortunately, SYNETECH has been cautious and has quite a large financial reserve created for times like these. But it is still important to have a clear strategy to keep things under control. Therefore, the ideal way of responding to the current situation is to adapt to the market and to try to slow down in tandem with our clients who are doing so at the moment.
The worst thing about the whole issue is precisely the unpredictability of how long the situation could last, or whether our clients could become even more constrained. In other words, we have to count on the fact that we could be reducing our income even much more than currently.
Therefore, we have put aside 30 % of our total reserves to bridge this pandemic phasing-out period (we assume that we are talking about a maximum period until the end of June). This 30 % represents an amount that should cover all losses due to the failure or reduction of budgets for this period. With clients that have a more vulnerable type of business, we can expect measures to reduce our workload, with clients who are more concerned with restrictions and are more cautious, we can also expect a reduction in allocation.
Multiple levels of action
At the same time, we have also prepared several packages for austerity measures. The lowest level package counts on an average work restriction to 75 % for all our workers (if the project permits). Should the situation deteriorate, we have prepared options for reducing workloads to 50 %. In the worst case scenario, there could be an overall reduction in allocations, but here we would have to notice a truly extreme response from clients and the market which has not yet occurred, and we hope it won’t. Still, it is good to include the worst case scenarios into our planning.
Reducing the allocation to 75 % is an acceptable compromise for us, which does not lead to individual financial hardships, but on the other hand, it will bring additional reserves to help resolve the crisis if the period is extended to more than 3 months.
There was also a logical reduction in possible fixed costs. By moving into home office mode, we do not need to continue financing common activities, office equipment, refreshments and similar costs associated with our physical presence at Letná.
But don’t cut down at all costs
On the other hand, even in the current situation it makes sense to continue communicating “out” and to maintain functional marketing (but here too, 25 % of the budget was cut, activities were reviewed and rescheduled). It would be a great pity not to take advantage of the current situation, which helps to speed up the digitization of the business. The internal analytical data shows that people are very interested in online events and that the most people in SYNETECH history have started following our channels over the quarantine period.
We have been advocating an agile approach to the financing of orders on a long-term basis, so this is how we are now trying to approach the situation as a whole. In the meantime, we have set austerity measures for April only and at the end of the month we will evaluate whether to loosen or extend them. We realize that our situation is not so bad at the moment that we would have to introduce further crisis measures, but if we start preparing now, we should mitigate the impact of the corona-aftermath, which may take several months to show. So now we have an ideal opportunity to slow down and develop individually in quarantine. We have time to finally take a breath after all the sprinting and we also have time to think about something other than app development.
Situation inside the company
Of course, we weren’t sure how to communicate all these constraints and salary cuts to the team so that we wouldn’t trigger strong negative reactions. We decided to be absolutely transparent and announced it at an all staff meeting, where we were met with acceptance of the situation and no negativity. Perhaps we could say that our whole team approves of it, which is a very positive thing for which we are grateful. Everyone has stepped up, individually taking responsibility for their projects, while we are all individually at home office, overloading Hangouts and hoping that everything bad will end soon and we will be able to meet again face to face in our offices.
In conclusion, I want to reassure our clients that they can stay calm, because they will not notice the protective measures we have taken in their projects and if we did not share them with you now, in fact, no one outside SYNETECH would be able to notice them. Nothing has changed within our running projects, we are still driven and dedicated, working at more than 100 %.
Cheers to app development and cheers to good health.
Vratislav Zima and the SYNETECH team