Idle Assets Are Still Assets, Regardless of the Economy – Use Them Well

Consulting and professional services companies spend most of their time trying to ensure that their human capital is fully engaged and working at all times. As long as your staff is serving a client, you are making money after all. Sometimes, these assets are idled by circumstance. This can be related to normal business cycles, or a down economy. Either way the effect is the same; talented and valuable people are sitting idle at their desks and they are not generating revenue.

If your company is on the edge and the down time becomes extended for any reason, then there is not much you can do but consider layoffs to sustain cash flow and protect the business as a whole. But what if your business is not on the edge? How do you leverage these assets now so that your future can be just a little bit brighter? If your business can sustain a long period with reduced cash flow, then you might want to take a longer term view of your client relationships.

Many service companies enjoy healthy margins. This allows the ownership to hire more people and move into new markets. If you are willing to give up the margins for a while then you might be able to “invest” in your clients by allowing them to do more despite the down economy. This might entail billing your clients less or not at all in some cases. Another option might be accepting deferred payments or straight-lining your billing so they can plan their expenditures better. This allows your clients to move forward with their initiatives while ensuring some future revenues for your business.

The benefits of this could be quite tangible. For one thing, your client will appreciate the budgetary relief. Instead of being forced to put an initiative that might help them competitively on the shelf, they can keep things moving forward. This is the kind of goodwill you can usually take to the bank later. Deferred payments might come in handy later if an economic downturn becomes extensive. This will protect your cash flow, even if at a reduced level, so that your business can ride out the storm.

Another option would be using these assets to invest in your own business. Think hard about how you can utilize your talent pool to grow your own business or position the company better for when the turnaround comes along. Can you develop a new service? Can you spend resources productizing your services so that you have a more diverse offering later on?

In the end, an asset is an asset until you decide it is not. Management’s responsibility is to manage human capital just as effectively as you would manage any other asset, including cash. You wouldn’t tuck your excess cash flow under a mattress when you could earn short term interest, so why would you leave a consultant sitting at his or her desk doing nothing? Find a way to engage your people and yourself in the business and work with your people to find creative ways to help your clients ride out the storm so that both they and your own firm are better positioned in the future.