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Tue, 22 Sep 2020 15:51:06 -0500
2020-09-02 Print

Digital Agencies Are Optimistic Despite Having 70% of Projects Cancelled

Despite massive project cancellations and COVID-19 raging without end, 84 digital service firms surveyed from North America, Mexico, Europe, and South Africa are optimistic about the second half of 2020. Because digital firms are lagging indicators within the economy and will be impacted much later than their own clients, this optimism could be squelched by a delayed economic hit.


**Vancouver, BC, Sept 2, 2020**

Despite massive project cancellations and COVID-19 raging on without any foreseeable end, 84 digital service firms surveyed from North America, Mexico, Europe, and South Africa are feeling optimistic about the second half of 2020. Because digital firms are lagging indicators within the economy, and will be impacted much later than their own clients, this optimism could be squelched by a delayed economic hit later in quarter three or four. Still, digital service firms need to understand how their optimistic and pessimistic colleagues are doing with regard to growth, cash management, project cancellations, operations, and stress so they can weather the changes ahead.

To make sense of the data, Pattern Report (a partnership between [Promethean Research](—a research and strategic consultancy and [Louder Than Ten](—a digital project management training school) has uncovered the patterns that make digital firms more or less optimistic to create a playbook for the future. This report will be released globally on August 27th, 2020 and will be available as a full download by anyone looking to chart a smoother course for their digital service firm. This report will help them understand the patterns of firms that are thriving versus just surviving and give them deeper insight into how they're managing their own firms.

## Optimistic firms are bullet proofing their operations

Optimistic firms have a different approach to the pandemic than pessimistic firms. They are small (typically 12 people or less), are seeing no changes to profit margin, and successfully offering services like email marketing, eCommerce, and content marketing. Their verticals are more stable: optimistic firms work in B2B services, education, government or public sectors, healthcare, financial services, entertainment, or funded startups. Not only this, optimistic firms are using tactics like increasing inbound leads and cold emails to grow leads and they're having less trouble filling their pipeline and closing new business. Furthermore, optimistic firms are raising capital, cutting expenses, yet are not renegotiating their contracts or payment terms. These firms are slightly less stressed, and profitable shops are running less than 5 active projects at once.

Fig. 1: Firm outlook compared to how many projects their project managers ran at once. Firms who ran 5 or less had a better outlook.

## Pessimistic firms are still reeling

On the flip side, pessimistic firms are more stressed. They are typically larger (over 40 people), and are seeing drastic reductions in monthly recurring revenue. They are offering services like digital media buying and data analytics—feeling the impact of project budgets slashed all over the globe. Pessimistic firms are working in verticals like tourism, hospitality, real estate, consumer goods, not-for profits—industries where lockdowns have halted economic growth. These firms are having more trouble filling their pipeline and are sticking to upselling current accounts to generate more revenue which may mean less new business. Not only this, but they are 1.5x more likely to change their payment terms with clients while running more late and over budget projects. Respondents' project managers are running more than five projects, are planning to return to the office post-pandemic, and are 35% less likely to have a support network to support them.

Fig. 2: Firms' level of optimism compared to whether or not they have adjusted their payment terms on projects. Pessimistic firms were 1.5x more likely to adjust payment terms.

## Project cancellations: 70% of firms hit

Regardless of optimism, respondents are feeling the pressure. Over 70% have experienced project cancellations and half experienced a decrease in profit in quarter two. In response, they're lowering pricing and extending payment terms. According to Nick Petroski CEO of Promethean Research, firms shouldn't be lowering their prices right now.

"It is concerning that 60% of the firms taking action to improve closing rates have led with reducing prices. While this seems like an easy solution, it comes with difficult long-term consequences. Raising prices back to baseline is difficult even in a good economy. This tactic adds an unnecessary growth challenge. Before cutting prices, examine breaking the project into multiple smaller ones. If you must cut prices, communicate clearly that it is a temporary discount. —Nick Petroski, Promethean Research

## Project negotiations are key

With a recession rippling out over the globe, firms will need to buckle down and ride out the next year by negotiating their agreements. According to Josh Barrett, Principal of Matchstick Legal, this year's Pattern Report partner, respondents seem to indicate they aren't negotiating their project terms despite a breach of agreement. They recommend that digital firms should ask for some sort of exchange.

"We believe that firms may not understand that certain client actions (asking to cancel a project, delay a payment, etc.) likely constitutes breach of the agreement or a modification of the agreement. This is an important legal point since both of those things create an opportunity for the agency to ask for something in exchange ... The data confirms our experience that digital firms treat contracts sort of as a black box. They take the contracts they have or that lawyers draft and do not change them even when the project, client, economy changes. For example, digital firms should generally be getting more money up front. We think they have the leverage to ask for it..." —Josh Barrett, Matchstick Legal

## How optimistic firms are riding out the the waves

According to respondents, optimistic firms reported at least three to four months of cash on hand, and were spending time reworking their operations over the last few months. Interestingly, while 82% of respondents indicated they'd gone completely remote since the pandemic, over 50% of them plan to stay that way once the pandemic is over. Most of this transition time was spent setting up digital operations and building team culture in a remote environment. Respondents reported that stressed out teammates were still working at the same or higher level of productivity than before the pandemic, even though teammates were worried about being laid off, and being forced to go back to the office.

It's not all bad though. According to Rachel Gertz, CEO of Louder Than Ten, respondents who spent their time tuning their operations and improving their project management will likely fare better.

"The data confirms that the organizations who focus on great project management practices and can deliver projects on time and on budget can also weather unpredictable periods and changes to their project environment better. In order to be more profitable, great project management is not a nice to have, it’s essential." —Rachel Gertz, Louder Than Ten

It's still too early to tell, but the long legs of the economic recession haven't stretched out fully—it'll be difficult to tell how many digital firms survive let alone thrive in this volatile time. The best thing they can do is study the trends and patterns that are keeping others afloat and hunker down for the rest of the 2020. Hopefully these patterns can help digital firms imagine a more hopeful future emerging out of this chaotic present. Pattern Report respondents seem to agree.

"[It's the] perfect time to be radical. New ideas that weren't being adopted can now be tried. This is when we switch and shift our minds for a better global future." —Anonymous respondent

Download the full report at


## Note to the editor

[Pattern Report]( is a new partnership between [Promethean Research]( (Akron, Ohio, founded 2016) and [Louder Than Ten]( (Vancouver, British Columbia, founded 2009).

Partner insights provided by [Metrics Chartered Accounting]( (Victoria, British Columbia) and [Matchstick Legal]( (Portland, Oregan).

All media inquiries can go to Louder Than Ten:



Primary contacts:

**Louder Than Ten**

Digital Project Management and Operations training for digital agencies, departments, and product studios all over the world.

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**Promethean Research**

A research and strategic consultancy that combines industry leading research with market defining strategies to transform digital shops.

Twitter: PrometheanRes](

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Great links:

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