VANCOUVER, British Columbia - Sept. 2, 2020 - • 70% of the 84 digital agencies, design & development studios, and product studios that were surveyed in Canada, US, Mexico, UK, and South Africa are experiencing project cancellations, and reducing expenses for the COVID-19 recession.
• Small firms (<25 people) have the same outlook or are optimistic about the future, while larger firms (35–50 people) are more pessimistic. Optimistic firms spent Q2 reorganizing, repositioning, and restructuring their firms, and had better cash management, reduced expenses, ran better PM processes and plan to stay remote. Pessimistic firms are seeing huge hits to revenue and aren't planning ahead. They're worried about the future. We've captured all of this in the Pattern Report (report link below)
Vancouver, BC, August 27th, 2020
Despite massive project cancellations and COVID-19 raging without end, 84 digital service firms surveyed 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. Digital service firms need to understand how their colleagues are doing with regard to growth, cash management, project cancellations, operations, and stress so they can weather the changes ahead.
Optimistic firms are bulletproofing operations
Optimistic firms are small (typically 12 people or less), and they are seeing no changes to profit margin despite 70% of projects being cancelled. 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 to grow leads and are having less trouble filling their pipeline and closing new business. Furthermore, optimistic firms are raising capital, cutting expenses, yet are not renegotiating their contracts. Profitable shops are running less than 5 active projects at once.
Pessimistic firms are 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. Pessimistic firms are working in verticals like tourism, hospitality, real estate, consumer goods, not-for profits. Not only this, but they are 1.5x more likely to change their payment terms with clients while running unhealthy projects. Respondents' project managers are running more than five projects, and are planning to return to the office post-pandemic.
Pattern Report has put together a playbook for digital service firms with details on cash management, growth, operations and stress levels.
Download the full report (for reporter only)
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Rachel Gertz
