How can a PPC agency prepare for an economic downturn?

Key takeaways

• Focus on cash flow first. Aim for 3-6 months of operating expenses in an emergency cash reserve to protect your agency if client payments slow down or projects pause.
• Review your client portfolio proactively. Identify which clients are most vulnerable to budget cuts and strengthen relationships with those who see PPC as essential, not discretionary.
• Diversify your service and revenue mix. Explore adding complementary services like conversion rate optimisation or analytics to reduce reliance on pure media spend management.
• Build operational efficiency. Use automation for reporting and bid management to maintain margins even if you need to adjust pricing during a downturn.
• Create a clear business continuity plan. Document steps for different recession scenarios, from a mild slowdown to a severe client exodus, so your team can act quickly.

Economic downturns hit marketing budgets hard. For PPC agencies, this can feel like a double whammy. Client ad spend often gets cut first, putting your retainer fees at risk.

Smart PPC agency recession planning is not about panic. It's about building a resilient business that can weather storms. This guide walks through practical steps to build financial resilience and ensure your agency survives and potentially thrives when times get tough.

We'll focus on actions you can take now, before any downturn hits. This preparation separates agencies that struggle from those that find stability and even opportunity.

Why is recession planning different for PPC agencies?

PPC agencies face unique risks during economic slowdowns. Your revenue is often directly tied to client ad spend, which companies frequently cut as a quick way to reduce costs. Unlike creative agencies with project-based work, your retainer model can be vulnerable if clients pause campaigns entirely.

This link to discretionary marketing spend makes PPC agency recession planning critical. You need strategies that address both your service delivery and your client's potential reactions. A good plan protects your cash flow while positioning your agency as a necessary partner, not an optional cost.

Many agencies wait until they see the first client budget cut before acting. By then, it's often too late to build the necessary financial buffers. Starting your planning now gives you the runway to make calm, strategic decisions.

How much emergency cash reserve should a PPC agency have?

Aim to save 3 to 6 months of your fixed operating costs in a separate business savings account. This is your emergency cash reserve. It covers salaries, rent, software subscriptions, and other essential bills if client income drops suddenly.

Calculate your monthly "burn rate". Add up all your necessary expenses that don't change with revenue. For a typical PPC agency, this includes team salaries, office rent, accounting software, project management tools, and your Google/Microsoft Ads partner fees.

If your monthly fixed costs are £20,000, a 3-month reserve is £60,000. A 6-month reserve is £120,000. This money is not for growth or new hires. It's your business insurance policy. Building this reserve is the single most effective step in building financial resilience.

Start by setting aside a percentage of each client payment. Even 5% of monthly revenue moved to a savings account will build your reserve over time. The goal is to have this fund in place before you need it.

What should a PPC agency's business continuity plan include?

Your business continuity plan is a written document that outlines exactly what your agency will do in different downturn scenarios. It should cover cash preservation, client communication, and team management so you're not making panicked decisions under pressure.

Start by defining trigger points. What early warning signs will prompt action? Examples include two major clients discussing budget cuts in the same month, a 20% drop in new business inquiries, or your own cash runway falling below 3 months.

Next, outline specific actions for different severity levels. A "mild slowdown" plan might involve pausing non-essential spending and doubling business development efforts. A "severe downturn" plan could detail how you would reduce team hours or negotiate with landlords.

Include templates for client communications. How will you proactively talk to clients about protecting their ROAS (Return on Ad Spend) during a recession? Having these messages prepared in advance ensures you lead the conversation with confidence and value.

Specialist accountants for PPC agencies can help you stress-test your plan against realistic financial scenarios, ensuring your numbers add up.

How can PPC agencies build financial resilience into their pricing?

Move away from pricing models based solely on a percentage of ad spend. Incorporate more fixed-fee or value-based retainer elements. This creates more predictable revenue that isn't directly exposed to sudden client budget cuts.

The traditional model of charging 10-20% of media spend ties your fate directly to your client's willingness to spend. In a downturn, that spend often shrinks, and your revenue drops automatically. Blended pricing models offer more stability.

Consider a three-part fee: a fixed monthly management retainer, a lower percentage of media spend, and a performance bonus for hitting specific ROAS targets. This structure ensures you get paid for your expertise and management time, even if spend fluctuates.

This approach requires clear client communication about the value you provide beyond just managing the ad platform. Focus on your strategic input, reporting insights, and conversion optimisation work. These activities drive efficiency, which is even more valuable when budgets are tight.

Which clients are most at risk during a recession, and how should you manage them?

Clients in highly discretionary consumer sectors (like luxury goods or travel) and those who view PPC as a pure customer acquisition cost are most vulnerable. Proactively engage with them to demonstrate how PPC can protect their market share and revenue during a slowdown.

Audit your client portfolio now. Categorise clients by their recession vulnerability and their strategic importance to your agency. Create a simple grid: high-value/low-risk clients in one corner, high-risk/low-value in another.

For at-risk clients, schedule strategic reviews before budget season. Come prepared with data showing how their PPC campaigns performed during previous slow periods. Present a "recession scenario plan" for their account that focuses on protecting core revenue streams with efficient, targeted spend.

Strengthen relationships with clients in more resilient sectors or those who use PPC for direct response sales. These clients are more likely to maintain or even increase investment in performance marketing when other channels underperform. Diversifying your client base across industries is a key long-term strategy for building financial resilience.

What operational efficiencies should PPC agencies implement?

Automate routine tasks like reporting, bid adjustments, and basic campaign monitoring. This reduces the manual hours required per client, protecting your gross margin (the money left after paying your team) if you need to adjust pricing or if clients reduce their scope.

Review your tech stack. Are you paying for multiple tools that do the same thing? Consolidate where possible. Many software providers offer annual plans at a discount, which can reduce monthly costs, but be wary of locking into long contracts without flexibility.

Implement clear processes for everything from onboarding to reporting. Process efficiency means you can maintain service quality even if you need to operate with a leaner team. Document these processes so any team member can follow them, reducing reliance on single points of knowledge.

Track your team's utilisation rate (the percentage of their paid time spent on billable client work). Agencies often aim for 70-80% utilisation. During stable times, lower utilisation might be fine for training and development. In a downturn, optimising this rate helps maintain profitability without overworking your team.

How should PPC agencies manage their team and costs?

Be transparent with your team about the importance of financial stability and involve them in efficiency ideas. Cross-train team members so you have flexibility, and critically review all non-essential recurring costs, from software subscriptions to agency perks.

Your team is your biggest cost and your most valuable asset. Sudden layoffs damage morale and your agency's capacity to recover. A better approach is to plan for flexible working arrangements. Could some roles move to a 4-day week if needed? Could you implement a temporary hiring freeze?

Go through your profit and loss statement line by line. Question every subscription, membership, and service. For each cost, ask: "If we had to cut our expenses by 20% next month, would we keep this?" This exercise often uncovers hundreds or thousands of pounds in savings.

Build a culture of cost-awareness. Encourage team members to suggest efficiency improvements. Often, the people doing the work have the best ideas for saving time and money. This inclusive approach to building financial resilience strengthens your agency from the inside.

When should a PPC agency seek professional financial advice?

Engage a specialist accountant or fractional CFO before you're in crisis mode. They can help you build realistic financial models, stress-test your plans, and ensure your bookkeeping is accurate so you're making decisions based on clear data, not guesswork.

A common mistake is waiting until cash flow gets tight. By then, your options are limited. Proactive PPC agency recession planning with a professional helps you see potential problems months in advance. They can analyse your client concentration, profit margins, and cash conversion cycle.

Look for advisors who understand the agency model and, specifically, PPC economics. They should be able to discuss metrics like cost per acquisition, client lifetime value, and your own client acquisition cost. This commercial understanding is crucial for relevant advice.

They can also help you access government support schemes if needed and ensure you're claiming all eligible tax reliefs, such as Research and Development (R&D) credits for developing innovative campaign strategies or bidding algorithms. Getting expert advice early is an investment in your agency's stability.

What does a practical 90-day recession preparation plan look like?

Month 1: Financial health check. Calculate your cash runway, build a 13-week cash flow forecast, and open a separate business savings account for your emergency fund. Start setting aside cash immediately.

Month 2: Client and operational review. Audit your client portfolio for risk, review all contracts for notice periods, and begin automating one major reporting or management task. Schedule strategic check-ins with your top 5 clients.

Month 3: Plan finalisation and team alignment. Draft your business continuity plan with scenario triggers, communicate the stability plan to your team to reduce anxiety, and have a first review with your accountant or financial advisor.

This structured approach breaks a daunting task into manageable steps. The goal isn't to predict the future perfectly, but to build an agency that is robust, adaptable, and financially aware. This preparedness itself becomes a competitive advantage, allowing you to guide your clients with confidence when they are uncertain.

For a structured framework to build your financial forecast, our financial planning template for agencies provides a useful starting point.

Effective PPC agency recession planning transforms a threat into an opportunity for streamlining your business and deepening client relationships. By taking deliberate steps to build financial resilience, you protect your team's livelihood and your agency's future. The most successful agencies aren't just the best at Google Ads; they're the best at running a sustainable, adaptable business.