Scenario planning for creative agencies managing project slowdowns

Key takeaways

• Scenario planning is your financial rehearsal for uncertainty. It involves creating different "what-if" budgets based on potential project slowdowns, client losses, or market changes, so you're never caught off guard.
• Revenue diversification is your best defence against a single client or project type drying up. A healthy mix of retainers, project work, and different service lines creates a more stable income base.
• Cost-risk modelling helps you identify which expenses to cut first if needed. By categorising costs as fixed, variable, or discretionary, you know exactly where to pull levers to protect your cash.
• A contingency budget is non-negotiable for creative agencies. This is a pot of money, typically 5-10% of monthly revenue, set aside to cover unexpected gaps or opportunities without panic.

What is creative agency scenario planning?

Creative agency scenario planning is the process of creating different financial forecasts based on possible future events. You build a "best case", "worst case", and "most likely case" budget to see how your agency would cope. This isn't about predicting the future. It's about being prepared for it, so a sudden project slowdown doesn't threaten your survival.

Think of it like a fire drill for your finances. You hope you never need it, but if a big client pauses work or the market shifts, you know exactly what to do. For creative agencies, whose income can be project-driven and unpredictable, this kind of planning is essential. It turns panic into a managed process.

In our work with creative agencies, we see the same pattern. The most resilient agencies aren't the ones with the most revenue. They are the ones with the clearest plans for when revenue dips. They use creative agency scenario planning to separate worrying about money from managing it.

Why do creative agencies need scenario planning for slowdowns?

Creative agencies need scenario planning because their income is often lumpy and project-dependent. Unlike a subscription business, your revenue can change dramatically if one major project ends or gets delayed. Without a plan, a slowdown can force rushed decisions, like cutting the wrong costs or taking on bad work just for cash.

Project-based income creates cash flow peaks and troughs. You might have three busy months followed by two quiet ones. If you only look at your bank balance today, you can miss the quiet period coming. Scenario planning forces you to look ahead. It helps you see the gaps before they happen.

This process also reduces stress for you and your team. Knowing you have a plan for a 20% drop in work is empowering. It means you can focus on doing great creative work, not just worrying about paying the bills. It's a core part of running a professional, sustainable creative business.

How do you start building scenarios for your creative agency?

Start by building three core financial models: a best case, a worst case, and a most likely case. Your "most likely" case is your main budget or forecast. Your "best case" might assume you win a big new pitch or a project expands. Your "worst case" should model a significant slowdown, like losing a key client or several projects pausing at once.

Be specific with the triggers. Don't just say "things get bad". Define what "bad" means. For example, "Client X, representing 30% of our Q3 revenue, delays their campaign launch by three months." Or, "Two of our ongoing project proposals are rejected." Plug these specific events into your profit and loss forecast to see the real impact.

Use a simple spreadsheet or a dedicated tool. The goal is clarity, not complexity. You need to see how each scenario affects your bottom line (your profit) and, most importantly, your cash in the bank. Specialist accountants for creative agencies can help you set up these models correctly from the start.

What does revenue diversification look like for a creative agency?

Revenue diversification for a creative agency means not relying on one client, one project type, or one industry for most of your income. It's about building a mix of income streams that balance each other out. A diversified agency might have income from retainers, fixed-price projects, and even productised services or intellectual property.

A common target is the 50-30-20 mix. Aim for 50% of revenue from ongoing retainers (providing stable, predictable income). Target 30% from larger project work (driving growth and profit). And have 20% from smaller, quicker wins or new service experiments. This mix cushions you if one area slows down.

For example, if your big branding projects (the 30%) hit a slowdown, your retainers (the 50%) keep the lights on while you find new work. This strategic revenue diversification is a proactive result of good scenario planning. You identify your over-reliance in the "worst case" model, then actively work to fix it.

How does cost-risk modelling protect your agency?

Cost-risk modelling is the process of categorising every expense by how easy it is to adjust if income falls. It shows you your financial levers. You sort costs into three buckets: fixed costs, variable costs, and discretionary costs. This tells you exactly what to cut, and in what order, if you need to preserve cash.

Fixed costs are things you must pay, like rent, core software subscriptions, and salaries for essential staff. Variable costs change with your workload, like freelance designer fees or production costs. Discretionary costs are optional, like team social budgets, new office furniture, or non-essential training.

When you run a "slowdown" scenario, your cost-risk modelling plan kicks in. You would first pause all discretionary spending. Next, you would reduce variable costs by using fewer freelancers. Fixed costs are last to be reviewed. Having this plan ready means you can act quickly and rationally, not emotionally, to protect your business.

Why is a contingency budget essential for creative agencies?

A contingency budget is a dedicated pot of money set aside to handle unexpected events, funded from your regular profits. It acts as a shock absorber for your agency. For creative agencies facing project volatility, it's the difference between navigating a rough patch and facing a crisis. This fund allows you to cover fixed costs during a cash flow gap without taking on debt or making panic cuts.

A good rule of thumb is to build a contingency fund that covers 3-6 months of your fixed operating costs. Calculate your total monthly fixed costs (rent, core salaries, essential software). Multiply that by three or six. That's your savings target. You build it by automatically setting aside a percentage of every invoice you get paid, say 5-10%.

This contingency budgeting is a direct outcome of scenario planning. When you model a "worst case", you see exactly how much cash you'd need to survive it. Your contingency fund is that amount, sitting in a separate savings account, ready to be used according to your pre-defined plan. It buys you time and options.

What are the most common slowdown scenarios creative agencies should plan for?

The most common slowdown scenarios involve key client changes, market shifts, and internal capacity issues. You should plan for a major client pausing or reducing their budget, a downturn in your primary industry sector, and a delay in your new business pipeline. Modelling these gives you a playbook for the most likely risks.

First, model the "Key Client Loss". What if your biggest client, representing 25% of revenue, leaves? How does that affect your profit? How long would it take to replace that income? Second, model the "Sector Slowdown". What if the property sector, which half your clients are in, stops marketing for a quarter?

Third, model the "Pipeline Gap". What if your new business meetings dry up for 60 days? How long can you run on your existing project work? By quantifying these scenarios, you move from vague worry to specific action. You might decide you need to start pitching to a new industry now, before any slowdown happens.

How often should you review and update your scenario plans?

You should review your core scenario plans at least every quarter. The financial landscape for creative agencies changes quickly. New clients come on board, old projects end, and team costs can change. A plan built six months ago might be irrelevant today. A quarterly review keeps your plans fresh and actionable.

Set a recurring calendar reminder. In that review, update your actual revenue and costs. Then, re-run your three core scenarios (best, worst, most likely) with the new numbers. Ask: Are our triggers still relevant? Is our contingency fund on track? Has our revenue mix improved or gotten riskier?

This regular check-in turns scenario planning from a one-off exercise into a living part of your management routine. It ensures you're always looking 6-12 months ahead. To understand where your agency stands financially right now, try the Agency Profit Score — a quick 5-minute assessment that reveals your financial health across profit visibility, revenue pipelines, cash flow, operations, and AI readiness.

How can scenario planning improve your agency's decision-making?

Scenario planning improves decision-making by providing a financial framework for every choice. It moves decisions from "gut feeling" to "informed strategy". When you're considering a big hire, a new office, or a service expansion, you can model how that decision plays out in both your best and worst-case scenarios.

For example, should you hire that senior designer? Run the numbers. In your "best case" with new project wins, can you afford them easily? In your "worst case" with a slowdown, would their salary force you into your contingency fund too quickly? The answers guide you. You might decide to hire, but on a contract basis first.

This applies to client work too. Is taking on that low-margin project worth it? Model it. If it uses capacity that could be spent on higher-margin work in your "most likely" case, you might say no. Good creative agency scenario planning gives you the confidence to make tough commercial calls that protect your long-term health.

What are the first practical steps to implement scenario planning this month?

Your first step is to block out two hours for a financial review. Gather your last 12 months of profit and loss statements and your current bank balances. Then, build your single "most likely" forecast for the next 12 months. List all your expected income and all your known costs. This is your baseline.

Next, create your "worst case" scenario. Take that baseline forecast and reduce your projected revenue by 20-30%. This simulates a significant slowdown. Now, look at your costs. Using your cost-risk modelling, identify which costs you would cut first, second, and third to keep the business afloat. Write this action plan down.

Finally, open a separate savings account and name it "Contingency Fund". Set up a standing order to move 5% of every client payment you receive into it. This is the start of your contingency budgeting. These three actions—creating a baseline, modelling a slowdown, and starting a fund—will immediately make your agency more resilient.

Getting creative agency scenario planning right is a mark of professional maturity. It allows you to lead your agency with confidence, not fear. The goal isn't to avoid all risk, but to understand it and have a plan. This is how you build an agency that lasts.

If the process feels daunting, remember you don't have to do it alone. Getting specialist support from accountants who live and breathe agency economics can fast-track your resilience. Start by taking the free Agency Profit Score to pinpoint exactly where your agency needs attention, then our team can work with you to build robust, practical financial plans tailored to creative businesses.