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Does the Recession Affect Your Self-Employment? | Freelance Sprout | Find, Start, and Grow Your Dream Freelance Business
Read the six part series on creating a freelance business plan
 

Does the Recession Affect Your Self-Employment?

Date February 19, 2009


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Being self-employed as a freelancer is a lot of W-O-R-K. As a freelancer, you are typically in charge of it all. It is up to you whether or not you sink or swim but sometimes things that happen in the business world are out of your control. Depending on the nature of your business, you may find that the recession is indeed hurting your business. In fact, this is one of the main reasons many with the entrepreneurial spirit balk at becoming self-employed individuals.

But how do you know if your business is recession-proof? Well this question has many answers. Here is a look at some of those answers:

Job Security for Freelancers

It does take a lot of time, patience, and work for you to create stability in a self-employed environment. There will be times when clients fail to pay or an expected job lead falls through. But these situations do not necessarily mean you are out for the count. Persistence is the key. If you are thinking about starting out as a freelancer but have not yet done so, start doing your homework now about the industry you want to enter. Ask others in your field how business is going since the nation fell a bit due to the recession. Most self-employed folks will be happy to be honest with you – good or bad. You may even find a mentor to help you work out strategies to keep work in the pipeline. Referrals are an excellent resource for gaining work. If you already are self-employed, you can still seek out referral opportunities to sustain you. Set up affiliate partnerships and try to offer a compensation of some kind for those other freelancers who send people your way. You may not want to contact direct competitors but other freelancers who do work that compliment your business may be crucial to staying afloat as an independent.

Financial Stability

Freelancers do not often get to collect regular paychecks, nor do they get to conveniently pay in to the government taxes that are owed. This necessitates the need for freelancers to not only make a profit on the work they are doing, they must also account for all of their own income, file and pay taxes on their own, as well as be able to keep enough cash to pay the bills. Self-employed individuals also have to account for the expenses of insurance costs and such that no longer come with the job.

There are often numerous cash flow problems that arise when clients or customers do not pay on time, or at all. For those freelancers who need additional funds for financing, may find it difficult to prove to lenders that they actually do have an income and that it is steady enough to warrant qualifying for a loan. It can be frustrating and ultimately cause financial stability issues for some freelancers.

Starting the Right Way

For people who have either started a freelancing business or are contemplating the move to the world of self-employment, it is crucial you do your research. Not all freelance businesses require a full-fledged business plan for start up, unless additional funding is required. But the financial aspects of a business plan are still an essential part of any new venture. You need to be certain you can work the numbers and that the numbers can work for you.

While the recession may have some negative impact on freelancers, there is also a bright spot for many of the self-employed: as more and more businesses are facing layoffs and staff reduction measures, they are turning more and more to freelancers to keep up with the work. The recession may be a prime time to take your freelancing skills public and snag some high profile clients, offering long-term work opportunities. Just prepare yourself and your finances before you start.

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Related posts:

  1. Tax Tips For First Time Freelancers
  2. Be a Freelance Money Coach
  3. 3 Steps to Planning your Freelance Startup

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