Economic downturns are inevitable. Nonetheless, freelancers can still thrive during a recession by diversifying their income streams and specializing in resilient sectors. Remember, freelance workers and business owners have the flexibility to pivot and adapt in many economic scenarios, while traditional jobs often face mass layoffs. So, if you're a new freelancer or one who wants to prepare for an economic downtrend, here are five things you need to know to recession-proof freelance business.
1. Diversify Your Revenue Streams
Recession-proof a freelance business by expanding its service offerings, leading to diversifying revenue streams. For example, a graphic designer may consider adding services like copywriting or social media management. Doing so taps into other platforms, such as Fiverr, to find new clients, offer a variety of services, and quickly expand your income streams. Fiverr is also a great platform for connecting with clients looking for freelance services, helping you secure more work even when the economy slows down.
Another example is by selling digital products, like Canva templates or online courses. Investing in high-value skills and passively leveraging them can help generate recurring passive income, reducing the risks of financial decrease during a recession.
2. Build a Strong Client Base
It’s safe to say that many businesses, including those owned and/or managed by freelancers, can thrive in building long-term relationships with clients. So, building a strong client base is a must to recession-proof a freelance business. One way to start to prioritize client retention is by offering exceptional service.
The ability to deliver consistent and high-quality work fosters communication and trust between freelancers and clientele. Hubspot even indicates that a 5% increase in customer retention can increase a company’s revenue by 25% to 95%.
Remember, your most important customer is the one you already have. Reliability, paired with proactive communication through networking, such as attending local events and engaging with online communities, helps create and, more importantly, deepen business relationships. Adding incentives for client referrals can also help grow your network.
3. Focus on Essential Services
Entrepreneur Marie Forleo, who is also the founder of Marie Forleo International, said, “Clarity comes from engagement, not thought.” With that statement in mind, focusing on essential services through the alignment of a freelancer’s offerings to a client’s core needs can support business growth and revenue, even during economic dips. Freelancers should adapt by upskilling in emerging tools to match evolving client demands.
Remember, bundle different services strategically. For example, combine services like social media management and project planning to gain the upper hand against the competition. Upwork solidifies this idea through its 2023 Marketing Research, wherein the report mentions that about 47% of all freelancers provide knowledge or skilled services in different niches. Refining these skills and identifying client pain points puts freelancers as growth partners instead of simple vendors.
4. Improve Financial Planning
Recession can happen at any time, and it might be at the worst possible moment for a freelancer. After all, it's tough to wake up on the wrong side of the bed, knowing that an economic downturn happened while you were sleeping.
So, prepare for the worst through effective financial planning, and one excellent way to accomplish that goal is by creating an emergency fund. Aim to have about 3 to 6 months of savings to help cover expenses during slow periods. Remember, a crisis isn’t the time to start organizing finances.
Start monitoring your expenses and earnings as early as now to avoid overspending. Additionally, reduce high-interest debt to free up cash. Remember the wise words said by investor, philanthropist, and the chairman and CEO of Berkshire Hathaway, Warren Buffett:
“Don’t save what’s left after spending, but spend what’s left after saving.”
Let disciplined saving be part of your financial lifestyle. Conduct financial reviews for your freelance business to reduce the risks of acquiring significant monetary pitfalls during the recession.
5. Be Adaptable and Proactive
Adaptability and forward-thinking to help recession-proof a freelance business. It's ideal for freelancers to keep up with market trends through continuous learning. Have an open mind and the will to pivot when necessary. That way, you can expand into new niches when one service area dries up or, worse, disappears.
Don’t forget to collaborate with others, as it amplified resilience. Partnering with other freelancers, such as writers cooperating with designers, can help boost client retention.
So, remember the following words said by the Lead Digital Product Manager at Brand Patron Consultancy, Nosamudania Alexis, in her LinkedIn post:
“By working with people from different backgrounds and areas of expertise, you can broaden your own horizons and learn new techniques and approaches.”
