The self employed make up a bigger group today than they ever did before. In the past, if you wanted to be a graphic designer you would generally look for a graphic design studio that's hiring. Today you place an ad on Craigslist. In the past, if you wanted to write for a living you would probably take assignments from magazines or an editor, today you find work online.
The recession happens to have hit at the same time as this wave of self employment, so of course, there's been a lot of difficulty for people who work for themselves and find that sales aren't always booming. If your business has taken a hit such as losing a major client or encountering some major expenses, there are a number of things that you can do to recover the blow. Here are a few strategies proven to work.
Downsizing
There's a tendency in business for people to always want to go bigger and bigger. To an extent, there's safety in size, but think of the business world like the ocean. Whales are less plentiful than other sea life because it takes so much in food and space and resources to sustain them. Shrimp on the other hand, crabs, fish, oysters show up in droves of thousands at a time. Shrimp are so plentiful that you can eat a dozen on a single plate and not think twice about it. Smaller companies don't make as much money, but they don't usually close their doors when the market shrinks, either.
When the company is just you, downsizing could mean getting rid of some of your superfluous expenses. If you live single in a two room apartment, you may as well downsize to a comfortable studio. If you drive two cars, you might sell one. If you rent an office somewhere, you could simply work from home. You can cut expenses at work such as getting rid of advertising campaigns that aren't doing you any favours and holding blowout sales on products that aren't selling. Get rid of anything that's costing you more than it's earning you.
Work Harder and Cheaper
One of the easiest ways to survive through tough times is to land more clients by offering more for cheaper. In these trying times, too many companies are still stuck on their old ways, ways and methods that worked like a charm ten years ago but are doing them no favours in the middle of the recession. They simply can't or won't compete with you if you offer better service at better prices.
They say that goods and services are worth what a person is willing to pay for them. Well, in tough times, you need to be brutally honest with yourself. Even if you're, say, a cartoonist who usually works on a $200 page rate, if a $150 page rate can double your client base, then you'd be crazy not to cut your prices.
Moving On
As a last resort, sometimes it's better to sell a business that's only costing you money and move on. If you built a business from the ground up before, you can do it again. Look at your business in terms of gains and losses. If keeping your business going is going to cost you your retirement savings without paying you back over time, then it's simply not worth it.
That being said, this really is a last resort. Don't just give up at the first sign of adversity, rather, be willing to move on if that's the corner you find yourself backed into. At the end of the day, it's a business, not a hobby, and even if you only started the business for fun, it's never fun to manage a failing business.
Loans and Credit
When the hit is a minor setback that you know you can recover from, it may be prudent to put your business credit card to work or seek a business loan to get you over the gap. All businesses face scenarios where they could easily get over the hump if only they had a little money to keep things going for the time being.
It's important to know the difference between a hump and a business model that just isn't working, but when it is a hump, the risk to your credit can actually be quite minimal. It can be more than worth the risk, just so long as that money is being used to get more cash flowing in and not merely to keep a sinking ship afloat a little longer.
Running your own business isn't easy, but with a practical perspective and a bit of experience, it's not impossible to get over a rough patch now and then.
Andy is the co-founder of CreditCardCompare.com.au. Based in Australia, his website provides a dedicated credit card comparison service that is impartial to the banks. For more of his writing, visit the blog.
