Companies are shutting down, laying off employees, and cutting budgets.
Goldman Sachs Research estimates that the risk of a recession in the next year is 30% in the US. That rises to 40% in Europe, and 45% in the UK.
When your entire livelihood hinges on your ability to get clients to pay you for services, it’s no wonder the word “recession” induces fear. Should the worst happen and clients cut budgets, you might be first on the cut list, leaving you income-less.
That’s enough to keep even the most experienced freelancers awake at night.
The potential impact of a recession on your freelance business is uncertain. This guide shares two possible outcomes, alongside 10 smart ways to recession-proof your freelance business.
The impact of a recession on your freelance career
A recession’s impact on your freelance business is uncertain. Each turbulent economic condition (including the coronavirus pandemic) affects freelance industries differently.
Generally speaking, it can go one of two ways:
- Positive: Companies cut in-house employees to save more money on payroll. They allocate a smaller percentage of that freed-up budget to freelancers, who they don’t indefinitely commit to, nor have to pay employee expenses (taxes, insurance, or pensions) for.
- Negative: Companies cut their spending altogether, or commit only to consistent expenses like payroll. Relying extra on full-time employees could stop them from outsourcing to freelancers.
I did a quick Twitter poll to see the general consensus, asking companies who hire freelancers to share how much their outsourcing volumes have changed. Albeit the small sample size and the fact we’re not economists, there’s a very even split between “outsourcing more” and “outsourcing less”:
For freelance copywriter Jacob McMillen, “Demand for my work has always jumped when the market dips. Layoffs mean more tasks that need to be outsourced, usually to freelancers. No more frivolous ad spend means everyone is panic-investing in organic.”
However, freelance content consultant Michael Keenan says, “I know that people are expecting they’ll need to meet the same demand, but they won’t have the in-house staff to do it, so they’ll turn to freelancers.
“I wouldn’t depend on that as being the narrative, because I’ve also seen contracts be cut from freelancers with these mass layoffs that have been happening this year.”
⚡️This is a snippet from a live Q&A we hosted for Creative Class. Watch the full replay here (free!)
In other words: the jury’s still out. Nobody truly knows how a looming recession will impact client budgets. The only thing you can do is prepare for the worst… and hope for the best.
How to make your freelance business recession-proof
- Sign retainers with clients
- Limit expenses
- Take deposits for large projects
- Diversify income sources
- Extend your skill set
- Strengthen client relationships
- Refine your value proposition
- Increase your rates
- Continue networking
- Pitch recession-proof businesses
Disclaimer: Some of the links below are affiliate links. We may earn a commission if you buy something through our link at no extra cost to you. This helps keep our articles free of charge. Please know that we only recommend products and services we’ve personally used and support.
1. Sign retainers with clients
Regular income is the holy grail of any freelance business. Typically, these look like monthly retainers—documents which bind your client to pay you for a certain amount of work on a regular basis.
If you’re a freelance writer, monthly retainers could be a commitment of two articles each month. If you’re a freelance developer, that could be five hours a month to fix bugs.
The problem? Convincing clients to commit to regular work is hard when they’re amidst a budget cut. The trick is to secure them before your point of contact has the dreaded conversation with their boss.
Here’s a quick template you can use (taken from our email template bundle):
I’ve loved working with you over these last [few weeks/months]–especially that we [goal/result you helped them with.]
I’ve actually got a monthly retainer space that just opened up. I’m able to take on [x] posts per month, starting [month]. I’d be the same stuff I’m already doing for you, just on a more regular basis.
Some of my other clients prefer this contract type because it’s more consistent (both in terms of their content output and budgets.)
Let me know if you want to switch to a monthly retainer and I can send a revised contract over. Happy to set-up a call to discuss if that’s easier.
If not, we can carry on the way we are–no problem.
Side note: clients can cut regular agreements, but so long as you build a notice period into yours, you’ll have at least one month of regular work before your income dries up. That gives you plenty of time to find a replacement.
2. Limit expenses
Freelance tools make our lives easier. For me, having enough money to invest in tools that save time is a major privilege.
But if you’re concerned about running out of cash amidst a potential recession, go through your business’ subscriptions or regular bills. Pause or cancel tools you haven’t used or don’t need to be paying for.
For me, that’s:
|Essential and keeping ✅||Non-essential and pausing ❌|
|Accounting software||International travel for conferences|
|Insurance||Paid time tracking tools|
|Content optimization software like Clearscope||E-signature software (I’m downgrading to free plans)|
|CRM software like Harlow|
If you’re freelancing on marketplaces like Fiverr or Upwork: the fees you’re paying for them would fall in the “non-essential” category. Follow these tips to free yourself from the marketplace and keep more of the money you’ve earned in your own pocket.
Take it from Josh Garofalo, freelance SaaS copywriter, who says, “I prepared by not acting like a bull run can last forever. Lived well below my means for the last seven years. If business does slow down, I’ll slow down, too.
“Enjoy myself, work ON the biz, and get ready for the next run,” Josh adds. “I don’t need every year to be better than previous years.”
3. Take deposits for large projects
You’ve started a big project with a new client, only to get two weeks into it and hear: “Sorry, but my budget for this project has been cut. We’ll have to put this on pause.”
A solid freelance contract protects you in that situation. Deposits give even greater protection since you’ll already have a percentage of the entire project fee in your bank account. Any time you spent on the project up until that point doesn’t account for zero.
When you ask for deposits, and how much you ask for, is personal choice.
For me, I’d charge a 50% upfront deposit on any work totalling more than $5,000. Half of that is the amount I’d be upset if I lost the client unexpectedly.
4. Diversify income sources
Money is the root of most recession-based fears. The last thing you want to do is have your only source of income dry up with no way to replace it.
Liz Heflin, founder of MACE Writing says, “As a freelancer, I’ve always been a big proponent of diversifying. If you rely on a single client or a lone income stream, one thing falling through can sink you.
“This is even more important during a recession, when volatility and uncertainty mean no client is a sure thing.”
Let’s put this into practice and say you’re a freelance writer looking to diversify your income. You could:
- Start a productized service company where clients know they pay $X for a specific, non-personalized services. Examples include Kaleigh Moore’s Content Remix or Kieran Tie’s Chatty.
- Start an affiliate website. Exercise your writing and SEO skills, while also breaking outside of your niche, and earn extra income by getting paid to promote another brand’s product.
- Turn your knowledge into digital products. Whether it’s a book or online course, help companies take the DIY approach to working with you. They get the knowledge without the heavy price tag ($500 upfront versus $2,000+ per month on services.) You get to build once and sell infinitely.
Phoebe Simpson, founder of The SEO Girls, is one freelancer taking this approach to making her business recession-proof: “We are aware that there might be brands who are less likely over the next few years to spend their budgets on this type of marketing services.
“However, with this in mind, we have made sure to add multiple offers to our business such as courses, and audits,” Phoebe says. “This educational content will help brands realize the potential of SEO by implementing it themselves, and in turn, will then lead to understanding the investment in The SEO Girls in the long term.”
Further reading: How I Turned a Pandemic Layoff Into a Six-Figure Freelance Business
5. Extend your skill set
Speaking of diversification, extending your skill set is a great way to solidify your business—especially if the freelance work you offer isn’t mission critical to clients.
If you’re a freelance writer, for example, consider broadening your service offering to include content strategy. Clients pay big bucks for strategies they can implement internally. That one-off fee can also bolster cash flow if your emergency fund is running low.
“Just like when COVID first kicked off, marketing was one of the first things to be knocked on the head but very quickly. Businesses realized they needed to continue with marketing if they were to make any money and survive through the pandemic.”Ryan Scollon, freelance PPC consultant
CNBC reports product designers, writers, and product managers are the most in-demand work-from-anywhere jobs this year. (Side note: this reflects the closer you are to a client’s product, the less likely they are to cut you.)
As Oscar Rodriguez, freelance content marketer, summarizes, “There’s always work for people who can show they’re good at what they do and can be trusted to deliver.
“The future of freelancing looks bright even in the face of an economic downturn. Clients may be more hesitant to spend, but they will still need quality work done. Those who can adapt and offer value for their services will be able to weather any economic storm.”
Further reading: What Skills Do You Need to Become a Freelance Writer?
6. Strengthen client relationships
Strong relationships with your client could mean they give you the heads up on looming cuts. That gives you time to make alternative plans—like cold pitching or applying to job ads—before they affect your income.
Your freelance business will also likely be last on the cut list. If the decision is between you and a freelancer who does their work and leaves, you’ll be the one harder to let go of.
Simple ways to improve client relationships include:
- Being open to feedback
- Asking “is there anything else I can help with?”
- Talking about non-work-related things, such as travel plans or family life
- Doing what you said you’d do, when you said you’d do it—a simple thing many freelancers overlook
“Small things can make a difference,” Karolina Łachmacka, freelance translator says. “And here I mean those things like customer care and support. Such small extra steps can make a client decide to choose you over someone else.”
7. Refine your value proposition
Your value proposition is a promise you deliver to your freelance clients.
Much like companies who manufacture products that have a unique selling proposition, your value proposition explains why a client would want to hire you, over another freelancer.
In Kaleigh Moore’s masterclass, she recommends to ask yourself “What are you the expert in? What are you the go-to person for? It’s great to have a niche, but it’s even better to have a really specific service offering that positions you as the person for this one specific thing.”
In Kaleigh’s case, that is as simple as saying, “I’m a freelance writer specializing in long form SEO content for e-commerce platforms,” versus just “I’m a freelance writer.” What does that mean? Do you do website content? Do you write for HVAC companies? What exactly do you do?”
“People who hire me are doing so because they want to pay for high quality work,” Kaleigh says. “They don’t just want cheap and done.
“They want a subject matter expert who really knows the space, who knows the trends, who knows the people and the thought leaders within the space, and maybe can even leverage those as part of fresh quotes. That’s often something that I’ve talked about being able to tie into my pieces.”
8. Increase your rates
Rate increases might sound counterintuitive if clients are already on budget cuts.
But when we asked freelance content consultant Tiffany Regaudie how she’s preparing for a recession, she said she’s “Raised my rates so I can save more. [I’ve] let go of the subject matter niche to diversify the kind of clients I serve.”
Rate raises don’t have to mean doing more work for less. Your experience, network, and inflation has likely ballooned since you set your initial project rate with any given client. Don’t let yourself leave money on the table because of it.
Unsure where to start? In my article for Business Insider, I shared the template I use to frame these rate increases with existing clients:
“Having been writing about ecommerce for two years, my subject matter expertise is growing, as is my network, so I’m limiting the number of clients I take on so I can best serve them. Because of this, and the fact I’ll be investing more time and expertise in your content, my new rate from 2023 will be $[rate].”
9. Continue networking
The saying, “it’s not what you know, it’s who you know” rings true in the freelance world. Unexpected conversations can eventually lead to paying clients.
(In my case: I attended a conference in Dublin and coincidentally sat beside one of my favorite marketers. A brief discussion with him led to me being hired six months later.)
Great ways to network as a freelancer, and expose yourself to new opportunities, include:
- Online Slack communities like Peak Freelance
- Starting conversations on Twitter or LinkedIn
- Attending local conferences and/or events
- Reaching out to old coworkers
Michelle Garrett is a freelance PR consultant who’s worked through two recessions: “The one back in 2008/09 was TOUGH. I learned lessons during that time that I won’t forget.”
However, Michelle says, “I think a recession may not be as tough for freelancers, especially those with experience and a thriving network. Why? Because brands who lay people off will still need to complete projects, so freelancers may be a cost-effective, flexible way for them to fill those gaps.”
The biggest lesson Michelle learned freelancing through two recessions? “Keep marketing yourself through your site, your social media, your blog and any other channels you may be leveraging.”
“Never stop marketing and talking with people. You just never know what the future may bring, so it’s always a good idea to keep talking to people, even if/when you’re booked with client work.”
Further reading: How to Promote Your Freelance Business in 10 Simple Steps
10. Pitch recession-proof businesses
Some industries thrive in a recession.
Pivot your freelance business to work with those companies. You’ll minimize the chances of your own freelance business going down the drain should the worst happen.
Things people will likely not stop spending money on include:
- Digital security
- Baby products
- Health and medication
- Personal finance software
- Essential foods or groceries
If your niche is B2B software and you typically work with marketing brands, for example, dip your toe into the world of cybersecurity. Companies will continue to invest in digital security, meaning the brands who supply that software are less likely to be impacted by a recession.
Prepare long before a recession hits
A looming recession might feel like a given, but impact it’ll have on your freelance business is still unclear.
The best time to prepare for a potential recession is now.
Use these techniques to diversify your income by adding alternative freelance services, limit expenses, and strengthen existing client relationships. If one client cuts their budgets, your freelance business won’t tank overnight.
Access our free Slack community to join the recession conversation. Learn from freelancers just like you who are feeling the impacts of a looming recession, and how they’re preparing for it.