What freelancers and small business owners should do right now during these current economic times.
It’s a scary time in the world today. It’s even scarier if you work freelance or are a small business owner and you’re not sure how your business is going to survive. Weeks of being closed, work drying up, hustling to make things work can you leave you feeling exhausted and terrified. I didn’t know what to do when my freelance jobs dried up and I had no way to replace that income. I was lost. I asked Nev Harris, an agency owner who specializes in helping people, especially freelancers, learn how to take control of their money for advice. This is what he said:
Business Stress Test
To analyze the state of your business, you need to give it a stress test. To do this, make a list with two columns. In the first column, you will need to list all of the income that you have coming in every month. In the second column, you will need to list all of your expenses for a given month. Now add up both columns and subtract the numbers.
If the difference between your recurring revenue and your expenses is positive, you know you can continue to run your business with the amount of revenue coming in. In other words, this means you have more recurring revenue than expenses, and you will be able to meet all of your bills.
If the number is negative, that’s the gap that you have to fill every month. Let’s say that you have a gap of $500 each month that your recurring revenue is unable to cover. You have a few options. You may cut your expenses, get a loan, find more business or you may even have cash in the bank to help cover the gap. Say you have $5000 in the bank, you know you have 10 months of leeway if nothing changes. This is even if you don’t get any new business, but your goal is to get new business and for each month new business is brought in the gap lowers.
Knowing these numbers makes the future less unknown and as a result less stressful because you know where you stand and what you need to do.
Kill some expenses
One of the main ways to save money is to not spend it. You want to take a look at your monthly expenses. Now we can find can several ways to save money. One, you may find that you have a few subscriptions that you never use. Cancel those and immediately your expenses decrease. The next way is to look at the purpose of each subscription you have. Let’s say you have three great subscriptions that each do a really great job at one thing. But one of those products will do an okay job at the two other things. In this case, you can cancel the other two subscriptions and use the one to do all three jobs. In situations where you need to watch your expenses, rely on the one that does all three of the things you need to do even though there are better products out there for two of them.
Prioritize Expenses
You have done a quick audit of your business and know if you are going to run out of cash. In this situation prioritize your expenses so you know which ones you could put off for a little bit and which ones you’re gonna have to pay immediately. You know which expenses are the most important to pay and which are the ones with some wiggle room. For example, if you have a loan or a credit card, you know that if you miss a payment you’ll be charged a late fee, your interest rate will skyrocket and it will damage your credit report. In this case, you need to make this payment an absolute priority. Now let’s look at your electricity bill. You miss a payment, you may get a slight late fee but they are not going to turn off your electric bill for a while — it will take many missed payments before that happens. You know that you have some room to make a payment later without any devastating and long term effects so this could be a lower priority. Our goal is to never have to be in a situation like this but this crisis has shown us that things happen that we can’t predict. This is not an ideal way of managing money nor a long term fix, but we’re looking at the worst-case so we have a plan in place. Having a plan in place makes us feel better and helps us to have less stress over what could potentially happen because we have given it thought and prepared it for.
Understand Cash Flow
You need to understand how money is flowing in and out of your business. Knowing when you have money coming in and when money is going out will give you more clarity and allow you to make better decisions. Write a list of all your expenses with a date they are due in one column and then write a list of the moment you expect to get in recurring, hourly, project fees any time of payments from clients. For example, You will know that you have a $500 payment going out on a certain date and you will whether you will or won’t have the cash to cover it. Knowing this gives you the flexibility to solve the problem in a few ways. The first way is if you are working on a project that will be paid for upon completion. Since that money could be used to pay the bill you have coming due you can prioritize that project so you have the money. Another way is if you know that a certain customer is very slow-paying, you can bill him early so that we’re sure to get the money in. You can offer a flash sale to generate quick revenue. Understanding your cash flow is one of the biggest ways to get control of your businesses. It not only can help you find potential blind spots but it helps lessen your stress and make better decisions. Because making having the information to make informed decisions is a key way to keep your business moving in the right direction.
Refinance and Negotiate
Another thing you can do right now is to refinance and/or negotiate your current bills to help save money. Call your providers (anybody from adobe, to your internet service provider, to your insurance company, and loan companies) and see if they have some kind of relief or switch providers to get the promotion that they are offering. Adobe, for example, will give you three months free if you call them. If you have federal student loans most likely your payments are automatically suspended till September. If it’s a federal loan that doesn’t qualify, you try to get a forbearance, which suspends the payment, but not the interest or a deferment. Those are your two options there. You can also refinance your student loans. It’s not all or nothing deal either so if you have some high-interest rate student loans this could be an excellent opportunity to lower those rates.
Save Money on Future Purchases
You could save money on things you’re going to buy in the future. For example, if a new car is in your future, right now is an excellent time to buy a car. Interest rates are really low. Car dealers need to make sales, car manufacturers are going to start opening up plants. Because of the excellent prices on cars and financing right now it provides a great opportunity to take advantage of even if you weren’t planning on buying so soon.
If you normally flying and you have credit card miles, you could transfer these miles to airlines to get free airline tickets. Right now, some airlines are giving big bonuses for you to transfer miles in. American Airlines, for example, will give you a 40% bonus for transferring miles in. So if you transfer 10,000 miles in, you get 14,000 miles. Doing this will reduce the future costs of airline travel.
You can also continue to make your student loan payments because right now 100% of the payment will go to reduce what you owe as opposed to being split between what you owe and interest. This will help you pay off your loan faster and save money in interest charges.
Many companies out there need to sell products to keep their cash flow going. So they’re going to be really aggressive pricing on their products right now. If you have the ability and you know you’re going to be spending the money anyway, this could be a good time to buy so you free up future cash flow.
Acquire a New Skill
This is an excellent time to see a need that has been created and to jump on learning how to fill that need. Or is there a new skill that you have been wanting to learn but have not had the time. Right now, a lot of online courses from good quality companies are offering free or highly reduced courses.
Create Content
Another thing that you could do is create content to position yourself as an authority. The problem is you’re normally so busy working on your business and with personal obligations you don’t have the time to do what you need to to make it happen. This is your opportunity to build an Instagram following, start a blog, create content for your Facebook Group, begin a podcast. You can create 5–6 months of content right now. If you are viewed as an expert, you’re able to gain clients and followers and more easily raise prices. People always are willing to pay more from someone who is an expert. And then your business becomes more insulated front he se type of events.
Become Indispensable
Become indispensable to your existing clients. Make yourself into a person who is counted on and can’t be lived without. Offer more value to your clients for what they are already paying. Offering strategy sessions, consulting, increase what they are receiving. For example, I have a client who gave 25% more retainer hours to her clients. She was scared of these events were going to cause her to lose several retainer clients. This cemented her as a trusted advisor who cared about her clients and her company was taken off clients list of ways to reduce spending.
Have Conversations
This last tip is the scariest one because we fear if we talk to your clients it gives them the opportunity to cancel. Sure it could happen and one or two may leave but to learn their fears, needs, wants, and industry trends so that you can improve your current services or create new offerings. In the dozen or so conversations I’ve had with business owners that have lived through previous recessions and come out ahead, this is one of their main strategies.
His advice helped me make a plan to get back on track. With my state opening up soon, I’m ready to get started finding ways to stand out to my clients and be the one they call back!
