One of the important aspects of succeeding as a solopreneur is adapting to the ups and downs the broader economy. Whether the economy is growing strong, or in recession, your solo business needs to stay afloat! If you’re in a booming geographic area or if you serve an industry that is growing fast, it can be easy for your business to tag along on that expansion – but if your local market is struggling, or if the economy goes into recession, that can make it more difficult for your company to prosper. Even if times are good now for your business, there are some steps you can take right now to prepare your solopreneur business for the possibility of leaner times ahead.
Here are a few strategies to recession-proof your solopreneur business:
1. Broaden your customer base.
Sometimes, especially in a strong economy, solopreneurs fall into a pattern of getting complacent and relying too heavily on just a few big clients or just one type of client – whether it’s a single industry vertical or a few big companies. Of course, there’s nothing wrong with working for a few clients that you love and feel confident working with – but in a recession, having too narrow of a base of clients can be deadly to your business. What happens if you lose one or two big clients, or if the entire industry that you serve suffers a big downturn and starts cutting back on how much they buy from you? Could your business survive?
Before the next recession, start to proactively expand your base of customers. Try to supplement your 2 or 3 big client accounts with 4 or 5 new, smaller clients. Try to expand your business to serve additional industries or offer additional services to make money from a variety of sources. With a broader base of clients, you’ll be able to be more stable in the event of a downturn – and you won’t have to rely too heavily on any one client for the bulk of your revenue.
2. Diversify your portfolio of lead generation tactics.
Just as you diversify your client base, you also need to take a look at diversifying the sources of your new business leads. Solopreneurs often tend to rely too much on just a few methods of generating sales leads – whether it’s PPC ads or Google ads or just networking on LinkedIn. Trying some new strategies and methods to generate new business leads. Here are some examples:
- Attend a trade show or conference for your industry. This could be a good time to do it. Sometimes in-person networking is surprisingly effective – many solopreneurs get a bit isolated and over-rely on online marketing, but you might find it rejuvenating to attend a big conference and meet people in real life.
- Cold calling. This is not a popular idea with many online solopreneurs, but it still works! Especially if you have some companies in mind that you know would be a great fit for your services, don’t underestimate the value of picking up the phone and connecting with new clients that way.
- Try a new platform for marketing. For example, there are some great social media tools that can help your business with the power of automation, artificial intelligence (AI) and machine learning – get more mileage out of your social media marketing while reducing the amount of time you have to spend.
The time before a recession is a great opportunity to try new things. If your business is thriving and you’re making good money, now is the time to experiment and try to put your business on even more solid footing for the future.
3. Increase your cash reserves.
Personal finance for solopreneurs can be a dicey topic – lots of solopreneurs tend to invest everything into their business and might not have adequate cash savings in the bank for a rainy day. Again: you don’t want to wait for a recession to hit before you get your financial affairs in order. Make sure you have enough money to cover at least 3 months of everyday after-tax spending in an emergency fund, preferably in a liquid, easy-to-get-to, FDIC-insured cash savings account. (Not in a brokerage account, not in CDs – don’t get fancy with your emergency savings.)
Are you in a particularly volatile industry or an overheated market? (Are you seeing news headlines saying that your industry is in a “bubble,” for example?) Are you making more money than ever before? Then, in that case, try to bump up your cash reserves to at least 4 or 5 or 6 months’ worth of expenses. You need a financial cushion in case your income suddenly drops or you lose a big client.
Are you currently spending every dollar you make, or not making enough money to comfortably pay your taxes, save for retirement and build up an emergency fund? Then, you need to seriously re-evaluate your monthly budget and/or change your business model. If your business isn’t paying the bills at a time when the economy is booming, you are going to be vulnerable to a financial disaster if and when a recession hits. Talk to a financial planner if needed.
4. Cut costs.
Even if you already have an ample emergency fund, the year before a recession is a great time to cut costs in your business. Start now to look more closely at your costs of doing business and your personal expenses before an economic downturn forces you to cut the fat. Running a lean operation is always good business no matter what happens with the economy. For example:
- Are you getting enough value out of your office space or co-working studio? Consider working from home or from coffee shops and libraries instead – save yourself a few hundred dollars per month.
- Are there subscriptions or gym memberships that you never use? You might save $100 a month right there.
- Are you still signed up for cable TV or a landline phone? Cut the cord and save $50-$100 per month!
- Can you shop around on car insurance? You could save a few dollars a month that adds up to a few hundred per year.
- Are you spending too much money on eating out during the workday or on Happy Hours? This is one of the major “discretionary income” items on most people’s budgets – pack a lunch at home, or learn to cook dinner and save big money.
5. Raise your prices.
That's right – ask your current customers to pay a bit more. Boost your margins and distinguish yourself as a premium option on the market – the best customers will be happy to pay a bit more for what you do, and the most price-sensitive customers will usually be the first to go when a recession hits, so it pays to lock in more valuable client relationships ahead of time.
6. Stay optimistic.
The last recession to hit the U.S. was ten years ago. Depending on how long you’ve been in business, lots of solopreneurs might have never experienced a recession before. But don’t be afraid. Try to stay positive. Even if a recession hits tomorrow, there are lots of things that you can do to stay profitable and keep building your business even in lean times. Solopreneurs are some of the most optimistic, dynamic and hard-working people in America. No matter what happens with the broader economy, your own little corner of the business world can keep thriving – as long as you make some good strategic plans in advance, and stay ready to keep adapting to new challenges along the way.