There is one thing that is certain in business – there will be lean times and they will come at the worst possible moment for you both professionally and personally.
I could insert a cute little inspiring quote here about how if you keep trying that you’ll eventually succeed, but what you really need are tips for how to survive the lean times. Otherwise, you’ll likely run screaming from your business and head back to the corporate world before you really have a chance to get things off the ground.
According to the US Bureau of Labor Statistics, about 40-45% of new businesses fail in the first four years. However, take heart, because the other 50%+ succeed. With the tools I’m going to give you, you can easily nudge yourself over into the success category.
Amp Up Your Management Know-How
The Indiana Small Business Development Center (ISBDC) estimates that 46% of the businesses that fail in the first five years do so because of “incompetence.” That’s a pretty broad description and can include things such as:
- Poor record keeping
- Lack of marketing
- Not understanding the client
- Lack of cash flow
- Poor management
One of the easiest ways to increase your business know-how is to surround yourself with mentors who know more than you do. Learn everything you can about running your own business.
- Attend conferences in your industry, which will give you both networking and learning opportunities.
- Read books by successful business owners.
- Seek out a mentor or consultant and take constructive criticism. This means you make changes and try new things instead of getting insulted by the critique.
- Ask your clients for feedback. It is hard to see our own flaws. If you’re open to feedback from others, though, you can improve your management style.
Study Your Market
If you’ve been reading my blog for a while, then you probably already did your market research before opening your business. However, it is important to continue to do market research throughout the life of your business.
The Small Business Administration stresses that successful businesses understand not only their target demographic but also the industry as a whole and any competitors’ businesses. During slow times, study your niche industry and you’ll likely gain some marketing know-how that will have your business booming again.
- Look at government statistics and industry indicators, such as information from the Census.
- Get local information from the local chamber of commerce, trade associations and marketing firms.
- Study the national and global market for your business, particularly if you want to branch out into online sales. Particularly for service industries, online sales can save your business when local client traffic is a bit slow.
Cut Back on Expenses
Lean times are a good time to cut back on unnecessary expenses. Even saving a few dollars a month here and there can have a big impact over time.
- Check for waste. Are you printing out client invoices when you could simply email them?
- Is there a cheaper, but still a high quality source for any office products you use? What about what you’re paying for website hosting? While you don’t want a cut-rate host, you also may be able to work out a deal if you pay by the year instead of monthly.
- Cut home office expenses. Are you leaving the office light on 24/7 and could save electricity by installing a motion sensor light instead? Perhaps you need to shut your computer off at night.
- How much are you paying for utilities and are they all necessary or is there a cheaper source for Internet, phone, and even the fees you pay for your merchant credit card accounts or other payment options?
Create an Invoice Management System
During slow times, invest in your bookkeeping and invoicing system. As a freelancer, you are likely the one who is in charge of sending out quotes as well as billing. It’s easy to forget to send an invoice or two and suddenly you have a cash flow problem.
There are many online systems that are simple to use for invoicing and will even send out automatic reminders if the invoice is past due. Use your down time to set these up and schedule invoices and recurring invoices for your regular clients.
- Try GoDaddy Bookkeeping or Freshbooks to start. Another advantage is that they will track income for tax purposes.
- Figure out when payments from clients are coming due and how you can better manage your cash flow.
- Study reports in your payment software to find out which clients are always late on payments and then trim the non-paying clients over time and replace them with clients who pay consistently.
Collect Debt
Nearly every business has some outstanding money due. Freelancers often battle to get final payment from clients they are no longer working with for whatever reason. During lean times in your business, you can collect bad debt to get some funds in the door.
- Place a personal telephone call to clients who owe you money. You don’t want to sound desperate or you might lose future business, but you can politely explain that an invoice is past due and if they can pay it today you will discount the total.
- If you are a writer and have a client who has published your work and refuses to pay you or to arrange a payment plan, you can file Digital Millennium Copyright Act (DMCA) notices with their web host to have the content removed. While this should always be a last resort and you should try everything you can to work things out with the client, there might be occasions where you need to file a DMCA and sell your work elsewhere.
- Have you advanced any outsourced contractors money? Inquire about when it will be paid back or work will be finished. By the way, please don’t advance contractors more than 50% until they complete the work.
- Many freelancers require 50% payment up front and the other 50% after completion of a project. Did you remember to send out all your invoices after completing a project? If not, now is a good time to do so.
Drum Up New Business
Your lean times are the perfect time to reach out to new clients. You never know, you might even land a rush job, which you can deliver on, securing a new account and bringing in funds immediately.
- Send out a note to current clients. Tell them you have an opening in your schedule and if they need work completed you are available.
- Reach out to social media. Let your followers and fans know that you are taking on new clients.
- Send brochures to local businesses.
- Ask family and friends to share information about your business and that you’re taking on new projects.
- Ask for testimonials from happy customers to put on your website and social media.
- Reach your target demographic where they are most likely to be. If your customers are mainly stay-at-home moms, then give a talk to a local Moms of Preschoolers group, for example.
These are just a few of the things you can do to get through the lean times in your business. While I didn’t offer a bunch of quotes about sticking through the hard times, it is true that if you can just put your head down and keep working that the lean times will fade away and your business will be more likely to succeed.
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