How to deal with income loss when you’re self-employed

Turning Points 4 min read

I’ve been preparing for something like this pandemic to happen ever since I quit my corporate job at the end of 2016. Not that I predicted a pandemic specifically (I definitely didn’t see that coming), but as a millennial who graduated college in the midst of The Great Recession, I knew it was only a matter of time before we experienced yet another financial crisis.

You may think that I was prudent and forward-thinking for doing so. However, throughout the past three years, there were plenty of times that I second-guessed myself. Was it necessary to have such a big emergency fund? Should I be outsourcing more of my work to freelancers instead of doing things myself to save money? Was my business overly diversified? Was I doing too many different things to generate income?

Then, March 2020 happened, and all of my worries disappeared. Here’s what I did to successfully recession-proof my business and deal with income loss while self-employed.

1. Cut non-essential business expenses

What’s the first thing you should do when your income drops? Cut back on your business spending. This means sorting through all of your business expenses, especially subscription-based expenses, and cutting out anything that is not 100% essential for your business to run properly.

For me, this meant cancelling a few software programs that I wasn’t using regularly, downgrading some of my subscriptions to save money if I didn’t need all of the features, and pushing back some planned business expenses to the following year. By doing this, I was able to quickly save a few hundred dollars per month, giving me some much needed breathing room.

2. Diversify your business offerings

As I previously mentioned, something I used to think was a shortfall of mine was doing too many different things in my business. I know one successful business strategy is to have a short list of business offerings to stay focused and to avoid spreading yourself too thin. Although that’s generally good advice, I’m so glad I set my business up to be well-diversified and flexible enough to pivot when need be.

As an example, two of my big income generators were public speaking and organizing in-person events. But not this year. If these were my only two business offerings, I’d be struggling to stay afloat right now. Instead, I shifted my business’ focus to selling online products and offering online financial counseling services. Since these were already parts of my business, albeit small, it was easy to make the change and work towards replacing the income I would have normally earned through speaking and events.

3. Reach out and follow up on business leads

It was easy to make the change, but a little harder to get people to buy my online products or hire me for my financial counseling services right off the bat. As someone who normally hates sales, I had to start being more proactive by reaching out to new and warm leads, and following up with past clients.

This is never a fun thing to do and it does come with some unfortunate rejection. However, once you turn a lead into a sale, it will make all that time and effort worth it. For me personally, by putting more energy towards outreach and promotion, I was able to attract more financial counseling clients in the past three months than I’d had in the past three years.

4. Stand your ground and say no

One thing I noticed in recent months is that a number of inquiries I’ve been getting are using these current uncertain times as an excuse to request free labor or discounted rates. I’m telling you, I’ve received an embarrassing number of requests to do free presentations for virtual summits.

At first, especially in March when almost all of my work dried up, my first instinct was to say yes in the hopes that the exposure would attract new clients to my products and services. I did one speaking engagement as a test run, and instead of gaining any new clients, I actually funneled some of my followers to that virtual summit’s business.

After that, I said I would never do another speaking gig for free, and although it can be difficult saying no, just remember that you can’t live off of exposure. You deserve to be paid for your time and work. Moreover, if you accept work for free or lower your regular rates, it may devalue your work and make it difficult to negotiate payment or higher rates in the future.

Instead, I would suggest focusing your energy on ways you can actually generate revenue for your business.

5. Look into relief options for your business

I didn’t quit my day job until I had at least one year’s worth of living expenses saved up in cash. I wanted to make sure that if the worst-case scenario happened and I couldn’t earn a dime in my first year of business, then I could at least afford to pay my bills while searching for a new job.

Having this emergency fund was a huge saving grace when everything happened this spring. If you don’t currently have a sizable emergency fund to not only cover your business expenses but also your personal expenses, make this your number one priority.

In terms of other forms of financial relief, take this time to research your options. What are some government relief programs you could apply for? Are there different ways you can work with your financial institution to lower your interest payments or reduce your fees? Consider some low-interest credit products, like a line of credit, you can draw from as a last resort to keep your business running.

You’ll thank yourself later for being as prepared as you can be right now.

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