In Good Times, Prepare For The Bad: Steps You Can Take Before The Next Economic Downturn
"In good times prepare for the bad, and in bad times prepare for the good."
If you've read my book, The Prosperous Leader, you know my father would quote this often. He believed that what goes up must come down and that what goes down will come up. He also believed that (most) money is made when you buy at the low and sell at the high.
According to a CNN report, we are in the second longest-running economic boom, but most experts agree that there will be a correction. Data shows that more than 170,000 small businesses closed down in the 2008-2010 recession.
How can you, as an entrepreneur, prepare for the eventual downturn while enjoying the current upturn? Here are some tips.
Consider Outsourcing Or Hiring Freelancers
Many businesses are hiring temps or outsourcing work. With unemployment rates low, salaries have risen, but not necessarily in other countries. Some are hiring back-end service in countries such as India, the Philippines and the former Soviet Union.
It’s become the freelancers economy. Take advantage of it.
Hiring freelancers has several benefits when the economy slows down.
Instead of taking them on as an employee with benefits, a freelancer is paid with a 1099, not with a W-2. So other than the end-of-the-year 1099 filing, there is no additional reporting.
Also, if at some point you don't have enough work for both full-time employees and freelancers, you can decide to keep all the work in-house. Or maybe you don't need so many full-time employees. In that case, you can decide to use the freelancers instead.
Most importantly, it's easier to fire or end an engagement with a freelancer without hurting your morale or worrying about lawsuits.
Many (if not most) employers dread firing people, and they often will keep people on payroll even though they can't afford it.
At the same time, many great employees-turned-freelancers don't want to be tied down to one place or even one company. They are comfortable working virtually, and you should be too. A virtual option has many benefits, especially in a downturn, as you don't need all that expensive real estate, and you can hire labor from anywhere. This is especially helpful if you're based in an expensive city.