Wherever you turn, the news is that startups, even some amazing ones, have a target on their backs.
CNN led with this banner, “The world of startups must cope.”
Bloomberg’s headline read: “Tech companies have pampered their employees. Now they saw them.
The NY Times described the current conditions as follows: “Startup workers entered 2022 expecting another year of cash-filled initial public offerings. Then the stock market crashed, Russia invaded Ukraine, inflation skyrocketed and interest rates rose. Instead of going public, start-ups began cutting costs and laying off employees. People also started dumping their starter stock.
In a tweet, a well-known VC opined that investors were warming to the layoffs. “Good big companies are overstaffed by 2x,” tweeted Marc Andreesen. “Bad big companies are overstaffed by 4 times or more.” His frustrations aren’t entirely surprising. Crunchbase notes: “Of the 17 companies in Andreessen’s portfolio that have gone public at initial valuations of $1 billion or more in the past 18 months or so, all but one are trading below their offering price. And even the only outlier – Airbnb – is down from its day one closing price.
Finally, Layoff tracker notes that 57 companies have reported layoffs since the start of March, including Better.com, the mortgage company whose CEO fired hundreds of people in a now infamous zoom call.
These depressing headlines and statistics lead to the likely conclusion that a recession, though not guaranteed, is likely to impact the independent economy over the next year and possibly sooner. This would affect independent platforms and individual independents in different ways.
If you’re in a high-demand professional field, especially technology, the impact could be positive rather than negative. For example, Upwork reports that among its most in-demand skills, those seeing particularly strong year-over-year (YoY) growth include areas such as web programming (43%), web design (31% ) and social media marketing (25). %).
Freelancers often perform well during economic cycles when companies lay off and lay off permanent employees to reduce fixed costs, but need ongoing help with critical projects. As a recent Forbes article put it:
“Freelancers are often more attractive to employers in times of recession. A sole proprietor or independent consultant doesn’t need the hefty benefits package of a full-time employee, including health insurance, a 401(k), or paid time off.
“A freelancer is also willing to work more flexibly or à la carte. Instead of requiring a paycheck for 40 hours per week, a consultant will often work flex 10-15 hours per week while providing what a business needs to keep the lights on, fill in the gaps, and build momentum towards the future. before.
But many professionals inside and outside of technology will be be affected by the economic slowdown that experts anticipate, particularly in areas of discretionary spending such as hospitality.
You might be one of the 60 million professionals who are full-time freelancers or employees with active side jobs, or a freelance platform founder or team member wondering how best to prepare. . In the latter case, you may be spending a seed investment and unsure how to meet your investors’ high expectations, and you see the need to lower your burn rate to preserve cash.
There is no right answer, but there is value in a disciplined examination of your business, assessing likely eventualities and identifying ways to reduce vulnerability. Here are several approaches that can help you define your risk and take action.
Personal Hackathon. Created by Tal Shmueli, an Israeli entrepreneur, the personal hackathon is a way to identify the strengths and weaknesses that impact your success during the recession: ask colleagues who know you well and who will be honest to describe what in what you are good at now and what you need become good at, to succeed during tough economic times. Then, absorb, identify, and take specific actions that enable you or your platform to significantly improve. Learn more about the hackathon here.
Fix the roof while the sun is shining. Most economists expect a difficult period, but it remains quite dynamic for many independents. And, therefore, it’s a happy time to meet the needs of improving your personal freelancing practice or the state of your platform. As the saying goes, “The best time to fix the roof is when the sun is shining.” Which investments can be put in place quickly with a sure knowledge of the strong return on investment? Is your current six-month projected portfolio of work strong enough? Are there ways to protect your forecast from risk? If you are a platform leader, do you have the right mix of freelancers? Do you have access to other talent networks as needed? Have operational issues been overlooked and need to be resolved? Is it a good time for a sprint to add automation to the platform or improve the administration of your business? Learn more about Linkedin here.
Demand Planning. More and more platforms have started to focus on demand planning: helping customers identify work needs over the next few quarters. Twice a year, Catalant engages its clients on the needs of upcoming projects. Gigged.ai in Scotland recently implemented a similar process. More business-centric platforms like Toptal.com recognize the value of ongoing contact through client partners who build ongoing relationships with important corporate clients similar to the role found in recruiting executives, consulting and investment banking. Read how Catalant uses demand planning here.
Stress test. The demand planning result positions you well for stress testing. If you’ve had much to do with banks during the Great Recession of 2007, you know that a stress test tests the financial resilience of your personal independent business, or the platform you run, against significant financial impact. . What is the impact of a 10% drop in revenue on your business? How about 20%? Could you afford to lose one or more of your top three customers? What if customers push to slow project schedules or renegotiate rates? Read a McKinsey article on stress testing here.
Scenario analysis. Treat scenario analysis as a stress test with ambition and imagination. Stress testing identifies sensitivities and provides a better understanding of the impact of the recession on your freelance practice or platform. Now, what to do? Scenarios help you test different options, for example, is it better to grow or to cut costs. For example, 9am.works, a new “freelancer first” platform, is the result of thinking about futuristic scenarios at Codecontrol.io, a successful German technology platform. Learn more about MIT’s scenario analysis here.
Action research. Do you know you need to make changes? Then get started using agile experiments. An example: Gabe Greenberg at G2i.co is driven by a vision of healthy work for platform staff and independent members. A recent innovation: the move to a four-day work week. Rather than endlessly debating, he and his team tested it extensively, ensuring good communication with clients and how to ensure client and freelancer coverage for issues that arise. were posing. He passed with flying colors. It didn’t save money, but it was a big plus in terms of motivation and job satisfaction. In difficult times, it makes a difference. Find out how Maersk used action research to accelerate strategic change here.
Find a good coach or advisor. It is always useful to have a guide when in new territory. A “been there, done that” guide can be of immense help in evaluating the various options for dealing with a difficult economic climate. One of the most useful contributions of such a coach is his understanding of the more non-obvious and non-linear consequences of different courses of action. Find out how Aceup, an independent platform of professional coaches, helps companies and leaders drive change here.
Each of these approaches is field-tested, and disciplined use will help both freelancers and independent contractors identify and take the necessary steps to keep the business running and customers well served. But, don’t delay. And, as Crunchbase recently put it, “To survive this cycle, think like a stingy. Down is fine.
Long live the revolution!