It’s all over the news; countries are entering or on the brink of recession. We’ve teamed up with Candy Phelps to explore essential financial skills freelancers and agency owners should flex during these times.
In this episode, we discuss how macroeconomics and personal finances affect our businesses, how to plan our finances and future-proof our organisations.
Questions we cover:
- How does macroeconomics affect freelancers and agencies?
- How do your personal finances play into the business?
- How might we prepare our personal finances for a recession?
- How can we future-proof our agency (ie our income)?
- Should our pricing or packaging change during poorer economic times?
During the course of interviewing Candy, here are some of my key takeaways:
- Examine your own finances carefully and strive to cut costs wherever possible.
- Look at what’s coming in, what’s going out, and the bottom line.
- Discuss your finances with your partner and how you may save money.
- Begin saving more money before/if things worsen.
- Be proactive with your finances, both in your personal life and in your business. Avoid being reactive.
- Prepare for the worst-case scenario. Nonetheless, enjoy the finest. So plan ahead of time.
- Try to find extra ways to bring in money for your agency so that you can diversify your income.
- Reduce costs by reviewing software that hasn’t been utilised in months.
In the episode, Candy mentioned her budget calculator. You can access this to download or make a copy of by clicking here.
Connect with Candy
- Managing your personal finances – click here
- Managing your agency finances – click here
- How to create a buyer experience – click here
Lee: Welcome to Trailblazer FM. This is your host, Lee. And on today’s show, I’m joined by Candy Phelps from 1 Day Works. Candy, how are you today?
Candy: I’m great. How are you, Lee?
Lee: I am tip-top and champion. I’ve just had a wonderful conversation with you before recording, and I’m super excited about this series. First of all, folks, if you’re not sure who candy is, can I encourage you go and listen to season 28, episode three, to get an idea of what Candy was up to a couple of years ago. Also, be sure to check out season 45 where we catch up with Candy. Oh, there’s alliteration, there, my English teacher would be super proud. Today, folks, we are looking at pricing in a weak economy, and over the next few episodes, we’re going to be deep diving into finance for your agency. So be sure to grab a notepad and pen and also be sure to bookmark this episode ’cause this is gonna be one you’ll want to keep coming back to. Okay, Candy, thanks so much for being with us. I am going to officially nominate you as our resident expert. And as we look here at macroeconomics, I’m gonna hit you with the first question, so how does macroeconomics affect freelancers and agencies, and importantly, what the heck is it?
Candy: Sure, so first of all, I wanna explain that I don’t have a CPA degree. I’m not a finance expert, but I am a bit of a personal finance nerd, so a lot of this just comes from personal research I’ve done over the years, and a passion for talking about money more openly, so I’m excited to be talking about this out loud with people and trying to make money a little bit more, something people talk about, not just pricing, but how expenses play into the business and all of these global factors that we’re gonna be talking about today. So macroeconomics is essentially just the world of money, so we’re actually talking about the entire world, not just the US stock market or what’s happening in China, or… It’s all of the things that make up the banking system, the money, and the commerce that’s happening in the world, and so something that I’ve found to be interesting, and maybe we all sort of know this, but has been confirmed by IBIS, which is a global marketing research firm is that macro-economic factors such as corporate profits and the number of new businesses started are the number one driving factors of our web design industry.
Candy: So what that means is that when there is a bad economy, the web design industry is suffering, when there’s a good economy, the web design industry is flourishing. So we all kinda know this, but this is why we’re talking about it as we possibly are heading into a recession right now, we wanna kind of brace ourselves because the industry that may have been doing really well for the last several years could be about to take a downturn.
Lee: I remember back in 2007, 2008, when the recession was declared, I was absolutely stressed out to the max. We were having to look at our business and try and work out how we could survive both as a business, but also personally, keep paying the bills, etcetera. So on that, how do our personal finances play into the business?
Candy: Well, so I also started my business in 2008, 2009, so right during that big economic recession. And when I started, I was just freelancing. So personal finances obviously play a role in everyone’s lives, but especially when you are a freelancer, you don’t have employees, your personal finances and your business finances really are closely tied. It always starts with how much money do you need to make to survive, so that’s why personal finances are important to understand. Before you even start looking at your business finances, you need to understand how much money do you need to make so you don’t get evicted from your apartment or so that you don’t start going delinquent on your mortgage payment. If you have children, obviously that adds to a whole another level of financial responsibility.
Lee: So always taking a really close look at your personal finances going into a recession is a good way to start preparing your business and your life to understand how much money is like the bare minimum that you need to make, and then also are there places that you can trim, are there places that you can do without if you need to, and start just kinda getting your life ready in that way. You don’t necessarily need to start hacking gym memberships just yet, but just knowing where are those expenses, how much are they and getting really familiar with how many Amazon purchases are you making every month and how much money are you actually spending going out for beers every Friday. Those are things that a lot of times people just kind of ignore until things get bad, so always looking at just what’s coming in, what’s going out and then trying to find that kind of bottom line is a good place to start.
Lee: I remember back in 2007 was also when our daughter was born. It always seems to be, doesn’t it, that there’s huge issues in the world, and you also then have the huge responsibility of something happening. I had a business, I had a baby, I was stressed out and realized that me and my business partners were putting a huge draw on the business. We had all of our own personal things going on, we needed so much money from the business every single month and that made it really difficult to operate the business off that. How do you think we can prepare our personal finances for a potential recession, especially if we do see any dip in the finances of our agency?
Candy: Well, I think the first thing is actually go back through a month or two, or possibly three of your credit card statements, a lot of people are shopping online, so credit card is a good place to start, and then also your bank statements and start tallying up where you’re spending your money and how that average is out over the course of the month, those things. Like everyone knows how much their rent is or their mortgage, but it’s those extra expenditures, like meals out, Amazon purchases, gifts, things like that, that you kind of forget about that you’re spending money on. So actually calculating that, just print out a few bank statements, run a few simple calculations, and then you’ll fully understand where it is you’re spending your money. And then from there, depending on whether you’re single or whether you have a partner, you have to have those hard conversations about money, of what can we do without if we need to do without it. So everyone has different things in their life that are non-negotiables. That thing in your life might be, you have to get a coffee at Starbucks every day, even though that’s the quintessential, you don’t really need a cup of coffee from Starbucks every day if you’re trying to save money.
Candy: But there’s certain things that people just feel very passionate about, is like a part of their life or a part of their identity that they really wanna keep. So those are the hard conversations you definitely need to have with a partner, if you have one, because of course, if you’re sharing your finances with that person, these things can get a little tense. So don’t wait until the economy is bad to have those conversations, start preparing ahead of time. You could start just stocking away a little bit more money into savings.
Candy: That’s always a great idea. Something that’s a really startling fact to me, according to the BBC, 80% of individuals in the UK have less than 500 pounds worth of savings in their current account, and there’s very similar numbers in the US. So what that means is that only two people out of 10 have more than $500 as a back-up, like a safety net emergency fund. So $500 bucks can go so quickly if your furnace goes out or a tree falls on your roof and you need to pay an insurance deductible, not to mention if you start making less money, and you need to be able to dip into savings to pay your bills. So start saving, stocking more money away for savings, trimming, where you can now, before things get bad.
Lee: The great thing as well about having those conversations now is we don’t necessarily have the pressures of a recession yet. I believe it’s coming down the pike, at least that’s what the media would have us believe. So having those conversations early are far better than doing what me and my team were doing back in 2007, 2008, where we were in a position where we just had to go… We had no idea what we were spending, we had to go through everything. We had to make horrible decisions so that we could all draw less from the business to allow the business to survive, and that’s the worst time to do it. If you can enter into the potential future recession absolutely prepared knowing what you’ll cut if and when it happens, I just think, mentally, that’s so much more freeing than doing it in response to things happening.
Candy: Exactly. And the whole point of this episode is to try to be more… Well, not just this episode, this season, is about being more proactive with your finances, both with your life and your business, and not reactive. And you’re exactly right, things are more likely to explode in your life if you didn’t see it coming. So if you could prepare, then worst-case scenario, you’re prepared for a bad situation. Best-case scenario, we don’t have a recession, people were over-blowing the economic downturn, and then you can take that big chunk of money you saved and buy yourself a boat or whatever you wanna do, but having the chunk of change, first of all, it takes a little while to build up. So just planning ahead, that’s what it’s all about.
Lee: So given that our agency is essentially our income, how do we future-proof our agencies, especially in light of a potential recession?
Candy: Well, there’s a lot of things you can do agency-wise, and this is the beauty of being self-employed. You’re not in a stagnant place at a job where you have a fixed income, so that’s one of the most beneficial reasons that being self-employed helps you during a recession, you can’t get laid off, which is amazing, and you can always make more money. So those are two things that a lot of people cannot say for themselves, so the good news is we’re all in an awesome position to be able to control our income a lot more than other people. So the first thing is to try to find ways to bring in more income, so that could be diversifying your income through other things that aren’t your agency, so maybe it’s getting a rental property or maybe it’s driving Uber for a few nights a week, or whatever it is just trying to find ways to bring in a little more cash to stabilize in case the agency itself starts suffering a little bit, but also just finding ways to bring in more income through your agency, so this could be looking at different services, this could be…
Candy: It could potentially be raising your prices, but we’re also gonna be talking about pricing a little bit later, it could be lowering your prices, but there’s having online courses or maybe offering different types of things to the existing customers that you already have, so trying to just really look hard at what it is that you’re selling and then how could you do some additional things to bring in more money. Then of course there’s cutting costs, so looking hard at your software, especially, that’s the things in our business that often are the highest cost. A lot of people don’t have offices, it’s not a high capital industry, but if you look at the software, like take a look at that and see if there’s anything that you can cut, is there anything you really haven’t used in a few months and cut down that SaaS bill if you can. And then there’s all sorts of other things like we have an office right now, and I just took on two roommates, just sort of because it was just me sitting in the office, our whole team is remote anyway, so that’s one thing that we’re doing that I’m reducing that monthly expense, it’s gonna be more fun having people in the office with me anyway, so anything you can do like that to reduce expenses without cutting the value out of your business. So don’t cut so many expenses that you can’t run your business if it’s…
Candy: Obviously, if you need Adobe software to run your business, you’re not gonna cut that, and just taking a look at all of those things and thinking about what’s essential and what’s not essential. And again, you don’t necessarily have to cut it now, just kind of labeling things like this is something that could go, if we need to trim expenses later is a good thing to do.
Lee: Yeah. Again, being prepared for the potential, but this is also a brilliant exercise anyway, isn’t it, because we can look at our business, potentially save some costs now and potentially find some extra revenue sources. Also, during a recession, our customers are gonna be scared as well, they’re gonna be stressed out, so how can we help them? Perhaps we can look at their website and think, you know what, they are gonna struggle to generate leads based on that particular page, maybe we can offer them some more help here. I insert example here, there must be many ways that you as an agency can help your customers during difficult times. And again, this is something that you could probably be doing right now. They will thank you, I am sure, for looking out for them.
Candy: Exactly, I think positioning yourself as an expert and not just as a commodity is an important thing we should all be doing all the time, but especially during a weak economy, things like website care plans will often get cut. Advertising is often one of the first things that get cut from businesses. That’s why those corporate profits and things like that affect whether web designers or digital marketers in general are doing well. So adding value where you can, maybe you’ve been coasting on a website care plans with a bunch of people where you’re just kind of running the WordPress updates every month and not doing much else, start doing more for your customers that are already paying you, so you can sort of prevent or head off a bunch of cancellations for things like that.
Candy: Try to send them an email once a month, giving them a hot tip or an idea of something you wanna change on their website. Anything you can do to keep in their space and remind them that you’re an expert and they wanna keep you around, even when times get tough, is a really good thing to do. And then also just trying to sell to your existing customers additional things. So it’s so much easier to get money from somebody who’s already giving you money than to go round up a bunch of new strangers to give you money.
Candy: So think about those additional offerings that you might be able to have, maybe it’s a one-hour consultation that you’re gonna have as an add-on to a website plan, maybe you could start doing more SEO work, maybe you wanna get into PPC ads, whatever it might be, but think about ways that you can add more value to your existing customers and try to rein those in before the economy gets bad, and again, just trying to build that relationship to the point where they don’t wanna cancel, it’s not, on their list, you’re an essential part of their budget, not a cuttable part.
Lee: So do you think our pricing or packaging should change as well during poor economic times?
Candy: Just reconfiguring or re-packaging things, so something someone else said one time that I think is really smart is if you’re doing content marketing or search engine optimization as a retainer for a customer, and then you’re also doing their WordPress updates or things like that, that you should package those separately, because if you have one huge $5000 package that somebody is looking at their budget and thinking, Well, maybe I don’t really need someone to write those blogs for me every month, they’re gonna cancel the whole package. If you have the website maintenance as a lower end item, and then the SEO or the content marketing is the higher end item and they’re separately build and they’re kind of line item differently, they’re more likely to cancel the expensive thing, but then keep the smaller thing. So it’s just a way to sort of, again, try to prevent cancellations for that recurring revenue that you’ve worked really hard to build up in your business. And then re-packaging things with add-ons, that’s another thing where maybe you actually reduce the base price of your websites, if we get to a point where people are saying, no, because they can’t afford it.
Candy: But then you add on those other features that maybe that you would normally include, that could be stuff like SEO, or it could be writing or things like that, that again, you might normally include. You don’t necessarily have to reduce your hourly rate, you’re just re-packaging things to make them more affordable for more people.
Lee: Awesome. A little story for you. Back during the 2008 recession, back when I had a full head of hair, I’m lying, I was actually bald then as well, we had this amazing client, and what they did with us is asked us for our expertise, and we delivered all of these design assets for them every single month, and they were super happy. It got to 2000 and… The end of 2008, and they got a new financial director in, who started calling us up regularly, questioning our invoices. It got to the extent where what was a 10k a month job eventually went down to a 1k a month job, but the kicker here is, is we were still doing the same amount of work, if not more. They were essentially slowly bullying us on price, and we were just saying yes because we were desperate for the money and having to find more income from more places. Once it got down to like a grand a month, we kind of realized that the math no longer worked, and we just needed to fire client, that they were completely toxic, but it took us an awfully long time. Clearly, what we were doing there is not re-packaging or anything, we were just giving in and dropping our prices out of desperation, any kind of insights into that?
Candy: Yeah, it happens so often, especially if there’s a change over in who you’re working with, because you have this trusted relationship with somebody and then somebody new comes in, and a lot of times their job is to try to cut costs or to try to make higher profits of that business. So they’re just going around bullying everyone into reducing their prices or giving more for less. And I think when you think about lowering prices, it’s important to try, if you can, to just repackage and not actually do the same amount of work for less money. There’s other ways that you can lower prices, you could outsource, you could start white-labeling, where then maybe you’re doing something for less money, but then you don’t have to do the work of getting those clients. That’s another strategy of where you’re essentially pricing the actual deliverable a little bit lower, but the work that you have to do, the project management and the sales work is going down, so in the end, again, you’re actually not doing a lot more hours for less money, it’s about shaking out to be the same.
Candy: So I think that’s a good plan, is just to try to rethink how you’re offering things and what could be cut or what could be optional, and then also thinking about firing clients that are sucking you dry. So even though it seems scary to get rid of a client when things are about to get rough, some clients are not worth it, and you could be doing two clients for the amount of time you’re spending on one client, so taking a hard look at that client list and thinking, is this worth it, is this an enjoyable to work with and do we wanna keep doing this, or could we actually go out and try to find two people to replace this person and then gently let them go. So yeah, it’s you wanna get more customers, but you don’t wanna get a bunch of bad customers because that will slowly kill your business, whether it’s bad or good economic times.
Lee: Yeah, thank you. Now, in season 43, we started something, which was one small thing, and Nicole and I looked at a whole range of subjects and gave people one small thing that they could do to start making a change in their business. So let’s wrap up with what’s the one small thing we could do as a result of what we’ve learned in this episode that will have a positive impact on our lives.
Candy: I think the first thing to do is just start working on a budget today. It’s something easy to do, it’s something most people don’t do, and we have made a really fun budgeting spreadsheet, so it’s not just a horrible looking Excel file, there’s some exciting looking graphics in there. And it’s self-adding, so you don’t have to do any math or fancy calculations, but, yeah, just starting to look at that budget and see how much money you really need to make and see how much money you’re really spending, those are two things that are relatively easy to do, but most of us don’t like spending a lot of time in spreadsheets, but sit in front of your TV with your laptop and just kinda do it while you’re watching a show or something, and you’ll be able to get it done, and then you’ll be way better prepared for if something starts going wrong in the economy, you’ll already have had some of that hard work done.
Lee: Folks, you can find an amazing spreadsheet from Candy that will allow you to go through that budget, make it look pretty, but there is something amazing about having it on paper. Also, there’s a couple of resources that you can check out over in the show notes on trailblazer.fm, and that’s two older episodes now of mine back from 2020. One’s called managing your personal finances, and one’s called managing your agency finances. So take what you’ve learned in this episode, go ahead and listen to those as well, and prepare for the worst, but hope for the best. Candy, you are a legend. I can’t wait for the next episode as we rock and roll, looking into pricing for our web design services. We’ll see you in the next episode.
Candy: Thanks so much, Lee, this was so much fun.