Economically, ******a recession is “a significant, widespread, and prolonged downturn in economic activity” and when there is a recession, prices usually increase and businesses have less money. Most recessions only last a few months, although some may take years to turn around. In 2022 we’ve seen prices rise globally but judging by the info circulating, 2023 seems to be the year for the next recession so we thought we’d teach you what we know about getting through difficult times as a freelancer.
Companies impacted by a recession will experience or have experienced a decline in business and when this happens, generally, there are major staff layoffs and the tendency is to hire freelancers to outsource tasks in an attempt to lower operating costs, which is great news for you.
Profits decrease
Your client's business isn’t generating sales because consumers are careful about spending. They'll need to cut costs and might decide to make employees redundant, to not invest in new products, and cut overheads to offset the loss of revenue.
Less credit
Increasing interest rates and tighter lending requirements affect businesses and also consumers.
Quality declines
Because manufacturing slows down and bills go unpaid, companies look for ways to cut costs and improve results. Some opt for a temporary reduction in quality to keep the business running.
“In general, prices tend to fall during a recession. This is because people are buying less, and businesses are selling less. However, some items may become more expensive during a recession. For example, food and gas prices may increase if there’s an increase in demand or a decrease in supply.”
They answer probably every question in the book, but since we’re here for the pricing, we just want to give you an idea of how this recession - which is unlikely to be like any other one in past - will impact outside of your work.
Shopping: people will cut down spending on many non-essential things but they might instead end up spending more for prime necessity products or services, many of which will see price increases due to the global political and economical situation.
Buying and renting a home: while as a rule of thumb buying real estate could be a great investment during a recession, housing - rental or for sale - might only get cheaper in markets that are badly hit by the recession.
Travel: Travel is rather unpredictable and while the industry is expected to keep on growing, it might not reach pre-pandemic growth.
Axel Hefer, CEO of Trivago sums it up well: “With a recession looming, consumers will likely adapt their travel in three ways: shorten the length of their trips, select cheaper destinations and use more price comparison platforms…we [already] saw these shifts in consumer behavior in Western Europe as the recession is expected to hit harder there than in the U.S.”
Working and living in a moment of recession means you might be tempted to do is to lower your prices but let’s see what tips you can concretely action, to recession-proof your business:
