Risk can be scary, but the best way to address risk in your business is to name it and start taking action. As a freelancers, all are within your power to address (even if you can’t completely eliminate them) and the answers are usually more simple than we think.
This page is an overview of the most common risks to our businesses.
1. Cash Flows
Likely the most common risk for freelancers, this is when your business either doesn’t have enough cash coming in, or it’s held up because of slow client payment or processing issues.
The answers to this issue are commonly simply bringing on more clients or establishing healthier payment standards from the contracting phase.
Action steps
Get your rates up and your payment terms on point to keep cash flowing regularly
2. Niche/Market
Every market has ups and downs. Our freelance businesses can feel them just like an employed person can. But we should be getting ahead of them by talking to other people in our field and leveraging our agility as one-person-businesses to branch out and diversify when we see danger clearly coming.
Action steps
Addressing niche and market issues starts with awareness. You should be talking not just with other freelancers, but also professionals of all kinds within your market to stay aware of threats (and opportunities) in your field. Check out these resources to get started.
3. Pipeline
A healthy business requires a healthy pipeline. The benefits and drawbacks can be delayed, but if you want sustainability in your freelance business, it starts here.
Action steps
Prioritize pipeline health and make it part of your schedule. Start with these resources.
4. Legal Risk
This one is just part of doing business, and for most of us, isn’t as big as it might feel. It ranges from what you produce as a freelancer to the presence you create as a business. The nice thing about this though, is that addressing it can go a long way in proving your reliability to your market.
Action steps
Most of us can get by with errors and omissions insurance, but depending on the responsibilities of your clients, where you function in your business, and the field you’re in, you could need more.
Talk to other freelancers in your field for basic guidelines. You’ll also want to read up on basic requirements in your home jurisdiction and the places you’re doing business.
5. Client Proportion
Is one of your clients making up more than 50% of your income? If so, you’re in danger. It’s time to start bringing on more work and diversify so you aren’t in a situation that’s actually worse than employment.
Action steps
Diversification is your friend
6. Overwork
Are you asking too much of yourself as an employee? If so, other areas of your life might be suffering. It might be time to raise your rates so you can work less without feeling it financially.
Action steps
Be the best employer you’ve ever had
7. Burnout
Do you feel emotionally and intellectually cut off from your work? This isn’t sustainable and you will break eventually. It’s likely time to look for ways to build a better work experience through options like offering a new service, changing niches, or taking on a new skill.
Action steps
Intentionality and honesty are key
10. Platform Dependence
AKA digital sharecropping, this is any situation where an integral part of your business is overly-reliant on one platform. You can check for it by asking “What would happen if “X” platform shut down or went out of business?” If any answer gets too close to “my freelance business would be dead in the water”, you’re high risk in this area. Some examples I’ve seen include
- Marketing being 100% focused on Twitter or LinkedIn
- Your services being completely platform-specific like Instagram management or Shopify development
There’s degrees of this of course. Established platforms that have been around 10-20+ years might play a big role in your business but are much less likely to shut down unexpectedly, especially if you’ve seen them ride out a couple bumps. Also you can be overly dependent on one feature on a platform.
Action steps
Have a backup plan. It can simply be an idea of what you’d do if things fell apart, but know which way you want to head. But also, pull your data. Occasionally pull your downloads so that you have something to go back to (e.g. pulling your CRM records from your provider annually). Consider setting a day on your calendar. (We observe World Backup Day around here.)
11. Tech and IT
If your laptop disappeared tomorrow, what would you do? Tech risk exists for both hardware and software, and is probably more significant than you realize.
Action Steps
Keep backups of your most important equipment (tower, keyboard, mouse, cameras, etc.) and find a good backup source for your business data. Keep backups of little things like cords and adapters, and keep up with maintenance, updates, patches, and cybersecurity for your devices.
