How do I cope with my small business having an awful year?
October 8, 2019 12:19 AM   Subscribe

I run a small business and, well... business has been bad this year. How do I manage this emotionally/logistically?

I own and run a small consulting business where I'm the only f/t employee (apart from a few contractors). 2019's on track to be a really bad year, businesswise - expecting to only gross about $70,000 in sales vs $160,000 or so in 2018.

My company lost its two keystone clients this year when one decided to do work in-house and another restructured their business. I'm left with a smaller amount of clients paying for smaller projects, none of whom seem to have budget/need to engage me for anything more expensive. I'm doing a ton of client development and reachout work, but this stuff takes time. My first kid was also born this year, and I made the conscious choice to take six weeks off for paternity leave. That meant leaving a decent amount of extra income on the table.

The good news is that my spouse has a F/T job and we're able to pay the bills/rent/childcare with some belt tightening and extra credit card debt. We live in an expensive city where every dollar counts. Some client income is coming in, but it's all going towards paying for necessary business expenses. At this point, my personal bank account is down to its last $200 and my company's business bank account is just a $2k emergency fund.

The bad news is that I haven't been able to write myself a paycheck in over six weeks, I don't expect to be about to write myself a paycheck for another two weeks, and my mental health is suffering as a result.

To put it bluntly, I'm used to my business making enough for me to be able to draw a paycheck and I don't know how to deal with that not being the case.

Any advice?
posted by anonymous to Work & Money (6 answers total) 3 users marked this as a favorite
Oh man, I've been there and through no fault of my own. Didn't get paid invoices, then lost steady clients and just assumed contracts came in when they didn't.

Besides cutting everything out of your budget that's not necessary to appear in business, what's your situation with your contractors? Can you work without them? It sucks but you may have to cut them and take on extra hours, you're not in a good financial position. I had a year of savings and was still stressed out, it shows in getting new clients.

You don't say what you do but can you get any job in your field? A bad decision I made was not just getting any job and thinking the next contract would come, My sales expenses are high so I couldn't say no to expensive dinners and things. I think if I could have done some "gig economy" job that was flexible enough to do when I wasn't doing a sale/looking for work it would have helped me at least not sit there and think about the situation I was in and I would have income.

Also, don't forget about you. Are there things you enjoy that are cheap? I would go out to eat and do certain things because if I stayed at home and didn't spend money I was going crazy. Maybe childcare can take a backseat as a cost while you wind down the contracts?

I guess the point being make sure your contractors know what situation you're in and not completely surprise them, you'd be surprised how much "free" work you'd get from good employees who want to keep things going versus saying you just can't make payroll this week, whoops.

Again -- very hard to say what your situation is but I lived in downtown Manhattan and all my clients were there. I did not physically have to be in the office all the time but they wanted me in Manhattan. I made due by moving out of my crazy expensive apartment, in with family across the country and was ready to take flights for next day / last minute in person meetings.

The key really is not to blame yourself, you haven't mentioned it but losing contracts happens for a ton of reasons.
posted by geoff. at 3:17 AM on October 8, 2019

It seems like the biggest issue here is the emotional piece, the fact that maybe a big part of your self-worth or sense of identity comes from the monetary success of your business. That's certainly common and reinforced by our culture, so no shame there! But you can see that it's detrimental when you have a slower year (both for reasons outside of your control and because you made value-based choices like taking a paternity leave).

Can you reframe your thoughts about success? Obviously that's not an overnight process, but you are clearly working hard and sometimes there's just a slow grinding period before things shift up again. You are putting in the work and it will hopefully pay off in the future, but it's not as if the lack of income is due to lack of effort.

Maybe you can make a "ta-dah" list (stupid name but it can be helpful) -- a list of everything you have been doing in the last month/6 months/whatever. Like, "Reached out for contact with all my past clients" or "Attended such-and-such training" or "Researched such-and-such business thing." Just to show yourself that you have been active.
posted by Bebo at 6:00 AM on October 8, 2019 [2 favorites]

You are more than your bank account and business. You are a worthwhile human even if you make 0.00 this year. Your family needs you as so much more than a breadwinner, especially right now. What you are describing has happened to me and every other person who has freelanced, a group with many very intelligent and "successful" people among us
posted by shaademaan at 6:00 AM on October 8, 2019 [2 favorites]

I can speak to the emotional part. I have a small business and have had some slower years (BTW, $70k is definitely not "awful"). Clients come and go, contracts come and go. It's hard sometimes. Losing clients is particularly difficult. But I remind myself that everything goes in cycles: the sun, the moon, the tides, the seasons, and so why should I be exempt? Trust yourself, have faith in yourself, be part of the ebb and flow, accept the cycle as part of having your own business - because it is. No blame, no shame, just the way the world works. And maybe take a step back to embrace and celebrate the understanding that one of the reasons your income is lower this year is because you took time off to be with your child. Being able to do that is amazing, and it's definitely in the plus column for the year no matter what the dollar figures say. There are non-monetary benefits to being self-employed, and having six weeks with your new baby is absolutely one of them. Congratulations and I wish you the very best.
posted by WotSwann at 6:15 AM on October 8, 2019 [3 favorites]

But isn't this what a line of credit is for? Expanded advertising, funding between payment dates, investment in new talent or equipment?

From Investopedia:
Business Line of Credit

Businesses use these to borrow on an as-needed basis instead of taking out a fixed loan. The financial institution extending the LOC evaluates the market value, profitability, and risk taken on by the business and extends a line of credit based on that evaluation. The LOC may be unsecured or secured, depending on the size of the line of credit requested and the evaluation results. As with almost all LOCs, the interest rate is variable.
I'm not a small business expert, but I think you're personalizing something that is so commonplace there are numerous public-private partnerships available to make it easier for small businesses to get loans. Like the Federal government's Small Business Association?
posted by Violet Blue at 3:14 PM on October 8, 2019

Hey, anonymous, I feel you. I've been in a similar position - a small business I co-ran with multiple years of steady growth, growing numbers of clients/employees just totally tanked last year. We had to shut it down.

I'm not necessarily in a good position to offer much practical advice, other than keep an eye on your ongoing tax responsibilities especially around credit/loans you already have or expect to take out. Violet Blue makes a good point above, but god help you if you ever actually pay down even a minor line of credit as part of closing down the business, as it's going to have tax implications you're going to need to plan in advance for. That I *can* speak to.

But in terms of possible emotional support—owning and running a business isn't, like, a moral good. Does that make sense? It impressed my dad, and it seemed to impress my friends and the rest of my family, and it led to me being able to do interesting work on projects that would otherwise have been out of my reach as an individual but like, it wasn't inherently better or cooler or more heroic or more indicative of my worth as a person than any other way to earn a living. It took me a long time to realize that, but we periodically teetered on the edge of shutting down over the course of the whole life of the business, so I'd happily come to this epiphany several years before we actually shut down. When our business failed, it wasn't because *I* had failed, or really that any of us had failed, not really. So it goes, you know? Circumstances change.

Finally, consider that all of the responsibilities that you took on as part of running your own business will likely make you a very attractive candidate for related full-time positions when you're ready to re-enter the market. You're a practitioner but also have experience managing contractors, payroll, managing a budget, working directly with clients, etc etc. If recruiters or potential employers ask you why you're (back) on the job market, you don't even have to say that you folded, but that you reprioritized after starting a family.
posted by lousywiththespirit at 4:15 PM on October 9, 2019 [1 favorite]

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