One of the questions that MyCake is asked on a regular basis is how are creative entrepreneurs weathering the recession? So we dedicated the recent Benchmark Bulletin 5 to answering that question, making comparisons between the 2008-9 (referred to as 2009) and the 2009-10 (2010 from here on) to see if we could spot trends in how creative businesses are reacting to the recessionary climate and to offer suggestions on how to weather the storm better.
In the first of two extracts from the bulletin we look at income and the price of time because these have the most direct and obvious connection to the actual (and potential) income of your business.
The data tells us that the headline here is that creative entrepreneurs are seeing an average of a 30% drop in income and are also seeing a drop in the market price for their time. This means that they are working more hours but achieving less income than prior to the recession.
Let’s look at this issue in a bit more detail, first overall income. The average income across all MyCake users has dropped from £105,173 in 2009 to £74,547 to 2010 – this is the thirty percent drop in income mentioned above.
Second the average hourly rate is stable at £36/hr (or just shy of £300 a day) the top quartile have seen a reduction in their rates by up to 10%. For a little more detail here’s a comparison of the 2009 and 2010 hourly rate bands:
Actually what strikes us first is how little is changing from 2009 to 2010. The only noticeable change is in the slight decrease in the £50-75/hr crowd and given that the slack is being picked up by the <£50/hr range we can reasonably assume that there is a slight reduction in rates for this clutch of businesses. Perhaps this is not surprising … the shift being the middle ground … the folks who are already keenly priced are not increasing their rates, those who are expensive are not dropping them (but perhaps doing more unbilled or extra time) but those in the middle are being forced to jump one way or the other and they can’t see an opportunity to put rates up so they put them down with a view to being more competitive.
What does this data mean?
Anecdotally the comments have been that people are spending more time winning the business than they used to. This impacts the overall capacity of the sales team if every job takes longer to win. In addition there is a greater chance of being undercut on a tender by younger firms or individuals who are hungry for the work and trading on price. Whilst previously clients might not have felt they had to go with the lowest price offer for the work they are more susceptible to this in the current climate and are willing to break long term relationships in favour of a lower price.
Of course the counter argument is that in tough times you want to make sure you have working relationships you can rely on to deliver the goods. So if your products and services to the clients are critical then should they really be risking them? Here you can negotiate a way forward that ensures stability of supply whilst being as keen on price as possible (don’t be tempted to under price as this is not sustainable. It makes it harder to stay in business and can prove to be a very false economy).
In the next post we will take a look at the changes in cost base. The bulletin also includes more detailed analysis for product and service based businesses, along with suggestions for recession busting tactics for your business. You can download the full MyCake Benchmark Bulletin 5 here