The following results looks at comparisons of key data that provide insights into the effects of the credit crunch, anticipated earning for the coming year and general business optimism for the future.
2.1 Methodology
| Crunch Index | |
|---|---|
| Response | Index value |
| Business has dropped a lot | -2 |
| I’ve had to lower my rates | -1.5 |
| Business has slowed a bit | -1 |
| Not at all | 0 |
| What credit crunch? Things are better than ever | 2 |
| Optimism Index | |
|---|---|
| Response | Index value |
| Very pessimistic | -2 |
| Things will be hard but I’ll get through it | -1 |
| I don’t think much will be different | 0 |
| Actually, things are looking great | 2 |
| Anticipated Earnings Index | |
|---|---|
| Response | Index value |
| Down from last year | -2 |
| About the same | 0 |
| Up from last year | 2 |
| No idea | 0 |
By combining the raw data in different ways (using the mighty Excel Pivot Table), we uncover several interesting findings regarding the subjective experiences of respondents in the current financial climate.
We categorised survey responses using set of 3 indices, based on 3 of the more subjective questions in our survey:
- Crunch Index:
- How have you been affected by the credit crunch?
- Optimism Index:
- Generally, how optimistic are you for the future with regards to business?
- Anticipated Earnings Index:
- Compared with last year how do you anticipate your earnings for the coming year?
Each survey response to the 3 questions provides a value for the index based on the answer, and we averaged across all responses to get the overall index. The Index values assigned to each survey response are shown in the tables opposite.
2.2 Which Industries Feel Worst Affected?
Comparing Industry sector vs the 3 indices we see the results in Figure 2.2. (Those industries with fewer than 3% of the total responses have been excluded)
Figure 2.2: Industry Sector vs Crunch Effect, Anticipated Earnings and Optimism
It seems that my business might actually be benefiting from the current conditions, as consumers and marketing are shifting their attention to the internet and online marketing from traditional media.
Graphic Designers, and to a lesser extent Web Designers & Developers, felt less affected by the credit crunch than the other industries represented. This sentiment was also reflected in comparisons of general optimism and anticipated earnings for the coming year.
The recession has merely accelerated a number of existing trends in the media – fragmentation – the shift to digital, plummeting ad revenues (particularly in traditional media), escalating costs (again, hitting traditional forms of media most hard), and a growing emphasis on less discerning and skeptical (therefore less investigative) journalism.
- Anonymous
These quotes and others lead us to conclude that you feel that the efficiency of the web in promoting and communicating means that budgets for web-oriented projects has not reduced as much as for other kinds of work.
2.3 Are Small Businesses or Freelancers feeling the pinch more?
The chart comparing the business description ("How would you describe yourself") against the 3 indices can be seen in figure 2.3.
Figure 2.3: Self-described Business Type vs Crunch Effect, Anticipated Earnings and Optimism
I think small, agile independents like myself can adapt to changing economy quicker than larger organisations. The overall economic downturn is bound to manifest itself somewhere along the line, but if you’re independent and you can engage in more than one main type of revenue generation that will help.
Although the variations are fairly small, we see that small businesses consistently felt somewhat less affected by the credit crunch and were more optimistic about both their earnings this year and their prospects for the future. This could be because of the ability of slightly larger businesses to reduce their reliance on a limited number of key clients.
In particular, Contractors were most affected by the downturn and were least optimistic regarding the future and their anticipated earnings. This is supported by the anecdotal evidence of many of the IT Contractors who responded being the 'first out the door' when the project budgets of larger organizations are cut.
2.4 Does How Long you've been in Business have an Effect?
Figure 2.4 compares the age of survey respondents' businesses against the 3 indices.
Figure 2.3: Business Age vs Crunch Effect, Anticipated Earnings and Optimism
Perhaps surprisingly we see that more established businesses tended to be hit harder by the credit crunch and be less optimistic about the future, compared with younger businesses.
You need to be nimble in this climate and a solid reputation and good relationships really come into their own. I’m lucky in that I’ve been building that up over 7 years and have contacts in high places. I’m also working in a growth sector and have deep experience in it which puts me in better standing than some people.
This quote is slightly at odds with the overall higher levels of pessimism among older businesses. It's possible that these older businesses relate their current experiences to previous 'good times', so the contrast feels more pronounced.
2.5 Does it Matter how you Manage your Accounts?
Figure 2.5 compares how people manage their accounts against 2 indices: the Anticipated Earnings Index and Optimism Index.
Figure 2.5: Does it Matter how you Manage your Accounts?
The results would appear to indicate that the more people have knowledge and control over their business finances, the more optimistic they feel about the future. Those using online software were the most optimistic of all.
Those who don't manage their accounts, or relied purely on an accountant to do so, felt significantly less optimistic about the future.
2.6 Does the Size of your Clients' Organizations have an Effect?
Figure 2.6 compares the 3 indices against who works with the 2 extremes of client base: freelancers, and large clients with over 500 employees.
Figure 2.6: Does the size of clients' organizations have an effect?
We see that those who work at least part of the time with other freelancers have been less affected by the credit crunch and are more optimistic, and this also true of those who avoid working with large clients (of 500+ employees).
The market has developed two ways actually, on one side things have completely dried up, but on the other side new opportunities are emerging. I hardly know any freelancers that are without a job right now, but many employees of large IT-companies (and we are talking several thousands here in The Netherlands alone) are ‘benchsitting’ right now.
Conclusion
It's of course inadvisable to draw any direct causal relationships between the results above, but we can certainly say that the results suggest you are likely to feel less affected by the credit crunch, and be more optimistic, if you:
- Work in Graphic Design and Multimedia, or to a lesser degree in Web Development and Design.
- Structure yourself as a small business rather than a solo-worker.
- Have set up fairly recently.
- Use online software to manage your accounts.
Thank you to everyone who completed the survey.
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