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Comment by jamestimmins | Hacker News Reader

Things that keep me up at night as a software contractor/freelancer: if there's a recession, are contractors the first to go? One counter-argument is that contractors can be a cheaper way for companies to build products (since it's not full time), which might mean companies favor contractors. On the other hand, companies who are reluctant to lay off full-time staff may start by canceling contract relationships.

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I was a freelance dev contractor in the 2008/2009 financial crisis.

To what you said above, both can be true. But it depends on the client's business.

I got completely crushed last time. But my clients were primarily in travel and fashion/lifestyle which both got hit hard early. And I was trying to bootstrap a social media startup at the time, which was also in travel. So I got destroyed.

Typically agencies and freelancers are the first to feel a recession. Vendors are more expendable than W-2 employees so contracts get stalled out or cancelled as soon as the warning signs hit the board room.

However... I've known of some people who actually did quite well last time around. Generally they were offering lower rates than the competition and specialized in maintaining software that was essential to recession-proof businesses (like entertainment, education, government etc). They had long-term contracts where they were essential to these businesses, and they lowered their rates to be competitive. This was eventually how I recovered as well.

Basically my advice is - prepare to shift from quality to quantity for a bit, diversify your client portfolio and put effort into building long term clients where you're essential.

"diversify your client portfolio"

This is a really interesting thought that I hadn't considered. I always hear to diversify your investment portfolio, but the thought of diversifying your client list is fascinating. It makes a lot of sense though.

Honestly "diversify" is not something I had ever considered before the last recession, and it runs contrary to most popular advice in consulting around finding a niche, but it becomes very apparent after you've weathered the ups and downs of the consulting business over a long time period.

If you look at any of the major consulting firms (ex: Accenture) that have lasted decades, you'll see that they have their fingers in many different unrelated areas and industries. "Niche" in the short term is a great way to build up clients, but stick narrowly to a niche over too long a time scale, and it becomes an anchor.

Ultimately yes, as a contractor your continued employment in financially difficult times is going to be a hard sell. Of course, you could always take a permanent position for a time if that would give you more of a sense of security. Or, you could fall back on the additional savings you've been able to make as a contractor, that higher rem being the benefit of the hedge you were making in the first place.

That said, I've seen companies shed permies over contractors in difficult times, because if you form the view that said difficult times will stick around for a while, the permies look worse as aliability/drain on your projections than having contractors which, although they are higher cost, can be shed trivially. Depends on location though, areas with stronger protections against letting go of permanent employees are the ones where organisations see those same permies as more of a long-term liability. In right-to-work states, for example, it's just as easy to shed either group.

I would assume contractors are first to go. Work moves in house. In house staff gets cut. The remaining staff gets to work on what the contractor did and what the employees that left did. The company is not beholden to contractors as much as they are to their left over employees. Everybody has got to pay bill. The company will usually look out for their employees.

A company will usually look out for those generating the most value. Which is the point of a company in the first place.

You cannot assume this to always be true. The company could have a directive from C-levels to cut all contractors plus 10% of staff and retain the rest. You never know. Sometimes there are competing interests that effectively "tie the hands" of managers to make the most logical choice.

It's more about budgets and survival politics. The people who are setting the budgets have no idea who is generating most value.

That's always what I've been told. This isn't apple to apples, but I've worked as a government contractor for the past 15 years. In my experience, when money starts to dry up, sub-contractors are the first to go, but sub-contractors who are particularly important get offered positions by the prime contractor. I've also seen across the board pay cuts go out rather than people getting cut, but that rarely ends well (as anyone who knows their worth will immediately start looking elsewhere).

In my experience, contracting has been a leading indicator with both contraction and expansion. Contractors get cut before full-time, but when things are still shaky later, contractors get brought on first before the company is willing to increase full-time headcount.

I got crushed in 2008-2010 when I was freelancer. There simply was no budget for anything in the companies I had worked with.

I am sure there is some business angle for freelancers to do well in a recession but I can't come up with one.

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