A lot of freelancers don’t budget for business disaster impacts. But you can’t run your business successfully if you are the keeper of all the knowledge at all times. Getting yourself sorted and planning for disaster impacts is not fatalistic. In fact, I believe it’s a good exercise in making sure that if you want to walk away from your freelance business for any reason, you can. Cleaning up your business house and preparing for disaster also tends to get you taken more seriously. For example, I write contingency plans for my clients and they have a much better time appeasing boards about risky ideas as a result. Or they tend to feel more confident about what is happening generally. You also feel better when you know that if you have an accident or if your kid gets sick in a major way, you know exactly how to handle the business side of things better.

This is part of a larger series on contingency planning. But before we dive back into that, there are a couple of things you need to get organised to meet business disaster impacts head on

Set it up for success with automation

I don’t know if this should be news but…disaster impacts are stressful. The more stressed you are, the more you drop the ball. Asking someone in the future to take over suspending or even halting business with everything inside your head isn’t fair.

That makes proper processes like automation essential.

If you’re not in a place where your systems (project management, tax, accounting record collection, client contact etc) are not automated, the first phase of using a freelance contingency plan should be to automate where possible. Honestly, if you are still messing about with your finances on an Excel, stop it! take yourself seriously and invest in properly automating your freelance business.

I know it takes time to break old habits but you should stage your transition. Reinvest with every client you complete by obtaining a new software is a great way to get your automation sorted. And that goes for your general working life as well as contingency planning.

Look for the opportunity to update each part of your business every 3 to 6 months until you are no longer working out of a shoebox or Excel. It’s not only great contingency plan practice, but also good for your freelance business, too.

This includes using the following:

  • A password keeping software (or at the very minimum, a list of plugins and software used and their login details)
  • An appropriate accounting software (e.g. Rounded, Xero, MYOB etc)
  • ATO debt management (e.g. MyGov, HNRY or clear log in Excel)
  • Accessible Superannuation in one spot (e.g. integrating all your super on MyGov, a consolidated super account, or somewhere like GigSuper)
  • Online banking (preferably a bank account that is solely for the purpose of your business)
  • Project management for your clients (e.g. on communication on Slack, project management in Asana, time tracking in Harvest or Rounded etc)
  • DropBox or similar cloud-based application for file keeping
  • An appointment scheduling app and instructions on how to turn it off (e.g. Acuity, Calendly etc.) Incidentally, I use people’s inability to use the link as a litmus test. If they keep trying to fire into email to book me and ignore the link, they are not for me
  • Contact forms on your website (and instructions on how to turn it off)
  • Insurance or an account that you send money to every single month that will cover the costs insurance normally would.

And extend this to anything else that helps reduces the drag and makes your business disaster impacts easier to manage through automation.

Save money to cover costs

No freelance contingency plan is worth its salt without funding to carry it out. Get into the habit of pulling money aside to cover your butt. And charge rates that allow you to do so.

If you are a regular saver, this won’t be an issue for you. However, a lot of freelancers don’t live with a financial buffer in their account. I urge you to change this. And please remember that if you use the extra money you pay off your mortgage or in a term deposit as this buffer, you also need to be able to access it. Most people don’t know they need a contingency plan until it is time to make use of it. Don’t lock up all your money and leave your family fighting to get it out for months on end.

Depending on your situation, you may find $2K to 10K is required. I split the difference and always make sure $5K is there for issues.

Why does it swing so widely? Your costs will determine it.

My suggestion to working out much financial buffer you might need should include the following:

  • Knowing what your outgoings are on average every quarter. This is yet another vote for using accounting packages as they include this info. But, if you think about a 3-month recovery, having money to cover whatever things you might need for your person to look after your business and for you to do your job on your return is easier than cancelling everything and potentially paying a higher price to re-join
  • Any payouts or fees for freelance friends taking over your clients, contractors you need to pay or a VA that is helping out. This includes any extra hours they might need to use to help in support of your plan
  • Extra funds for help from accountants and lawyers. You will need it and these professionals are not cheap.
  • Web developer money. Paying whoever does your website to update info if your person is non-technical is a much better idea than walking out of hospital to a deleted website.
  • Covering the cost of being out of work. Even if you have income protection, not all events are covered. And pay outs vary from 60 to 80% of your income. Plus, they are insurance companies. That means there can be delays in payments, and there is a burden of proof that is attached to accessing insurance that takes time to sort through. That means there will be money needed before insurance kicks in.

Also, one thing that most healthy, able-bodied people don’t realise is that illness, injury and disability can be quite expensive. Having funds available for doctors appointments, medicines and all kinds of supports can make all the difference. And even the best health insurance won’t cover the whole lot.

And write out your contingency budget. It will come at the back of the document. But always make sure the funds are front and centre with your planning processes.

Map out the problems you might encounter

For the purpose of this exercise, I am focusing on building a freelance contingency plan that helps you if you become sick or injured. However, there are a lot of ways your business might be impacted by problems. Knowing what your business disaster impacts will inform what action you take to reduce the risk and face the challenges.

For example, the sorts of issues you might need to map out include:

  • What happens if you get sick or injured? Or die?
  • If you are a primary carer, what would it look like if your dependents or other family members were sick, injured or killed?
  • What do you do in the event of a PR or social media disaster?
  • What happens if you are hacked? Or your laptop is stolen? Sensitive information is breached?
  • What happens if your coworking joint or house burns down?
  • Have you got a COVID safe plan for events or the things you do?
  • If a natural disaster or COVID event cancels what you have planned, how do you sort that out?
  • What do you do if you are sued?

Identifying the major business risks for you will start you thinking about how that works. Take the time to write down the bullet points that pop up. Maybe that a random thought today. But tomorrow, it might be the core of a great risk plan. But always keep it centred on finding universal answers.

For example, it doesn’t matter if you have to walk away for cancer treatment or your house sliding down a hill. The work processes, client notifications and a lot of the detail will be the same.

Once you start thinking about business disaster impacts, it might get a little scary. But it also tend to make you grow up a bit. I find people that don’t plan for the future generally leave their families with the most crap to sort through. And it’s not pleasant. Take it from someone who (on a few occasions now) has had to put their business on pause due to disability and health impacts. How you plan for your personal business disasters will directly influence how stressed you are in recovery. AND how much extra pain the people around you have to carry.

Your freelance business contingency plan is different to mine. My biggest impediment to success is disability and chronic illness. Yours might be that you do business from a war-torn country. Or having to navigate yet another ferocious fire season. Or that you can’t travel for work during COVID or if the hospitality sector falls over, so do you. Or because your kid has disabilities and that means they need a load of surgeries soon.

Mapping out what could scuttle your business and including it in your planning is incredibly important. As a fellow planner I met says, “Plan so you don’t have to activate it. But can breathe if you do.”

Let’s double back from business disaster impacts to contingency planning and see where to next, shall we?


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