New Contractor Downturn
According to a new survey from Contracting Scout yesterday, a new contractor downturn could wipe out half of all contractors.
It seems that 48% of all contractors have less than three months money put aside for a rainy day. As experienced contractors know, rainy days always come once a decade or so.
In a downturn contract gaps can be more tham that.
There was a severe downturn in the early nineties. Pundits said that IT contracting was over. There was another one after the dotcom boom and Y2K in the early Noughties.
Then here was the credit crunch of 2007/8.
New Contractor Downturn Due Soon
It is 8 years since the last contractor downturn.
New contractors may be foolish enough to think there won’t be another one – but there will.
Even worse is the news that 15% of all contractors only have a month’s money set aside.
Worse than that is that 7% of contractors have no money at all set aside.
So, that means that 22% of coutractors or 2-in-9 have a month’s money or less set aside.
Contracting a Risky Business
Contractors are risk takers by nature. Contracting is a risky profession.
Hwever, almost half of them are doing it without much of a safetly net or no safety net at all.
When a downturn comes, contractors are not out for weeks but for months.
Even three months money can go just like that.
Out of Date Contracting Skills
Some never manage to get back on the roundabout at all if their skills are out of date.
Usually, in a downturn, it is those with newer skills who are first to get back on he roundabout. Indeed, they often take on many new contractors, as permies with the new skills are taken on before existing contractors with old skills.
Often, when a downturn comes to an end companies start those projects they had been holding back. These will use the new skills.
Of course, contractors can insure themselves for longer periods out of work.
However, most of them don’t.
They think it is a waste of money.
Then, when it hapens, they wish that they had taken out the insurance.
Being out of work in a downturn, when the money is running out, can be a really miserable expeience for contractors.
Unemployed Contractor Stories
You only have to read about the experiences of contractors previously in our Unemployed Contractor Stories.
Such tales as “Champagne, Jets, Big Hotels and Girlfriend Gone”. There’s “House Gone and 100 Grand in Debt”.
Then there’s “Porsche Gone, Danish Model Gone, Shares Gone” or “Single Mother Contractor Facing Bankruptcy”.
Yet, many don’t see it coming.
New contractors should take a look at those. Indeed any contractor with less thant three months’ money set aside should take a look too.
Any new contractor downturn could wipe them out completely.
They could be adding their harrowing stories to our Unemployed Contractors section.
Do any of them know what it is like to wake up screaming in he middle of the night when their money is being used up and no more is coming in?
Then they start using the money that they have put aside for tax.
Well, to be forewarned is to be forearmed.
Six Months Contract Money
Contractors should have a minimum of six months of contract money put aside for a rainy day as a very minimum.
They should also make sure that hey have the relevant insurance against being taken seriously ill or being out of work for a long period of time.
Contractors complain that they don’t get the perks that permanent members of staff get like sick pay or holiday pay.
That’s not quite correct. Their limited companies could provide this to them – but most don’t.
Don’t be caught out by any new contractor downturn.
There is one due pretty soon.
Here’s mroe details of the survey Contract Gaps – How Contractors Deal Wih Them.