What To Do If You're Made Redundant
So you've been laid off - now what? Here are our tips for coping with redundancy, from planning your finances to starting your own business in a recession.
October 11th, 2010 by Becky Turner
What To Do If You're Made Redundant |
For many, the idea of being made redundant is a hellish one. And it's becoming a stark reality for millions of people around the world amid the worst economic recession in living memory.
But for some, redundancy can be a good thing, too. Here's a positive article on redundancy about Robyn Jones, who, after being laid off in 1991 founded her own catering business. Today it is Britain's leading caterer, turning over £75 million a year. She notes how her fateful redundancy gave her the shove she needed to start her own venture which made her a multi-millionaire. Yup, redundancy can be very good for some.
So where do you stand? If you were laid off tomorrow, would it be a total nightmare - or something you've been secretly dreaming of for years?
5 Tips for Coping with Redundancy
First of all, it's important to realize that it's not your fault. There is nothing wrong with you just because the company you work for could no longer afford to pay you. Don't let it knock your self confidence or give you an excuse to drink heavily or start smoking - look after yourself with all your usual exercise and healthy eating habits. Being made redundant is not a cue to dig a hole for yourself. It's time for an exciting fresh start.
Now here is the first and possibly the biggest challenge. Whether you start up your own business venture or flog yourself on the open job market, there is a good chance you won't have any income during the coming weeks and months. So here are a few short term tips to smooth over your finances and prevent any debt disasters.
- Calculate your redundancy pay. In the UK, redundancy pay is given to anyone who has been with their employer for two years or more; typically receiving one week's pay for every year of service. However, many young people change jobs so frequently now that redundancy pay is given far less than it was just 10 years ago.
- Claim your state benefits. If you're actively looking for new work, you can claim an unemployment benefit to help cover your bills. This is especially worth doing if money is tight and you have no savings. However, if you're starting a business, you technically won't be entitled to any unemployment pay as you're now self-employed.
- Tell your bank. Although you're not legally obligated to tell your bank you're unemployed, it could very well work in your favor. If you have expensive loan or mortgage repayments, they can reduce your repayments for a few months to interest only, which ultimately means you get to keep your house during this fiscally ugly period.
- Have an emergency fund. This isn't something you can arrange in hindsight. Disturbingly, a third of people only have enough savings to last them 11 days should their salary be cut off. If you plan to survive long enough to get another job or start your own business, you really need at least three month's worth of money tucked away.
- Plan for the future. It's decision time. With no job, you have the total freedom to decide what you really want out of your career. Statistics show that during times of recession, more people go into adult education to retrain in a new specialist area. It's also the ideal time to start a business doing something you truly enjoy - rather then letting this pipe dream go permanently unfulfilled for life.
Why Start a Business During a Recession?
Believe it or not, a recession may actually be the best time to start a business. Many world-famous companies were launched during tough economic times - including Disney and Microsoft.
When times are hard, people search for value. Retailers address this need by downsizing the things people always buy, such as smaller drink bottles or vacation packages lasting five days instead of seven.
Another way to make more money during a recession is to "value engineer" your products so they are cheaper to produce. This was demonstrated by one UK supermarket who sold unripe fruit. They saved time and money in the production process simply by allowing the fruit to ripen at home.
Meanwhile, some business types thrive when the economy stalls - such as job agencies, liquidators and business recovery specialists. So think hard about the kind of product or service you plan to offer and how it will be impacted by long term cutbacks or slow economic growth.
I've been surprised by the ability of my own businesses to make money during the recession. I launched my first content-based website in 2008 after the economic downturn began - and yet people consistently buy the affiliate products I sell (like books and MP3s) via my websites. I think this boils down to two things: selling "affordable treats", and having a large global audience by making my business internet-driven.
Also remember that some things in life are essential - eg we all have to pay taxes and so accountants will never go out of fashion. As long as you provide a quality service at competitive rates, you can be recession-proof.
5 Steps to Starting Your Own Business
With that in mind, here are five smart tips to get your own business started quickly and efficiently after being made redundant.
- Identify your business niche. Choose a model with low start-up costs, such as a passive income website. While you can justify capital investment, it is safer to pick a niche with low overheads that you can run from home (at least initially). If you can find a seed investor - great. But don't count on it during times of recession.
- Research your market. Identify your direct competition and figure out their strengths and weaknesses, plus what you can do better. Research market trends and find out what need you can fulfil. Try not to view everything through rose-tinted glasses though; there will be benefits and risks to your business model and your job is to weigh them out and make sure there is still a healthy profit potential.
- Write a business plan. What are you offering? Who is your target market? What makes you better than the competition? How will you market your business? What experience do you have to make it work? Even if you have no investors, you need a solid business plan just for yourself, so you know exactly what your business goals are and how you'll achieve them.
- Market your business. Generally, local businesses can focus on offline marketing (such as newspapers and community magazines) while national or international businesses can do more online marketing (such as Google AdWords and affiliate partnerships). Make the effort to network with new customers as well as professionals who can help your business grow through joint ventures.
- Never stop learning. The moment you stop learning new ways to improve your business, you risk being taken out by the competition. Always try to stay at the forefront of your niche whether it's knowing about the latest industry news or understanding your target demographic better. Staying ahead of the game will give you the best chance of being recognized as a first class provider.
Final Thoughts
Unexpected redundancy can be a bitch - but it certainly isn't the end of the world if you make the best of your new circumstances. The biggest threat to your survival is going a few months without your regular pay; fortunately this is something you can protect against, either by saving a little every week now, or taking out income protection insurance.
But what will you do if you're made redundant - long term? That's the question. Will you head back out into the job market with your updated CV? Or will you take your career into your own hands and explore the potential of more freedom, more flexibility and more profit?
If you have the brains and the motivation to lead your own career destiny, going self-employed after you're made redundant is a no brainer...
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