The Freelancer Recession of 2024

Age has always been an important topic in freelance consulting. In earlier times, consultants were typically experienced professionals between the ages of 35 and 60. Hiring an external freelancer meant investing in quality and reliable results. These consultants were usually well-dressed and knew how to conduct themselves professionally in all situations.

OMG Honey, was that just you or .. is that the rotten smell of the Freelancer Market decaying?

Then the 2000s arrived, and the traditional image of consultants from the 1980s and 1990s began to change. As I mentioned in another post, dress codes and appearances started to become more casual during this period. But that wasn't the only shift.

Starting around 2014—a significant year in my view—the field of digital development consulting underwent substantial changes, continuing up to the second year of the COVID-19 pandemic.

New players entered the market: consultant brokers and small consultancies focused on supplying personnel. Many small consultancies emerged, often founded by 3-5 individuals with coding backgrounds. They formed companies where they offered their own expertise directly to clients, bypassing traditional middlemen. They earned better profits and hired others at competitive salaries while charging clients accordingly.

New, fresh freelancers

Over time, consultant brokers became more aggressive. Instead of targeting seasoned, high-quality consultants, they began to recruit younger consultants who lacked the experience typically needed for freelance consulting. I recall observing conversations between brokers and these young developers. The brokers promised high monthly incomes as freelancers, but the young professionals lacked understanding of business realities. They asked questions like:

• "I like my current workplace. I don't want to miss the Christmas parties." If that's worth accepting a significantly lower income, so be it.

• "Can you guarantee that I'll always have projects if I become an entrepreneur? Can you put that in the contract?"

• "I need a MacBook Pro with 32GB of memory. Can you provide that?"

  
  

Such questions indicated that these individuals needed more maturity and experience. The brokers saw that these junior developers performed well in projects but didn't assess whether they were truly ready to be consultants. Nevertheless, many young developers were converted into freelancers. They lacked negotiation skills, dressed very casually, didn't have proper professional etiquette, and were often anxious about various issues like economic downturns or client dissatisfaction.

When the COVID-19 pandemic emerged between January and March 2020, things changed temporarily. Consultant brokers feared their businesses would suffer, but the opposite happened. Many clients initiated or accelerated digital transformation projects, and demand for consultants increased significantly. Venture capital was plentiful, and even I received inquiries from investors looking for opportunities.

The market downturn of 2021

This favorable period lasted until the end of 2021, when the energy crisis began to impact the market and inflation started to rise. Contrary to what some believe, these issues didn't begin with the war in Ukraine; they had started about six months earlier.

The war in Ukraine exacerbated the situation, drawing more attention to inflation, which was becoming a serious concern. Central banks raised interest rates, leading venture capital firms to reduce lending and prompting large companies to cut spending as borrowing costs increased.

In the consulting market, the outcome was as I had anticipated. The junior freelance consultants found themselves without projects, as clients were unwilling to pay premium rates for less experienced professionals. Many freelancers, including some more seasoned ones, became anxious and returned to traditional employment. This eased the perceived shortage of developers and further reduced the demand for freelancers. However, the most seasoned consultants remained in demand and managed to navigate the downturn.

As for the small consultancies, they were successful during prosperous times but struggled during challenging periods. Clients preferred to consolidate their engagements with a few larger providers as the boom times ended. Smaller consultancies declined, and by 2024, consolidation began. Larger firms acquired smaller ones, though not at the high valuations the smaller firms might have hoped for, since they primarily offered personnel rather than unique products or services.