Self employment is something many people dream of. Thoughts of setting your own schedule and landing huge clients tend to get people excited about the possibility of becoming an entrepreneur. There are some definite benefits of being in that type of work situation, but there are also some huge negatives. When deciding on a career of self employment, it’s important to think about both sides of the issue. As someone who made the decision to be self employed over a year ago, I have realized both the positives and negatives of doing so. The biggest, and most important, of these are outlined below.
The Positives of Self Employment:
Be your own boss
For many people, this is the biggest draw to self employment (it was definitely one of mine). The idea of being your own boss is very appealing to those of us who are independently minded, have had bad experiences with former bosses, or any number of other reasons. There are definite advantages to this. You are accountable only to yourself, so you don’t waste time constantly reporting to your superiors, and can often times get more work done. As your own boss, you make the decisions for your own business, and can decide what work you are going to do, and what direction you are going to take for the future of your business.
Work your own hours
Another huge positive for self employment is the ability to set your own hours. If you are a person that is most productive at night, then you’re going to have a hard time getting a job to accommodate that fact. However, if you’re self employed, you can decided when and where you’re going to work. I for one wouldn’t mind working on a beach in Hawaii at sunset every night. This can also allow for more flexibility in your personal life, like being able to work only when your kids are in school so you can spend more time with them when they’re home, or going to events that you wouldn’t be able to at a normal job with a limited number of vacation days.
Potential for Automation
The Four Hour Work Week, a bestselling book by Tim Ferriss, was what got this craze going. The idea is that you build up a business that you then automate via outsourcing and streamlining of operations. This business makes you enough money that you can live your dream life, and you have all the free time in the world because your business is fully automated. This system does work, although it isn’t nearly as easy at it sounds. Being successful at this requires quite a bit of upfront work. However, it is something that is a major positive for self employment, and a lot of people are willing to take the risk and try it.
Huge Money Making Potential
One quick look around the internet will show you all kinds of people that are self employed and making absurd amounts of money. If you have a marketable skill or good idea for a small business, you really can make tons of money. Remember, it isn’t a get rich quick kind of thing, and it does take just as much (and in most cases a lot more) work than a regular job. But, just to show you what is possible, freelance web designers will often charge over $100 per hour, whereas many working for companies make a tiny fraction of that. The allure of money making draws many people to self employment, and many get just what they were seeking.
This is the one thing that ends most entrepreneurial dreams. Without a boss telling them what to do, many people get lazy and don’t get work done. The projects they are working on get put off, and, consequently, the entrepreneur makes no money. If you are the kind of person who isn’t particularly self motivated, then don’t go off on your own. Unless you really think you’ll get the work done, you’ll do yourself more harm than good by striking out into the world of self employment.
One thing that many people don’t realize about self employment is that just because you set your own hours, doesn’t mean those hours will be short. Remember that when you are working as some type of consultant, you are going to be responsible for finishing projects within a deadline. As someone who does freelance web design, let me tell you that once you’ve pulled a 15 hour work day, you may just hate your choice to become a freelancer in the first place. Often times this hard work pays off, but it is still a pain. Also remember that you don’t get payed extra for working more than 40 hours a week like you do in a normal job if you’re self employed.
Instability of Pay
When you work a normal job, you know how much you are going to get paid and when that big check will come in. This makes it very easy to plan out your finances and budget. Not to mention the fact that you have consistent benefits like health care. Most times when self employed, you don’t have any stability of pay. One month you may get a check for ten grand, and another month you might not make anything. Obviously this creates a huge risk for you financially if you can’t weather a few dry months.
A little good and bad:
People who are self employed are governed by different tax codes than regular employees. People who are self employed have several advantages, including the ability to write off business expenses. Get a new laptop to use for your business? You can write off the laptop on your taxes, or at least a percentage of it. Other common deductions include home office expenses and mileage. It isn’t uncommon to not pay taxes if you make less than $20,000 a year, simply because you can easily have that many deductible expenses from your business.
However, if you’re self employed you do have to pay the second half of social security and medicare taxes that is normally paid by your employer, so be ready for that percentage to double.
Swapping Bonuses and Raises for Big Clients
Another thing to consider is that you’ll no longer be getting bonuses or promotions if you’re self employed. After all, how can you move up the ladder in a company of one? All hope for big money isn’t lost however. If you land a major client, you can still get some major dough. Or maybe you are a freelance writer, and you write a book on the side that becomes a bestseller. There are still opportunities to make big money as a freelancer, just remember that they will come in non traditional forms.
Being an entrepreneur has its ups and downs. While there is the potential for big money, easy hours, and the ability to choose your work, remember that self employment can be a rocky road. Is it the right choice for you? Maybe. If you like to take risks and think you can stay motivated enough, and there is a legitimate market for your skill or idea, then you may just do fine.