Self-employment : Why do it?

The definition of self-employment is ‘starting and running a successful business or social enterprise’. Many famous companies began this way as visionary men and women patented an invention, created a company or registered a brand. Although an excellent business idea plays a key role in the ultimate success of a business, the application of the idea will ultimately decide its fate.
  
Self-employment is sometimes the only option if you wish to pursue a specific career path. Journalism, certain legal and medical professions, and the creative and performing arts are all sectors where self-employment or freelance work is the typical mode of operation.
 
For some people, it is a lifestyle choice achievable by:

• setting up a business, either on a full-time basis or alongside a part-time job;
• working as a freelancer or contractor;
• buying into a franchise.

Reasons why people choose self-employment may also include:

• the desire to sell their skills and/or expertise;
• the desire to prove an idea;
• because they relish the challenge;
• wanting to generate a second income stream;
• reaction to an ill-informed first career decision;
• peer or family pressure;
• a feeling that there are no other options.

Self-employment has its benefits and risks.

The benefits

• Freedom.
• Being your own boss.
• Earning more money (possibly becoming rich).
• Working fewer hours.
• Independence.
• Variety and choosing work you enjoy.

The risks

The more glamorous aspirations attached to self-employment take years of hard work and commitment to achieve. It is this realisation that provides the biggest shock to most people who decide to work for themselves. This may cast some light on why only one in three business start-ups in the UK succeed in the first three years of business.

So, in the early days you may need to consider the following:

• You do everything yourself and are responsible for the day-to-day running of the business. You will rarely have the resources at your disposal that are available to an established business owner. This may mean doing tasks that you dislike.
• Large salaries or income are rare in the early days. Need for personal financial investment in the business, competition, economic fluctuations and changes in consumer markets may occur.
• You may need to consider having a second job to help provide a guaranteed source of income for day-to-day living costs.
• You need to offer a product or service for which there is a demand. This may depend on projecting a certain image, perfecting a technique or making a product unique.
• You alone are accountable. Taking an unwise decision could reduce your income.
• Expanding too rapidly or, conversely, not being quick to seize a chance might be detrimental to your business.
• Working from home is most effective when you have the space and facilities to do so. If you work out of other premises, you will have to pay rent and other overheads.
• It is impossible to escape some pressures, especially those that come from clients and customers, who will often dictate your working hours.
• By not being employed, you risk losing a range of benefits and a support infrastructure.
• Setbacks may impact on your confidence and profits. Be realistic and learn from your mistakes.
• You will have to make your own tax, pension and health insurance arrangements.