Is self-employment right for you?
While self-employment is an appealing prospect for some, it won't be right for everyone. Before starting a business, you'll need to weigh up your options and calculate whether you can afford to take the risk of setting up a new business
According to the Office for National Statistics, there are just over 4.2 million self-employed people in the UK, accounting for around 13% of the labour market. Roughly 2.7 million men are self-employed and 1.5 million women. While self-employment is possible in a variety of sectors, the construction industry is home to the largest number of self-employed.
The meaning of self-employment
According to the dictionary, self-employment is defined as 'the state of working for oneself as a freelancer or the owner of a business rather than working for an employer'. Basically, this means you'll run your own business and hold sole responsibility for its success or failure.
Popular self-employment jobs
Here are some of the most common jobs for the self-employed:
- Accounting technician
- Construction manager
- Financial adviser
- Interior and spatial designer
- Life coach
- Make-up artist
- Private tutor
- Sports coach
- Web designer
To find out if your chosen career lends itself to self-employment, see job profiles.
Self-employed vs employed
If you're self-employed you won't work for a specific employer who pays a consistent salary or wage like an employed person does. It's also important to note that you don't have the same employment rights (such as holiday entitlement, sick leave/pay and maternity/paternity entitlement) and responsibilities as employed workers.
However, it is possible to be both employed and self-employed at the same time. You could, for example, work for an employer during the day and run your own business in the evenings and on weekends.
Benefits of self-employment
- Creative freedom - By going self-employed you'll oversee the decision-making. You'll have the freedom to explore a number of creative solutions to problems that arise and have the satisfaction of seeing your ideas through to completion.
- Independence - As well as creative freedom, you'll also be able to set your own hours and fit your work around other commitments, which often leads to an improved quality of life.
- Job satisfaction - Reaping the rewards of your hard work can be very satisfying, while you also have the autonomy to do the things you love most.
- Location - Working from home, if applicable, means that you don't have to worry about office politics, company hierarchies or an expensive and stressful daily commute.
- Salary - Your earning potential is much higher when self-employed - everything is in your hands, meaning you can take on more work at various times of the day. Financially, the sky's the limit.
- Variety - As you're in control of your workload, you'll have the opportunity to work on a range of projects with a number of clients and develop new skills. You'll also gain experience in the different areas of setting up a business, including overseeing the finances and administrative work.
Disadvantages of self-employment
- Lack of employee benefits - You won't get sick pay, holiday pay or any other employee benefit, you also won't get the support or backing of an experienced HR team.
- Long hours - Your working day may be much longer and more irregular than someone who isn't self-employed. Business commitments may mean that you spend less time with your friends and family, or struggle to switch off from work life.
- Responsibility - You're in charge of your pension, National Insurance and completing your self-assessment tax return - what's more, you'll pay tax even if your business makes a loss. The fact that success or failure is down to you can increase your stress levels.
- Social isolation - You'll miss out on the workplace environment, at least while you're establishing yourself as a business owner. Not only can this be lonely, but it's likely you'll also have to work harder to stay motivated.
- Starting from nothing - Establishing your business and building a client base can be a long, tiring and at times frustrating process. You'll need determination to succeed and perseverance, even if progress is slow.
- Unpredictable finances - Your income can be irregular, especially in the early days. You could go several months without earning a profit, and you'll always have to pay running costs such as rent, insurance and internet access.
When considering whether now is a good time to become self-employed or freelance, you'll not only need to weigh up the points covered below and the practical aspects outlined in how to start a business, you'll also need to consider how global affairs and the current economic situation will impact the industry you're thinking of entering into. For example, will the cost of living crisis affect operating costs or the demand for your products/services? Will soaring energy prices effect premises?
If you are planning to start a business, it's important to conduct extensive research and seek as much professional and personal advice as possible. Speak to those who are already self-employed, especially if they work in the industry you're planning to enter. How is their business faring? What impact has running a business had on their personal lives, their finances and their mental health?
If you've carefully weighed up your options and have decided to set up your own business, discover things to avoid when starting a business.
Skills to succeed in business
Success as a small business owner largely relies on the strength of your product or service. However, you must also possess the following qualities to thrive:
- Creativity - You must be innovative, imaginative and have the initiative to push your business forward with new ideas. You'll also need drive, determination, and enthusiasm to make them a reality.
- Knowledge - Having a strong understanding of your market and customer is vital, while the willingness to listen and adapt to their ever-changing needs is also key.
- Leadership - Owning and developing independent projects, as well as managing a team, should come naturally to you.
- Organisation - You must be focused and goal-orientated, able to set clear and realistic objectives. Working well under pressure and having strong time management skills are also important.
- Self-belief - You'll need the confidence to take risks and responsibility for your decisions, as well as the appetite to network with individuals and other organisations.
Questions to ask before becoming self-employed
- Am I becoming self-employed for the right reasons?
- Does my business idea have longevity?
- Am I self-motivated enough to make a success out of it?
- Will becoming self-employed fit in with my lifestyle?
- Would I enjoy working on my own?
- If I become self-employed, how will I find/secure work?
- Can I afford to become self-employed?
- How will I fund my business?
- What type of business should I run?
- Do I have the right support network in place?
- Is the grass always greener?
- If it doesn't work out, what's my plan B?
5 signs you're ready to start a business
There's no 'right time' to go self-employed. You'll develop skills and learn as you go along - but if you'd like some reassurance, you might be ready once you've:
- mastered a professional approach - When starting a business, you need the confidence and motivation to market yourself from day one. Many think that charging a reduced rate or offering to work for free is what's required to build a client base but remember that the work you're doing will still add value to your client's business or project and you should be compensated for this.
- found a unique selling point (USP) - One of the biggest misconceptions about self-employment is that to be successful a business must be started by an entrepreneur with a big idea. Having the right skills, passion and business acumen are more important factors for finding success.
- developed excellent organisation skills - Taking control of every aspect of your business is no mean feat. By creating a long-term business plan, or a weekly to-do list, you'll have a clearer picture of where your business is heading.
- demonstrated resilience - Starting your own business doesn't happen overnight and will require months - sometimes years - of hard work, and a thick skin. It's a slow process, and you may encounter rejection from clients along the way, which can be disheartening.
- gained the confidence to build a client base - Building up a network of contacts is crucial for establishing a client base - as daunting as it may seem. You'll need the motivation, confidence, and enthusiasm to be looking for potential opportunities at every turn when you're starting out.
Find out more
- Take a look at GoCompare's guide to self-employment.