The pros and cons of working for yourself

What does self-employment mean in practice?

The pros

• You reap the rewards of your own efforts and have the potential to earn more in the long term.
• You have the independence and freedom to control what you do and when you do it – you get to decide your own direction.
• You can choose to work full or part-time. In theory, you can also set your own hours, and so potentially enjoy a better work/life balance.
• You may pay less tax and can offset business expenses, including use of home as office, against profits.
• You can choose to work with other people.
• Your quality of life may improve because you might not have to commute or deal with office politics.
• Your job satisfaction will improve. It’s exhilarating to build something from scratch and watch it take off.

The cons

• You are likely to earn a lot less in the short term. You are responsible for losses as well as profits. You also have no paid holidays or sick pay.
• There is no one to manage you, keep you on track or help with motivation.
• In practice, you may find you have less time with your family as business commitments mean you work long hours, particularly if you find yourself on call at all hours.
• You are responsible for your own tax.
• It can be lonely. You no longer have the support of colleagues and the backing of an organisation.
• You may be under more stress because your responsibilities will increase.
• In practice, unless you organise your business properly, you may find you end up disliking what you do because you may seem tied to it with no escape, except to go on or give up.

You will notice that this list is often contradictory, but this is because running a business is what you make it. It can become a millstone around your neck; equally, it can be your salvation.

To tip the scales in your favour, begin by taking a step back from what you are going to do and ask yourself the following questions about yourself:

• Do you know exactly what you are going to do?
• Does it use your best and favourite skills?
• How much will you rely on your weakest skills?
• Can you make enough money doing it?
• Do you know where you want to be in five years’ time?
• Will it get you where you want to be in five years’ time?

The right skills

It may seem obvious, but you do need to ask yourself whether you really have the right skills for the type of business you want to run.

Some of the most successful enterprises start out as a hobby, for example, gardening or writing. Others have set up a business in the trade or profession in which they have always worked, for example, accountancy, plumbing or car repairs.

You can launch a thriving business on the back of taking a training course – for example, bookkeeping or word processing. Services like these are always in demand, but no matter how confident you are in your idea, success will depend on how well you plan beforehand, as well as on your personal attributes.

You also need to think about the reasons why you have chosen to set up a particular type of business. Often these stem from having been an expert in a particular field at work, but that expertise alone will not usually be enough to guarantee success. You still have to sell yourself and manage your accounts.

Before you start a business, take some time to look at how other businesses operate, perhaps the one you are in now. Do you take any necessary elements of a business such as accounts and information technology for granted? What is the company providing for its employees that won’t necessarily be there when you run your own business? You may have to find someone else to fulfil the skills that you lack, or you may have to take a training course and acquire them yourself.

The key attributes

People often launch into business without first evaluating themselves and their skills. Get feedback from the people around you – colleagues, friends, family – and ask for an honest appraisal of your qualities. How good are you at self-management and organisation? How much do you understand of business as a whole (rather than your narrow expertise)? Do you use time effectively? Are you resilient when times are bad? Can you focus well, or are you easily distracted (especially if you plan to work from home)? Can you be assertive, or do you sound overbearing or indecisive?

Can you cope with the responsibility and, at times, the stress of running a business on your own? There will be no cushion. The biggest shock for most people when they start a business is discovering that things don’t happen unless they are there. For example, if you go on holiday for two weeks, you can lose two weeks of sales, two weeks of prospect building and two weeks of productivity.

There are many important attributes you need when working for yourself. You need some or all of the following traits:

• A burning ambition.
• Belief in yourself and what you are doing. You need an inner conviction and enthusiasm about the quality of your products and services.
• A positive demeanour – you must remain outwardly positive at all times, no matter how bad things are.
• The ability to blow your own trumpet – because nobody else will.
• Flexibility.
• The ability to think laterally – if at first you can’t get around an issue, you must use your initiative and find a way of overcoming it.
• Enjoying the unknown.
• Being a self-starter.
• Self-reliance and the ability to enjoy your own company.
• Self-discipline and good organisational skills.
• An ability to prioritise.
• Being able to work to deadlines, under pressure.
• A certain amount of stamina. Is your health good? Do you tire easily?
• As a self-employed person you’ll sometimes have to keep going when you’re exhausted, under the weather, or just plain fed up with it all.
• Self-confidence and trust in your own instincts.
• Being assertive, but not aggressive.
• Being perceptive and able to read between the lines of what you are being told.
• Determination to succeed.
• Ultimately, you must be a doer not a dreamer.
• You will need to develop sound judgement – knowing when to say ”no” and knowing when someone is pulling the wool over your eyes.

Successful owner-managed small businesses are often started by someone with entrepreneurial qualities. These are highly motivated people who want to be in charge of their own destiny. Research shows that the main factors for success are:

• Drive and determination.
• A well-defined set of objectives.
• Hard work.
• A willingness to listen – and learn.
• Common sense and realism.
• A very clear focus.
• This applies whether you are selling anything from aromatherapy sessions to bookkeeping or freelance typing services.

Why take the leap?

Going out on your own in a new venture is always a gamble. Are you sure you know why you’re doing it? Not liking your current job, or perhaps not having one at all, is not necessarily a good enough reason.

To succeed you must have a clear ambition, a vision of what you want to achieve. Unless you have a goal, how can you set a course, or measure your progress? Of course, there are many different types of goals. Some sample goals might be:

• “To launch my invention successfully and sell 10,000 units in two years.”
• “To build a business to sell for £1m in five years.”
• “To establish myself, as a decorator, earning £40k a year, with six weeks holidays for scuba diving.”
• “To launch an e-business that will allow me to move to Snowdonia in two years and give me a living of £50k.”

Note that some people are simply creating a job for themselves, others are founding a business, and others are creating a pension fund. Are you clear what you are after?

Business skills

Whatever field you set up in, certain basic business skills will be essential to your success. How good are you with people? Awkward customers, late payers and wrong deliveries all have to be dealt with tactfully and professionally.

Other useful skills include financial management, leadership, marketing and management skills. Do you have these, or will you learn them? You also need to be able to sell – yourself and your idea as much as your products and services. This ability in particular is vital as you will need to sell to lenders, investors, potential partners and employees, as well as to customers. If you dislike selling, how will you overcome this?

One alternative is to hire skills. You can take the employee route or the freelance route here, and both have their strengths and weaknesses. For example, how are your bookkeeping skills? If you know you are poor at keeping paperwork in order, are you prepared to pay a freelance bookkeeper to handle this aspect of your business?

This leads to perhaps the most decisive question: do you want to remain a “one-man band” in your trade or profession, or will you hire people and take on a more managerial position? This is partly a lifestyle issue, but it also focuses your long-term objectives since, as a single person trading on a skill or knowledge, you will have little of worth to sell on.

Working from home

Being your own boss also means being responsible for managing your time and fitting everything in around your personal and family life. If you are working from home, the problems of time management can be even more evident.

Some people find working from home impossible because domestic issues constantly distract them. Others have the reverse problem. They find it all too easy to slip back to their desk after supper “just to finish some work” and find that they are still there at 2am. It is important to separate work from home, even if it is all under the same roof – otherwise you will struggle to accomplish anything.

The people around you

The first few months of any business are a time of anxiety, when most people new to business doubt their own ability. It is human nature to have some misgivings. Ideally, you do not want to let this overshadow your work or it may actually affect it and, ultimately, the success of the business.

Then there are the practical considerations of your friends and family. How does your family feel about you starting a business? Are they aware of, and do they understand, what starting a business will mean to them? For example, how will they react to a drop in income and status and increased uncertainty in the early stages? There will be times when cash-flow is little more than a trickle, but the bills still roll in. How will you cope with this financially and emotionally?

What role can the family play and are they willing to play it? For example, will they give you the emotional support you need to cope with the ups and downs of your business?

Being your own boss means that you can arrange to be free when the children return from school. Is it possible to run your business around your children’s school times? You will also have to plan what you will do when the children are sick or on holiday. The whole family, even young children, need to understand that when you are working, barring emergencies, you are not available to them, even though you appear to be around.

It is also important to keep commitments to the people around you. It is likely that you will be working longer hours than you originally planned, at least in the early days. If you promise some time with the family, at the weekend say, you must stick to it.

Think long-term

Finally, try to think long-term in your business life. As the business grows, so will the responsibilities and the pressures. What are the challenges likely to be in a year or two years’ time? How will that affect your personal life?

Hopefully, by that time you will have established yourself in your chosen market, taken on some staff to relieve some of the pressures on you, and started to make profits. All of these things should allow you to realise some of the ambitions you had when owning your own business was just an idea.

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