Overview of Self-Employment
One way to understand the advantages of self-employment is to first review the advantages of employment, i.e. working for a business (not your own) or working for a different person than yourself.
ADVANTAGES TO COMMENCING ANY CAREER AS AN EMPLOYEE
The employer is solely responsible to provide:
(1) a reliable paycheck (prompt and accurate)
(2) a reliable source of work (unless the work depends on good weather)
(3) according to state law and depending on the number of hours worked: health insurance, over-time pay and paid vacation days
(4) costs of doing business, such as
(a) providing the equipment necessary to do the job plus the costs of maintaining and replacing the equipment;
(b) bookkeeping to manage customer billing and receipts;
(c) payments toward employee’s social security and worker compensation insurance;
(d) advertising;
(e) transportation to job sites
(f) payments into the state’s worker compensation plan providing benefits to employees who are injured while engaged in employment activities
(g) employee uniforms
(5) interviewing, hiring and supervising co-workers; also terminating co-workers for poor job performance and other misconduct
(6) “start-up” costs for employees to commence their job duties; an employee is only required to show up, on time every day and work hard at assigned duties
(7) compliance with all government permits and safety mandates of the federal Occupational, Safety and Health Administration (OSHA)
In addition to the employer responsibilities noted above, other benefits of being an employee of another person or business include opportunities, such as:
(8) “learn while you earn” – employee can learn specific job skills (e.g. in power washing: vary water pressure and any chemicals according to the surface to be washed; in carpentry: leveling the foundation and using power equipment; plumbing: detecting source of leaking pipes) and administrative skills (e.g. communicating with customers, preparing job cost estimates, dealing with complaints, preparing invoices and monitoring payments)
(9) promotions – dedication to your employment job through showing up regularly and promptly, then working with high energy while willing to learn and accept supervision usually leads to promotions involving more responsibilities and better compensation
ADVANTAGES TO SELF EMPLOYMENT
As there are advantages to being an employee, so there are potential advantages to self-employment / starting your own business, which include:
(1) being your own boss, which is an opportunity to do as much or as little work as you require to support yourself
(2) retain all the business profits (assuming there are any)
(3) control expenses (to the extent possible; for example, continue doing most of the work yourself rather than hiring labor; but if, for example, regional gasoline prices increase and you must drive to job sites but cannot afford an electric vehicle, your business transportation expense will increase)
(4) freedom to proceed with all your great ideas without having anyone else approve them (hopefully all your ideas will be great)
(5) supervise any employees to make sure they perform according to your personal standards (business will succeed if your standards are high)
(6) decide your business name and logo (any fictitious name must be registered and advertised and cannot be a name which is the same or almost the same as an existing, registered business name; so, for example, don’t choose your power washing business name as “Apple” or “Green Bay Packers Power Washing”)
(7) first choice for the best office and the best parking spot (however, the “best office” and “best parking spot” will be the exact same space if your office is your truck as you start your own business – LOL)
HOW TO KNOW WHEN YOU’RE READY FOR SELF EMPLOYMENT
There is no single set of facts to plug into a computer to obtain a reliable analysis of when is the right time to start your own business. It all depends on when you are ready to take a “reasonable risk.”
REASONABLE RISK
A risk is “reasonable” when it involves:
(A) Prior experience with the skill required. (If you want to start your own plumbing business, you should have worked with a knowledgeable plumber for several years to have the opportunity to learn both the basics and the nuances of the plumbing trade)
(B) Maturity. (Have you worked for a while within adult work situations and demonstrated both your dedicated work ethic applicable to any business plus the calm demeanor to work cooperatively with most anyone?)
(C) Willingness to learn. (While you have acquired the necessary physical skills to do your job, are you willing to seek and keep up with advances in those skills? Are you willing to learn how to be responsible for parts of the business which your employer had taken care of and will now be your responsibility, such as preparing job cost estimates, dealing with prospective and existing customers, advertising, bookkeeping, tax records and payments?)
(D) Dedication. (Are you willing to often work more than an employee’s typical 8-hour weekday?)
(D) Alternative plan. (sometimes called a “fallback” plan or a “safety-valve.”) (A fallback plan example: willingness to abandon self-employment and return to being an employee of someone else’s business.)
COMMON REASONS MOTIVATING SELF EMPLOYMENT
An individual can remain an employee from his or her first job through retirement, often working for different employees along the way, never intending to become self-employed. Or an employee can decide to become self-employed due to one or more events which occur quickly or unfold over a long period of time.
Dissatisfaction with employment arrangements may develop quickly and unexpectedly (for example, if an employer refuses to permit a day-off when the employee explains his or her child’s emergency medical condition or if the employee is the victim of sexual harassment)
Or employment dissatisfaction may arise slowly, over time, as it did for the employee (PW) of a power washing business featured in a separate story category TRADE – POWER WASHING):
First, PW’s recommendations to improve the business – to benefit the employer as well as himself – were being unreasonably ignored.
Second, the employer’s work ethic was evolving from daily hard work to laziness and inattention to important details. It’s ok for a business owner to slow down, especially as the owner nears retirement, but a wise owner will then better compensate the employees who must work harder to produce the same results. And it’s not ok for the business owner to get sloppy with providing cost estimates which leave the customer confused as to the scope of the work – for example, an estimate to “wash the house” for $300; when the work is done, the customer complains that “the back deck has not been power washed and it’s part of the house” – at which point, the employee likely has to invest additional time to power wash the deck, at no additional payment to the employee.
Third, the employer’s domestic life was unraveling, leading to his excessive alcohol consumption which negatively affected his work ethic and job performance.
PW’s employment situation became intolerable for him to continue. PW had not started as an employee with a goal to be self-employed but fortunately, he now had a self-employment option to pursue: continuing the same work as his own boss.
CAREER SATISFACTION IN SELF EMPLOYMENT
In addition to earning enough money to cover your personal (and perhaps family) living expenses (including housing, food, medical care, clothing, utilities, taxes, insurance, and transportation plus child support if applicable) and saving toward a comfortable retirement, common reasons for career satisfaction within self-employment, include:
* Exceeding customers’ expectations
* Satisfied customers referring other customers
* Establishing a reputation within the community for an honest, high-quality service
* Staying physically fit for the physical work involved
* Creating “good will” for the business name, which might provide the basis to eventually sell the business when the business owner is ready to retire
* Mentoring apprentices to learn the basics and nuances of the business
