Whether you are considering becoming a sole trader or starting up a limited company, working for yourself can be a very appealing prospect but before you dive right in and get carried away you need to assess all the pros and cons to figure out if it is really right for you. Are you prepared to invest money and time into starting up your business? Are you willing to sacrifice your weekends and evenings to keep on top of things? Can you be trusted with your own bookkeeping?
Flexible lifestyle – Having your own business opens up a lot of doors for you to travel around and work from different locations depending on the kind of industry you are in. You can also take a holiday whenever you like because there is no approval process or annual leave allowance – you can take as much time off as you can afford. It is down to you to decide how much time off and for how long you can be away from your work.
Earning potential – By being your own boss you have more control over your own progression. You can take on as much work as you like, or work long hours and weekends in order to earn a higher profit. If your earnings are proportionate to how much work you do then you will probably find yourself working much harder than you have done whilst being employed and achieve much more job satisfaction.
Creative freedom – You own all of the processes within the company which means you can take chances and explore new avenues for developing your business.
Fewer benefits – One major disadvantage of being self-employed is that you do not have access to all the employment benefits you get when working for a corporation. One big benefit that you may miss is your paid annual leave including bank holidays, in contrast, you will not make money during any time off you have. Pension contributions are also a very important benefit to ensure you have financial stability once you retire. You can still pay into a pension scheme if you are self-employed but you may have to wait until you are earning enough and you do not have the security of your employer paying in at least 3% of your salary.
Financial instability – Self-employed people arguably have a much higher earning potential but they do not have the guaranteed regular income of someone who is employed. Income is far less certain for a start-up business and if the demand for your goods or service goes down then you run the risk of losing profits and you may struggle to keep your clients. This is especially worrisome if you have rent, mortgage, or other regular payments to cover so it is important to have a plan of action and a good amount of savings in case of an emergency.
Experience is essential – Some people may get lucky starting up a business with no experience but ideally, you will need to gain some solid experience before you take the risk of striking out on your own. In fact, your chances of success are much higher with a business degree, strong experience, and industry knowledge.