Self-employment is a lifestyle in complete contrast to the 9-5 rat race. So, if you have thought about making your dreams of working for yourself come true, give serious thought to the reality of self-employment.
Living your life independent of corporate America or a manager peering over your shoulder has its fair share of advantages and drawbacks.
Here’s what you need to know about the advantages and disadvantages of going it alone.
Advantage: Be Your Own Boss
The most obvious advantage is being your own boss. It is the leading motivator for Americans to start their own businesses, with three in five Americans citing it as a personal goal.
The pandemic has spurred many to take the reins of self-employment and launch their own businesses.
If you no longer want to answer to anyone else, self-employment is the way forward.
Disadvantage: No Safety Net
Enjoying the benefits of being your own boss also comes with the drawback of not having a safety net. Living as a number within a large corporate setup is a form of security. Even if laid off, you can access unemployment benefits and severance packages.
As the boss, you accept responsibility for the fate of your business. But, unfortunately, there is no safety net should your idea fail.
Moreover, you may even find yourself spending all your savings and using your personal assets as guarantees to keep your business moving.
Advantage: Break Through The Glass Ceiling
Corporate employees often grumble about their pay packages and the lack of pay rises. However, most businesses have established compensation schemes. So regardless of how high you climb up the ladder, there will always be a cap on your earnings potential.
Running your own business empowers you to break through the glass ceiling. There are no limitations on how much you can earn, allowing you to achieve your financial dreams.
Disadvantage: Liability Risks
The majority of businesses will experience a lawsuit at some point. Obviously, the chaos and the disruption caused by these incidents are significant. But, on the other hand, you always have to consider liability.
Protecting your personal assets by choosing an incorporated business structure, such as a C-Corporation, is a start, but you’re never fully protected. Performing an action that pierces the corporate veil, or finding yourself personally liable, could mean risking your personal residence, cars, and bank accounts.
One way of protecting yourself is with self-employed business insurance. Comprehensive policies offer you an additional layer of protection if you personally are dragged into litigation. These policies can also protect your business further and your employees.
Advantage: Save On Your Expenses
Declaring yourself as self-employed makes many of your previous expenses obsolete or tax deductible.
Working from home means no commuting costs, work uniforms to pay for, or overpriced business lunches.
Other expenses become tax deductible. For example, your home office, office supplies, and any equipment you purchase for your business can now be deducted from your annual tax returns.
Intelligent tax-saving strategies can put thousands of dollars more in your pocket annually.
Burnout is natural when you are working 16 hours per day to get your brand off the ground. However, burnout presents a genuine risk for founders.
Numbers on the prevalence of burnout vary, but approximately 30% of founders in one study reported feeling the effects of depression.
The problem with burnout is that it can hit at any time and directly result from stress. All work and no play mean you are at an elevated risk of burnout.
If you fail to maintain a positive work-life balance, you could find yourself unable to operate at your peak potential.
Advantage: Flexible Schedule
Take back control of your day with the schedule you define. You are no longer required to ask someone when to take a break. If you need to attend a family function, there is no lodging a request with HR.
Self-employment delivers you the schedule that fits your lifestyle. Note that this flexibility does not imply working fewer hours. Typically, most entrepreneurs work more hours than their salaried counterparts.
The added flexibility lets you plan your day to get the most from your time.
Disadvantage: Unstable Income
Anyone who owns their own business is perfectly aware of the feast and famine cycle. You are guaranteed to experience scenarios where nothing works, and your income plunges by half. But, on the other hand, there are also times when you may be making more money than you have ever earned in your life.
Unfortunately, there is nothing consistent about the life of the self-employed. Instead, market conditions, the season, and your own performance will dictate how well you perform at any given time.
If you’re uncomfortable with a predictable monthly income, self-employment may not be your choice.
Advantage: Make Your Dreams Come True!
Self-employment is not just a way of getting away from the corporate lifestyle. There are so many perks to being self-employed, but immense responsibility comes in exchange for those freedoms. As a result, you will experience the most challenging times of your life as you start your own business.
Most founders report that making the transition was the fulfillment of a life goal. It was a chance to make their passions part of their livelihoods.
The biggest advantage of being self-employed is the opportunity to make your dreams come true. So whether it was a desire to spend more time with your family or bring that wacky idea to life, self-employment is the way to go.
Weighing up the pros and cons of self-employment with a critical eye is vital for anyone looking to start a business. Although many idealize being your own boss, this is certainly not the right choice for everybody.
Self-starters and freethinkers will benefit from self-employment, but it may not be the best move if you cannot handle the lack of stability and the crushing responsibility. Think about the transition before taking the plunge so you have the confidence necessary to become an entrepreneur.
Do you believe the world of self-employment is compatible with you?