What are the advantages and disadvantages of being self-employed?
You may be asking yourself this question if you are thinking about starting your own business but are not sure if you should make the move.
Similarly, you may be saying to yourself “I want to quit my job and work for myself”, but you just aren’t sure how to start your own business and transition into working for yourself.
Change happens when the pain of staying the same is greater than the pain of change.Tony Robbins
The Coronavirus (COVID-19) pandemic outbreak, it makes you wonder if jobs are really as secure and stable as most people I know make them out to be. Fortunately, I’m in an industry that is considered an essential service and has the ability to continue working from home.
So, I managed to maintain my job and work from home with full-time hours for the lockdown period, but many others were not as fortunate.
Even before the pandemic, I was considering how I would be able to become self-employed or start my own business.
I think understanding what some of the advantages and disadvantages are may help with weighing up if it’s worth spending a load of time and effort to achieve the goal of becoming self-employed.
Ultimately, working for someone else, your income is going to be capped.
You could work for 40 years of your life and maybe end up reaching $150-200k/yr.
Although that’s nice, what if you could start bringing in that sort of money in 5 years, or 2 years or even less?
None of these get rich quick schemes or become a millionaire overnight.
How can you achieve the goal of becoming self-employed first?
Then you can set the goal to work your way towards becoming a multi-millionaire.
This article takes a look into some potential advantages and disadvantages of being self-employed, what the advantages of having your own business may be, as well as some potential disadvantages of starting your own business.
What are the advantages and disadvantages of being self-employed?
There are many different potential advantages and disadvantages of being self-employed.
Most disadvantages I consider to be risks.
All risks can be mitigated to some extent.
It’s just a matter of working out how to mitigate those risks.
- Risk mitigation – identify risk, assess risk, control risk, review controls. Essentially you need to be aware of the risks, understand them and come up with methods to mitigate them.
- The seven P’s – Proper Planning and Preparation Prevents Piss Poor Performance
For someone in a similar position to me (where you have a full-time job but want to become self-employed or start your own business) – the best way I think of to mitigate the risks or disadvantages around self-employment is keeping the job you have, whilst also establishing your own business.
So, for me, rather than quit my full-time job with a steady income to try and start making money online, I’ll keep my job and dedicate as much time as I can to building up my business online.
I can do this by working hard, putting in the time in the evenings and on weekends.
Eventually, when the time comes that I’m earning a more substantial and sustainable income from self-employment, then I can look at quitting my full-time job.
I can then spend more time growing my own business and bring in even more income.
Some of you may not go down the path of an online business.
Maybe you’re working as a mechanic for someone else but want to start up your own business.
See if you can take on work on weekends with tools and equipment you have available to you.
Maybe once you have a few regular customers of your own, you could see if you could start working part-time at your place of employment.
Then eventually you could quit and work full-time in your own workshop.
These are ultimately all decisions you’ll have to make.
The below list that has been compiled from a number of different sources. These sources have been linked throughout if you want to check them out, but what’s provided here should be plenty for what you’re probably looking for!
Most of the advantages and disadvantages of being self-employed or advantages of having your own business listed below are self-explanatory.
However, if you would like to know more about a particular one, simply click on the one you are interested in to expand more details.
Advantages of being self-employed or advantages of having your own business
- Savings on some expenses
- You may not need to spend money on business attire work clothes, maybe you opt to work in your PJ’s or sweat pants and a t-shirt.
- Instead of buying a coffee each day, instead you might use your coffee machine at home.
- Similarly, instead of buying lunch at work, if you’re working from home you might just cook up a meal since you have access to a full kitchen.
- Independence and a more flexible schedule
- Independence, control and freedom from routine – Instead of working for an employer that may direct your work, you are working for clients. Those clients can state the results they expect from you but you are your own boss and can choose when, where and how to work.
- With independence, you can do your work around other commitments and set your own hours. With a more flexible schedule, you could book an appointment in the middle of the day and return to work later, or take a holiday whenever you want.
- Are you more productive early in the morning or late at night? Do you hate waking up early in the morning and do your best work at night like Roshan mentioned in this article? You choose how many hours you work and when you want to work, getting the work done is all that matters.
- Spend more time with your family and friends
- Since being self-employed can provide the ability to have a more flexible schedule, you can organize your work around spending more time with your family and friends.
- Freedom to travel more
- Being self-employed can provide the freedom to travel more.
- Some types of self-employment such as online business (freelancing, blogging, digital marketing etc), allow the ability to work while travelling.
- No more or less commuting to and from work
- No more spending hours upon hours each week commuting to work or sitting in traffic jams because it’s rush hour!
- I know people that spend 1-1.5hrs getting to work and another 1-1.5hrs getting home from work – 2-3hrs of driving a day. Not everyone may experience this, but imagine working Monday to Friday with this sort of commute, that’s a total of 10-15hrs a day in commuting to and from work, likely not getting paid for it either! Working for yourself or running your own business, especially if from home you can take this out and spend more time with family and friends, doing some exercise or working to grow your business and making more money.
- Creative freedom and the freedom to choose your work
- Starting out, you may need to take on the more mundane tasks or jobs, but as your grow and start having more money coming in, you can choose the work that you do. You can choose to knock back work that comes your way.
- Additionally, since you are your own boss, you’ll be in charge of all the decision making and have the creative freedom to come out with the solutions to any problems that arise.
- Job satisfaction
- You can reap all the rewards of your hard work. Instead of working your butt off to make a company you are working for a bucket load more money, you’ll be the one earning the extra dollars from all the hard work you put in.
- Do what you love – want to build websites for a living, be a social media marketing freelancer, sell your products through eCommerce – you can choose what you want to do.
- Tired of doing the same old work over and over? Even though it might change a bit with the different clients and projects you take on with the company or business you may work for, maybe it’s still all fairly similar.
- Being self-employed or running your own business will mean you’re have more opportunities to work on a range of tasks. This will mean you’ll develop new skills that will be with you for life.
- Choose the people you work with
- Similarly to choosing the work you do, once your business is well established, self-employment gives you the ability to choose who you work with and who you take on as clients.
- Choose the location of where you work
- Many self-employed people can run their businesses from anywhere in the world – all they need is a computer and internet connection. Even if you require a physical location such as an office or shop, at least you can choose the location.
- The other advantage from working from home or wherever you choose is you don’t need to worry about office politics or company hierarchies.
- Tax advantages
- Some business expenses may be tax deductible. These may be purchasing office equipment and supplies, marketing or business trip expenses (transport, accommodation, meals).
- Anything that you pay for that directly relates to the work you are doing for you to earn your taxable income is typically considered a business expense.
- Ability to earn more money
- You are responsible for your own income and therefore have more control over it. You’ll have more incentive to work harder because your income is proportional to the amount of effort you put in – the sky’s the limit!
- You will earn a lot more money being self-employed as long as you work hard, don’t get comfortable and keep learning new skills to improve your business.
- A client isn’t necessarily paying you for annual leave or sick pay, or other employee benefits if you are working for yourself. If you’re loaded up with work from clients, you could make a killing!
- Your business may become very profitable working as an independent contractor. Some companies hire independent or sub-contractors because they don’t have the long-term commitments of an employee (such as leave benefits etc), and usually they pay more for this.
- Never having to answer to a boss
- Ever wondered what it is like being your own boss vs working for someone else? Being your own boss means you have control over the work you do, when you do, how you do it and where you do it. Have a great idea you want to try out? Go right ahead. Obviously as time goes by, you’ll get better at deciding if your ideas are worthwhile pursuing or not.
- You’ll be more productive
- Working from home improves your performance, lowers stress levels and boosts your morale.
- Start your own business
- Dress how you want
- Dress how you want because you set the dress code! Want to stay in pyjamas all day and work? No problems! Unless you’re meeting up with a client than you may want to wear something a bit more formal than you’re comfortable PJ’s.
- Get new equipment when you want it
- Have a new project you’re taking on and want some new equipment to get the job done better or faster, or simply just want some new equipment? Well, if you can afford it, then just go out and buy it! No need to go through any approval process, or the bureaucracy or waiting times!
Disadvantages of being self-employed or disadvantages of having your own business
- Unstable or irregular income and less financial security
- Unsteady pay – instead of receiving your weekly, fortnightly or monthly pay, your pay will depend on the work you do, your expenses and when your clients pay you. There is no guarantee of work or monthly paychecks.
- The first few years of self-employment are often difficult.
- Your finances could be unpredictable, you could go several months without making a profit. There may be times where you are very busy with work from clients, but there could also be times where you may have no work (and therefore no income). This can also make it more difficult for getting a home loan.
- Once established and earning a modest income, you may still receive late payments. However, through preparing for instability and setting up a financial cushion can mitigate this.
- You’ll have less security as it’ll be your responsibility to ensure you have enough work to keep an income coming in.
- You could make less money
- You could potentially earn less money. You need to be self motivated and driven to be self-employed. If you’re lazy and don’t put in an effort, than you won’t make any money.
- Until you’ve established a business that is self-sustaining and provides a passive income (i.e. you make money without having to actually do anything), then if you are not working, then you’re not making any money.
- Working for free
- Starting out you may have to do some work for free or at a very low cost to help establish your reputation. You’ll also probably spend a lot of time trying to market yourself, quote for jobs, process invoices, do your accounting and other overhead expenses.
- More responsibility
- It’s up to you to get the work to keep an income coming in. You’ll also need to manage your finances, insurances, tax, superannuation, and pension to name a few. It’s your responsibility to set all of these up and manage them.
- Difficulty picking up work
- Without being established and having much of a reputation you may find it difficult picking up work. You may need to take on work you don’t necessarily like to get you off the ground.
- You’ll need to work much harder
- Starting out being self-employed, you’re probably going to have to work a lot harder to get to where you want to be. You’ll need to finish certain tasks on time, provide updates to clients on progress, manage expenses, provide quotes and invoices, marketing, and a whole lot more!
- To achieve your goals you may need to sacrifice some time when starting up, you’ll likely spend more hours than a typical job being self-employed.
- Social isolation
- Being self-employed may be your likely not surrounded by a bunch of colleagues in an office where you probably chat amongst general business discussion and during breaks. You probably won’t discuss your problems or any professional setbacks with them.
- If you’re working by yourself, you won’t be able to victories and frustrations with your colleagues. You’ll also miss out on company get togethers and social gatherings.
- You might not have other people to bounce your ideas off as easily and have fluid and open discussion with people on ideas.
- The loss of a client
- Sometimes it may be out of your control and you’ll lose a client which was a large part of your income.
- Do your own bookkeeping
- Starting out, you’re probably going to have to do your own bookkeeping if you want to keep expenses low.
- Lack of employee benefits
- Having to answer to clients
- Being self-employed means instead of answering to your boss, you’ll be answering to your clients. Your boss might actually be a little more lenient that a client if your work is a bit late or lacking quality. Worst case, if you’re client isn’t happy, they may not pay you or they may not want to work with you again.
- Higher potential for burning out or overworking
- Becoming self-employed is not easy. Start out, you’ll probably spend many more hours trying to turn a profit and there will be higher potential for burning out or overworking
- More distractions
- You may find there will be more distractions, especially if working from home. You may be tempted to watch some TV, play a video game, talk with your partner, play games with your kids or catch up with friends or family. It will take discipline, dedication and self-motivation to make sure you spend the time required to make an income being self-employed.
- Starting from nothing
- You’ll have to start from scratch. This is covered more below in “what are the disadvantages of starting your own business?”
- Paying taxes
- Being self-employed means you are responsible for managing your tax. You’ll need to set aside the required amount and ensure you pay it on time.
- There may be instance where you may pay higher taxes depending your type of business and location. Additionally rather than having a portion of your pay deducted from each paycheck, you’ll probably have to pay your tax less frequently – so make sure you’re setting aside the required amount each month!
Self-employment has some advantages and disadvantages.
It can be a great challenge but also very rewarding if done successfully.
What are the disadvantages of starting your own business?
- Starting from nothing
- Unlike working for a business that already has well established procedures, processes, systems, client base and work load coming in – you’ll have to start from scratch.
- Building a client base from nothing can take a lot of time and effort. It can be a long and tiring process.
- Learning new skills
- There will be things that you do not know how to do and will have to figure out yourself. You’ll likely spend a lot of time researching and working out how to do something in particular. However, you’ll be learning and developing new skills that will help you keep getting better at the work you are doing and the service you are providing to your client base. Most of the time learning a new skill is like riding a bike, even if you don’t do it for a while, when you have to do it again you’ll pick it up fairly quickly. This means you won’t spend as much time research and learning the next time you have to use the new skill that you learnt.
- Multiple responsibilities
- When starting out you’ll have to wear multiple hats. You’ll be the CEO, COO, CFO, Business Development Manager, Marketing Manager, General Manager, Sales Expert, Administrator, Logistics Coordinator, Personal Assistant, Content Creator, you name it. Whatever needs to be done, you’ll be the one to have to figure it out and get it done – unless of course you’re already cashed up and ready to pay someone to start filling some of these roles for you. However, I think having to ‘wear multiple hats’ will force you to have a better understanding and appreciation of these roles when one day you may be managing the people that may be in these roles working for you.
- “You have to create your own schedule, keep yourself on task, make sure work gets done, track deadlines, invoices, payments, all business expenses, and create a structure to your day.” – Jessica Schwartz, Medium.com
It will take a lot of time, effort, determination and perseverance to succeed, but if you keep at it, you will succeed.
Why did I write this and why am I providing all this information for free?
- Why have I started this blog and why am I giving away of this information?
- It takes many hours to research and consolidate all this sort of information, so why am I giving it all away?
- There is a lot of information out there on how to start your own business and how to build a business online. Many of the free online information I find isn’t really structured in an easy to follow manner. My plan is to develop a series of modules in a chronological order that will allow people to follow some logical steps in building their own online business.
- Setting the goal
- I want to become a millionaire within the next 2.5yrs (by the end of 2022), and help others along the way. To achieve this though, I know I need to break it up into smaller, more achievable chunks.
- I want the freedom to work where, when and how I want, on what I want.
- Money provides the ability to have the financial freedom to do many things.
- To be able to go on a vacation without having to wait until I have enough annual leave and money saved up.
- Financial freedom to buy the things you want that you wouldn’t be able to afford with a typical 9 to 5 job, even after working 20 years of your life in a professional career (engineering in my case). Have you ever met a person that owns a multi-million-dollar house and a Lamborghini (or some other luxurious expensive car), or maybe a few? Maybe you have, maybe that person invested in houses or real estate or some other investment that worked out for them in the long run. That’s great, but are those investments they started later in life when they had enough money saved up to invest? Why wait that long to start bringing in passive income when you can start doing it while you’re still young and have the financial freedom to travel the world, or buy the things you want if you want and when you want, before your nearing retirement age?
- Rather than list out of all the things you could do with financial freedom, I’ll leave it up to your imagination.
- I think establishing a business online provides the best opportunity to build a passive income and make money while I sleep. The internet offers the ability to scale immensely, have a global reach and setup automation.
- Why bother trying to start an online business – and why select such a broad niche such as Internet Marketing and how to start a business online? Because I cannot fail. Even if I fail trying to setup an online business that revolves around Internet Marketing, I will gain so much valuable knowledge and skills even if I don’t reach my financial goals from it.
- Best case scenario – everything goes according to plan.
- Worst case scenario – this online business fails, maybe I’ve selected a niche that is too competitive – but I will have gained so much valuable information (that my readers now also have) and I will be able to apply these to a different online business and try again.
- I can use these for trying something else online if I do not see results (traffic / money) in my planned timeframe. Too many people are afraid of failure. I think you learn a lot more from your failures, than you do from your successes – it’s the fastest way to learn and grow. No education is wasted.
Conclusion – Final Thoughts
Some people may be happy working the regular 9 to 5 (or likely more hours these days), which is perfectly fine for some people.
However, I think if you really put in some hard work and dedication you can become successfully self-employed realistically within a couple of years.
What if I can control my own future better, what if I can go well above the income cap that the industry I work in has?
I think I can change my future through Internet Marketing, and I think you can too.
Starting your own business can be difficult and there are some advantages and disadvantages of being self-employed. However, with the right attitude, using risk mitigation and following the seven P’s (as mentioned earlier in this Module), I think you can succeed in becoming self-employed.
You can build up your knowledge and skills with me by reading these Modules.
Want to know when our next Module is released? Sign up below:
What are your plans to become self-employed millionaire?
Are you ready to put in the hard yards as well?
Do you have what it takes to run your own business?
If any of the information here has helped you or been useful, please let me know in the comments!
As part of Module 1, I’ll also be running through the below:
- How to start an online business website
- How to learn anything faster
- Best books for starting an online business
- 12 Things to Know Before Starting an Online Business
- List of Niche Markets + High Demand Blog Topics
- What Do People Buy The Most Online + Best Things To Resell Online
- Digital vs Physical Affiliate Products: Pros and Cons
- Best Products To Sell From Home
- 22 Best Selling Items At Markets
- Creating New Products
- 7 Stages of New Product Development Process
- Companies That Build Prototypes
Affiliate disclosure: We may earn commissions from qualifying purchases made through affiliate or referral links we provide on our website. You can learn more about our affiliate disclosure here.