5 Things To Think About Before Becoming Self Employed

Very few of us intend to spend our whole lives taking orders from somebody else, and working according to the demands of someone else’s clock. Some people are happy that way because it gives them a sense of security – and there’s nothing wrong with that – but the rest of us eventually get tired of being told what to do. We get bored of following management directives when we can clearly see that there’s a better way of doing things, and we become even more bored of seeing the majority of the money we make for the company we work for disappear into the company’s pockets instead of coming back to us.

Right now, there are more people becoming self-employed than ever before. We’re living through a self-employment boom, and the idea of becoming your own boss is becoming a reality for a record number of people. Thanks to the gig economy, freelancers, and the rise of remote working, it’s easier than ever to sever ties with an employer and set up for business by yourself. It can be a wonderfully liberating experience, and if everything goes well, it might even be the best decision you ever make, but it can also be a disaster if things go wrong. The hard truth is that the majority of start-up businesses fail, and making money as a self-employed person or a sole trader is rarely as easy as you imagined it would be. It’s certainly not for everybody.

If you’re one of the millions of people across the world who’s currently thinking about becoming self-employed, we want to encourage you with that aspiration. You’ll find plenty of resources on this website that will hopefully help to make your dreams come true. We also think there are a few things you should give careful consideration to – things that might not even have crossed your mind – and here are five of them.

You’re Going To Need An Accountant

Unless your self employed business is accountancy, or you know a thing or to about tax and accountancy, you’re going to want to pay someone to do it for you. This can be both an annoyance and an unplanned expense; your accountant will likely want a retainer, a regular contribution of some kind, and a fee every time they file anything for you. Given that you could technically complete and return all of the paperwork yourself, it might be tempting to save the money and do things that way. Our advice is that you shouldn’t do that. People make mistakes on tax returns all the time, and those mistakes can be extremely costly. You could find yourself facing a huge tax bill because you made a reporting error. You could also find yourself paying too much tax because you didn’t make all of your allowable deductions. An accountant is a helping hand to guide you through the legal side of managing your own business, and you should take that hand even if it costs you a little money to hold it.

Vacations No Longer Exist

The type of person who considers self-employment tends to be a workaholic. Hard work and long hours don’t faze you, and they never have. You might think you’re psychologically prepared for the long hours that your new occupation will require of you, but don’t forget that there’s no leave when you’re self-employed. When you don’t do any work, you don’t make any money. You don’t have any paid holidays. You don’t even have any sick leave. You only generate income while you’re working, and that makes vacations a thing of the past, at least for the short term. Assuming everything goes well, you’ll eventually be able to hire staff who can manage things for you while you’re away, but for that first year or two, you’ll probably be going nowhere, and you’ll be working while you feel sick. This can be hard on you, and hard on your relationships with the people around you.

You’re Gambling

Do you think of yourself as a gambler? If not, think twice about whether self-employment is for you. Becoming self-employed is just as much of a gamble as throwing all of your money into an online slots website, and you shouldn’t for a moment pretend otherwise. Why do we make that comparison? Because when you place a bet on an online slots game, you have no idea if you’re going to make any of that money back, and little control over how and when winnings might arrive. Any seasoned gambler will be familiar with the thrill of a big win playing online slots such as Starburst online slot, but they also know that win comes with a sense of relief because they didn’t know for sure that it was coming. When you’re self-employed, you have no guaranteed income. If nobody buys from you, nobody’s going to top up your salary for you. You’re gambling that you’ll be good enough at what you to make ends meet, and that your services will be popular enough for you to continue making money for the long term. Do you feel lucky?

You Need Savings

Self-employment isn’t an avenue anybody should go down if they don’t have any money in the bank. There are set up costs for even the smallest type of business, and there are always business expenses that you didn’t think about on top of that, too. During your early months – and perhaps even your early years – you’re going to struggle to attract the same kind of income you were receiving before you became self-employed. Until your business becomes established and starts to grow, you’ll be battling for every sale you make, and every customer you attract. You’re going to need some financial reserves to fall back on during the months where your income is a little more meager than you’d have liked it to be, and if you don’t have anything in the bank, you’re almost guaranteed to fail.

You’ve Become A Credit Risk

Lenders, be they mortgage, credit card, or loan lenders, like certainty. They like to see that someone has a guaranteed salary coming into their bank account every month, and that the salary in question is sufficient to repay any credit agreement they might have entered into. They do not like brand new businesses with no track record, no trading history, and no consistent income. Even if your credit record is clean and you have no history of financial difficulties, you’ll find that the companies who used to welcome you with open arms for lending no longer want to know you. Your mortgage company might not offer you as favorable a rate next time your deal is up for review. Your credit limits on your existing cards may even be reduced. Until you’re in a position where you can prove that your monthly income is both substantial and reliable, you may struggle to get credit in places that wouldn’t have thought twice about giving it to you before you became self-employed.

We don’t want any of this to put you off the idea of becoming self-employed. It’s still the best feeling in the world when it goes well, and it can lead to a lifetime of financial freedom. Only the strongest survive, though, and if any of the five points we’ve raised above concern you, it might not be the best time to make the jump.