Entrepreneurship and being self-employed are often thought of as going hand-in-hand. Naturally, starting up a business requires a degree of initiative and entrepreneurial thinking. However, this isn’t to say that being employed by a business doesn’t also allow entrepreneurs to thrive. So, what are the pros and cons of being self-employed?
By Elena Carruthers. Published 28 July 2022. Last updated 11 January 2023.
The terms lawyer and solicitor are used interchangeably in the UK but don’t always mean the same thing - so it’s a good idea to explore each in more depth.
There is no one way to define an entrepreneur. For some, being a self-starter with their own business is what an entrepreneur looks like. To others, an entrepreneur is someone who works a 9-5 and has multiple other streams of income, or even somebody who just continually drives innovation in their day job. Entrepreneurship is not a particular type of work but rather a way of thinking. The question for business-minded students and graduates is deciding whether self-employment is the right route for them.
Self-employment is an umbrella term used to describe anybody that works for themselves, either registering as a sole trader, becoming a business partner, or establishing a limited company and hiring other employees depending on the type of work.
Having a start-up company opens up the door to travel and work in various different locations. It’s also easier to take a holiday as there is no approval process required. This means that there are essentially no restrictions for when, or for how long, a self-employed person can go on holiday. Rather, it is down to the individual to use their initiative and decide whether they have capacity for some time off.
Owning your own business means you own all of the processes within that company. Business owners are constantly innovating, taking chances, and exploring new avenues for developing the business. Whereas if employed by a company, there is not so much freedom and control to make such changes and take ownership of the process.
Self-employment provides strong earning potential as people have more control over their own progression. Going hand-in-hand with the flexible lifestyle, individuals who work for themselves can go over and above to work long hours on some days, network, and reap the benefits of their hard work. For many, this aspect of self-employment is more motivating than having a fixed salary.
Less employment benefits
One of the best things about being employed by a company is benefits such as pension contributions, annual leave allowance, private medical cover and so forth. Benefits will vary from company to company but will share some common benefits such as having 28 days of paid annual leave including bank holidays. Self-employed people on the other hand, will not make money during any time off they have.
Benefits such as pension contributions are also very important for ensuring stability for the future. Self-employed people still have the capability to pay into a pension but may have to wait until they are earning enough in order to do this – while employed people have the security of their employer paying at least 3% of their salary into a pension.
While the potential to earn good money is there, income is much less certain for start-up businesses. If the demand for that service becomes less and there is difficulty in gaining or keeping clients, income will drop.
Financial instability is challenging when having to pay for rent, a mortgage and other such expenses, so self-employed people generally have a plan of action and solid amount of savings in place for emergencies.
Experience is essential
Some people start up a business when young and are very successful. However, it is ideal to gain solid experience before taking the plunge into self-employment. Those who delve into it when too inexperienced might become overwhelmed and struggle to make ends meet. A 2019 report by IFS found that 20% of sole traders’ businesses fail within a year and 60% within five years. It is certainly a risky business and one’s chances of success are much higher with a business degree, strong experience and industry knowledge.
Many young entrepreneurs gravitate towards the idea of being a business owner. As entrepreneurs are independent, creative, and bold, this often stands out as a career path as it gives individuals the flexibility to build their own unique brand. However, even the most confident, risk-taking business owner knows that self-employment is not without its pitfalls. It simply comes down to timing, experience and what is right for the individual but the ultimate benefits of building your own successful lifestyle business can be fantastic.
All in all, being employed by a company and being self-employed can both offer lucrative and fulfilling careers. Entrepreneurs can develop themselves in either career path or opt to try both at different stages of their lives.
Explore your entrepreneurial skills and learn more about the courses offered by The University of Law Business School.