The true cost of working for Yourself

March 18, 2008

Choosing to be self-employed. Why do we do it? More control over our careers? Yes. More money? Hopefully. Better work/life balance? Definitely. According to a recent poll conducted here on PeoplePerHour.com, a massive 59% of respondents stated that finding a happy medium in the work/play debate was a major factor in their decision to shun the trappings of ‘normal’ employment. But if new research is to be believed, many of us are simply swapping one headache for another, risking health and home in our desire to seek a self-employed fortune, forgetting what drove us to make the decision to quit our 9 to 5 jobs in the first place.

Professor Richard Scase, a business expert, recently went on record to say that, by 2015, he believes some 30% of the workforce will have non-permanent jobs. The UK truly is a nation of wannabe shopkeepers, it seems. And yet, it appears that the choice to become self-employed is far from an easy one for many of us, more of being stuck between a rock and a hard place. New research commissioned by Orange Business Services clearly demonstrates that we are increasingly aware that being a freelancer is no bed of roses: a detrimental impact on health is now the fastest growing concern when deciding whether to start up a business of our own. 34% of respondents believed that starting a business would negatively affect their love life; 33% felt it would damage their quality of sleep; and 33% believed it would make them more aggressive. Yikes. But with analysts at the Institute of Directors claiming that one in five of the UK workforce will be freelance by 2025, it seems that massive numbers are still putting potential wealth before health. Did you know that the largest UK company classification is businesses with 0 employees, with a whopping 3,262,715 companies run single handed?

The majority of those who decide to make the leap into self-employment do so in the full, eyes-open knowledge that setting up a new business or even working alone demands full-time commitment, both of time and resources, and yet the sacrifices we make in choosing to be self employed are not limited to our health. UK based accounting software company Kashflow commissioned a survey of 400 UK small business owners, asking them what sacrifices they had made in order to ensure their companies are successful. 32% said that they often forego family time, the demands of work leaving them struggling to attain that ever-elusive work/life balance. It’s harsh but true: faced with the responsibility of paying the bills, with no regular salary and an increasingly unsympathetic bank manager on speed dial, over 26,000 individuals went bankrupt or had an IVA last year alone, crippled by lack of funds and increasingly strict red tape governing small businesses. 21% of small business owners surveyed said they had increased their personal debt levels and were relying more on credit cards. 18% of small business owners said that they now have less disposable income and hadn’t had a holiday in years, while 5% bemoaned their lack of social life. No money and no spare time definitely do not make for effective work/life balance, especially as it is the increasingly impatient families of small business owners who are left to deal with the fall out as the business becomes the number one priority due to the risk and investment tied up in it.

So what is the solution? Is the only answer to rejoin the ranks of commuters and one-hour-lunchers? Ask the majority of freelancers and the self employed and they will shudder and answer with a resounding “NO”! We are, it seems, willing to accept that there may well be a substantial time lag between making the leap and living well, as long as the journey between these two phases isn’t too long. And, yup, this is where the old chestnut of good planning comes in. By no means exhaustive, make sure you’ve ticked most of these crucial boxes before you go and tell your boss what you really think of him.

1. Do I want to be a freelancer?

Be honest, can you do it? Do you really want to do it? Why? Do you have a support network? How much are you willing to invest, both time and money? You know the potential benefits but do you know the risks? Do your research.

2. Know your market

The worst thing you can do is merrily enter into a market that’s already saturated with what you do/where no freelancers operate. Effective market research is essential in finding out if there actually are people out there who want what you offer and who, crucially, will pay you for delivering it.

3. Have a business plan

Every, and I mean every, business needs a plan. At its simplest level, where are you now, where are you going and when and how will you get there?

4. Company formation

Know the rules and laws about company formation. Fundamentally important.

5. Finance

Finance isn’t just about how to pay the bills, it’s about having a back up plan, a get out clause. Investing in the services of an accountant is crucial if you have decided to establish a limited company. So is insurance. Make sure your accountant is fully up to date on the changes being made to small business taxation.

6. Spreading the word

A portfolio of what you do will stand you in good stead. Make it simple and stylish. Advertising and networking are ever-changing beasts. Become media savvy and watch and learn from how the successful people in your field made it to the top.

Nikki

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