There are many rewards to being your own boss, but there are also many risks and challenges of being self-employed. Some of these are universal small business risks, while others may pertain only to your field. Although there is no way to avoid all of them, there are ways to minimize their impact.
Pros of Being Self-Employed
As a self-employed person, you get to makes all sorts of choices for yourself, as to how you run your business. This includes just about everything from deciding which services you want offer to setting your own schedule and dress code. Self-employment also means you get to set the rates for your services, and keep all the profits (after taxes) at the end of the day. These are certainly some of the stronger pros of going into business for yourself. That being said, there is no shortage of challenges faced by self-employed people.
Challenges of Being Self-Employed
Of course, not all challenges are equal, and you may not encounter them all. But some of the more common challenges of being self-employed include things like:
- No guaranteed income – When you work for someone else, you’re guaranteed a paycheck each month. When you work for yourself, not so much. As such, one of the bigger risks of being self-employed is not knowing how much money you’ll take home.
- Lots of potential costs – More than no guaranteed income, setting up your own business will likely require an initial investment including some overhead costs, and if needed, a cash infusion along the way.
- Multi-tasking duties – You probably started your own business in your area of expertise. But as a business owner you’ll need to take care of all sorts of things. Managing the bookkeeping, hiring staff, scheduling, office supplies, and even cleaning are some of the common challenges of self-employment. In other words, there’s a lot to learn, and do. Even if you don’t do it all yourself (which you probably shouldn’t), you need to learn how to manage it all.
- Marketing and sales – People can only choose to use your services if they know you exist. As an employee, unless you're in sales or marketing, you generally don't have to worry . As a business owner, again, it’s up to you.
- Motivation – While some risks faced by small businesses are more concrete, as a small business owner, you'll face abstract ones too. For example, the challenge of motivation, both for yourself, and any employees you might have. Motivation may be easy when business is booming. But it also applies when things are feeling a little slow.
- Expansion – Are you a contented team of one or do you dream of building an empire? In addition to figuring out how big you want your business to grow, you’ll also need to determine how.
Risk Management for Small Business
With all the challenges of being self-employed, it’s important to do a bit of small business risk assessment
, and then come up with ways to cope.
For example, it’s a good place to start by hedging some of your risks with general liability insurance
. Whatever your line of business, you need the type of coverage that protects you from claims as a result of mistakes or accidents.
Another important area of risk management for small business owners is on the financial end. That is, if you haven’t already done so, you should definitely learn a bit of background in terms of budgeting, bookkeeping and accounting. Even if you hire an accountant or purchase similar software, an understanding of your finances is crucial to your success.
In terms of marketing and sales, you may be best off hiring a pro. That being said, you should be doing as much as possible to brush up on your marketing skills
. You could, for example, take a marketing course at your local college, or even take an online course. Similarly, you may consider signing up for a session on how to use social media.
As for managing growth, you may find that in time you'll need to hire a human resources (HR) expert to help. In the meantime, feel free to consult with other small business owners for guidance. You can also do some Google searches to help. Once you've established your goals and considered your resources, come up with a definitive plan. Decide where you want your business to go, how you plan on getting there, and what’s next once you do.