Self-employment: Is it Right for You?
Before deciding to become self-employed, it’s a good idea to think through the implications of working for yourself…
This guide will show you:
- The pros and cons of self-employment
- The personal qualities you need
- The business skills you need
- How to make sure your family life is not adversely affected
Reasons for becoming self-employed
Have clear reasons for taking the decision to become self-employed, and a vision of what you want to achieve. Begin by asking yourself the following questions:
- Do you know exactly what you are going to do?
- Does it use your strongest skills?
- Can you make enough money doing it?
- Do you know where you want to be in five years’ time? Will self-employment help you get there?
People choose to become self-employed for a variety of reasons, but merely disliking your current job, or perhaps not having one at all, is not necessarily sufficient. Thinking about these questions will help you evaluate the idea of self-employment from a realistic perspective.
The pros and cons of self-employment
Many of the issues regarding self-employment have both positives and negatives. How you view them will help you decide if this is the right move for you.
Potential advantages of self-employment
- Reaping the rewards of your own efforts, with the potential to earn more in the long term.
- Independence and freedom: enjoy more control over what you do and when you do it.
- The choice between working full or part-time: ideally, you can also set your own hours, and so potentially enjoy a better work/life balance.
- Improved quality of life and increased job satisfaction, perhaps thanks to cutting out the daily commute, avoiding office politics, or being able to focus on the aspects of your career you most enjoy.
Potential disadvantages of self-employment
- More stress as responsibility for success or failure lies with you: you are responsible for losses as well as profits, have no paid holidays or sick pay, and are likely to earn less in the short term.
- No one to manage you, keep you on track or provide motivation or moral support.
- Less time with your family as business commitments mean you work long hours.
- Isolation from colleagues and customers.
- Responsibility for your own tax, and with no company pension scheme you will have to make your own pension arrangements.
The personal qualities you need
Your success in becoming self-employed and setting up your own business will depend on both your personal qualities and your business skills. Evaluate yourself and get feedback from colleagues, friends and family, to obtain an honest appraisal of your qualities.
The main factors for success in starting a small business are:
- Drive and determination.
- A well-defined set of objectives.
- Hard work.
- A willingness to listen – and learn.
- Common sense and realism.
- A very clear focus.
The business skills you need
Ask yourself whether you have the right practical skills for the type of business you want to run. By looking at how other businesses operate you can see the variety of skills and knowledge you might need to make your self-employment a success. Typically these might include:
- Time management.
- Sales (both selling yourself and your idea to lenders, investors, potential partners and employees, and selling your products and services to customers).
Do you have these skills already? Can you see any obvious gaps in your skill set? If so, you could:
- Hire someone else to fulfil the skills that you lack, either by taking on an employee or using a freelancer.
- Take a training course to acquire the skills yourself.
Working from home
Many self-employed people, particularly those starting up a business, choose to work from home. Find out more with our guide to Working from home.
Tax and National Insurance issues
If you become self-employed, you must register with HM Revenue and Customs. You can register online or call 0845 915 4515.
HM Revenue and Customs will send you the Starting up in Business guide that explains the records you need to keep, how to pay your National Insurance and how your tax will be worked out. Each year, you will be sent a self-assessment tax return to fill in.
How to make sure your family life is not adversely affected
Becoming self-employed can mean a huge change in lifestyle. Ensure your personal life is prepared for this move.
- Ensure that family and friends are aware of how your life will change, and how they may be affected.
- Prepare those who depend on you for the possibility that your income could fall initially, and that long term it may be less predictable or regular.
- Be aware that there could be increased financial and emotional strain for both you and members of your family.
Making a long-term success of self-employment
If your move into self-employment is successful, you will probably want to make it a permanent part of your life. Think ahead and ask yourself:
- How do you want your business to progress and expand?
- Do you want to grow to take on more staff and become an owner-manager or do you want to remain a sole trader?
- How would your business goals be affected by changes in your personal life such as children, marriage, or caring for an elderly relative?
This Self-employment: Is it Right for You? business advice article published in association with Lloyds TSB.
Whether you are looking to start-up a business account or want to move your existing business account Lloyds TSB can offer you all the Business Banking support you need
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