THE 3-levels of Self-employment
Cynics never contribute!
Sceptics never create!
Doubters never achieve!
SINCE the felonious activities of certain unscrupulous organisations at the root of the global financial meltdown of 2007-8, the UK Governments ‘Start-up Britain’ initiative anticipates new business start-ups for the year 2018 to be well in excess of half-a-million.
Ever increasing numbers of people want to escape the pressures associated with working for a boss and a 2013 US survey returning a verdict that 7-out-of-10 full-time employees ‘hate’ what they do gives credence to the above.
Being an employee has its perks of course; someone else takes care of workplace administration including deducting income tax and settling National Health Insurance (NHI) contributions to satisfy Her Majesties Revenue & Customs (HMRC) and Department of Works and Pensions (DWP). However, an employee is only paid what their ‘job’ is worth, rarely what ‘they’ are worth.
This blog looks at the pros and cons of the three levels of being your own boss, viz:
· Self-employed Sole-Trader
· Self-employed Business Proprietor
· Self-employed Business Entrepreneur
The simple but vital differences between the three propositions of self-employment:
Self-employed Sole-Trader ~ if you don’t want to be at the summons, control or service of another, your initial aim as a sole-trader will be to satisfy ~ or improve ~ your current lifestyle or what’s the point of becoming self-employed? But, not having a boss doesn’t mean you will expend less effort.
On the contrary, a sole-trader still has a ‘job’! The difference is you direct your available time and talents into maintaining a position in your chosen marketplace, administering your business protocols and satisfying HMRC and DWP. Though more freedom may come in due time, you can reasonably expect your early years to demand significantly more than an 8-hour working day over a Monday to Friday week.
TWO PROs: 1) you set your own hours without someone chasing your tail! 2) The Internet offers an opportunity for marketing and business administration not previously available!
TWO CONs: 1) you set your own hours without someone chasing your tail! (Yes, this is deliberate repeated) 2) Sole-trading is a highly demanding occupation!
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Self-employed Business Proprietor ~ if you excel at what you do as a sole-trader, there will be increasing demand for your products and services that you won’t satisfy on your own. As you put into practice your desire to select and train others to duplicate what you do, you ‘may’ multiply your individual efforts by achieving leverage. In other words, you add the performance of those you recruit ~ through effective, appropriate and sustained recruitment ~ and man-management.
As you organise yourself ~ or engage the expertise of appropriate consultants ~ and build an effective ‘team’, your profits should increase. Though business maths is never a precise science, you could reasonably expect to equally split each additional employee’s gross production across the three business headings of:
1. Operating Costs (including their wages)
3. Profits (see Entrepreneur below).
TWO PROs: 1) as profits rise, you could employ/engage more people to expand your business further! 2) you release your time to think about, plan and organise new and improved ways to grow your business!
TWO CONs: 1) if your business does not accumulate a perceived market value you will not have an exit strategy! 2) selecting, recruiting, training and managing demands acquired disciplines!
Self-employed Business Entrepreneur ~ as and when your efforts as a Business Proprietor generate greater and greater profits you must inevitably attract a higher and higher tax bill. One legitimate way to keep more of your hard-won money is to divert excess profits into other operations, which may include other people’s businesses ~ or even registered charities (see In-A-Nutshell below).
Businesses to invest in may include other people’s new start-ups as well as established organisations that require cash and/or expertise to help them raise their profile in their chosen marketplace.
Investing in someone else’s business is always a high-risk tactic requiring in-depth commercial analysis which is still no guarantee you will increase your return on investment (ROI). However, paying away your profits in higher taxes is always a guaranteed loss.
TWO PROs: 1) spreading your spare cash over other commercial operations can be an effective tactic to reduce your risk exposure and tax bill! 2) you have existing executive management in place within another’s business so no need to recruit!
TWO CONs: 1) if you can’t afford to lose your money, you can’t afford to invest in someone
else’s business! 2) you have executive management in place within another’s business (Yes, this is deliberately repeated)!
As reviewed within recent Thought4TheWeek, less than 5% of new business start-ups survive beyond their 10th birthday ~ revisit BLOG May & June. There is a view however, this ‘success’ percentage is dramatically improving as more Internet businesses launch. A counter view claims the accelerating rate of Internet businesses only increases competition.
When people won’t discipline themselves within their chosen self-employed strategy they pay the price often citing lack of support, or lack of money, or lack of time as the reason for their failed adventure. Whilst these may have some validity in some situations, the ultimate resource of all success in business is maintaining ‘the dream’ ~ come what may ~ which may mean starting over and over again. It is the dream that fuels emotional fortitude and sustains your resourcefulness through difficult times.
Remember: Cynics never contribute, Sceptics never create, Doubters never achieve!
To explore your chosen strategy and obtain a FREE and CONFIDENTIAL assessment of your self-employed potential, email email@example.com or call 044 (0) 7900 251258 ~ this offer closes 31st August.