Being self-employed or starting a small business is the first step on the entrepreneur ladder. Most people get excited and fired up when starting out on their own. They want to be their own boss.
The emotional trigger of an employee is security. Whereas for a small business owner/ self-employed person, the main driving force is to control their own destiny. In most cases, people start out with just one employee: themselves.
Self Employed/Small Business Trap
In the majority of cases, the impulse to start their own business comes when people are unemployed or between jobs. They get a flash idea that they can do a much better job than their boss. Without much preparation or thought, they start their own business. Their mindset is still that of an employee. They feel they are the experts in their field. This is the first major mistake. They start a business on what they can make rather than starting a business on based on what product they can sell.
This is the starting point of self-employment trap.
A self-employed person is an extremely busy person. Firstly, they have to chase work i.e. find new clients through sales and marketing. Then they have to work to complete the job and deliver on schedule. They are always buried in work and tend to lose the vision for which they started the business in the first place.
They don’t have a vision or know how to grow the business. Their business is centered on their particular skill. A TV technician will start a TV repair shop and will be satisfied if he has enough work to keep him busy.
In most cases, small business owners are worse off than those employed because they find it difficult to even go on a holiday. They are still trading time for money but without the perks of an employee. Their attitude towards money is same as an employee. They have to “make money” in their business which is the same thing as “earn money”.
Most people have little or no knowledge about cash flow. They think advertising is a waste of money. They lack the skills to put systems into their business so that it can operate without them. Their entire business is centered on them, and they do not trust or delegate authority.
This is also true for self-employed professionals like lawyers, accountants, and medical practitioners etc. who try and set up their businesses.
Most small business entrepreneurs become frustrated sooner than later and give up at this stage, which is why 80% start-ups fail within two years of their launch.
Walking Through Fire
Being an entrepreneur is like walking through fire. Being self-employed or owner of a small business is the most robust stage of financial growth. When starting out you are a one-man army and don’t have funds to hire best people to advise or support your business. Unfortunately, there is no way to bypass this stage and climb the next step on the financial ladder to freedom.
There are some solid reasons for you to succeed as a self-employed:
- No Hourly Rate – You learn the art of selling. If you become good at marketing and selling there is no hourly rate. You can determine the level of your income through your determination and hard work.
- Company Structure – you will learn about company structure such as holding company and trading company.
- Accounting – This is the lifeblood of any business. You will learn about cash flows and balance sheets. Cost reduction is a critical aspect of running a business that you will learn.
- Work Ethics – As you are central to your business you will learn values of hard work and discipline.
- Communication skills – To succeed in your business, you will not only have to improve your communication skills but also learn to develop networks.
- Taxation – To improve the bottom line of your business, you will be forced to learn about tax and legal aspects.
- Time Structuring – Compared to an employee, a self-employed person has control over his time. In order to run an efficient business, a person improves his time management skill.
- Cash Flow Management – To succeed at this stage, you have to learn cash flow management.
Running a small business or being self-employed is a steep learning curve that pays rich dividends at next stage of financial growth.
Moving Up from Self-Employed
To move up from being self-employed, you have to first broaden the vision for your company. You have set higher goals for your company. Next, you have to chalk out a plan for growth of your company. You have to draw out an organization chart for your employees and assign specific jobs.
Most importantly: you have to stop thinking yourself as a worker but as a business owner. If you are an electrician, then do not think yourself as an electrician but the owner of an electrical business.
The next step to wealth creation is to graduate to being a business owner.