Advantages And Constraints Of Self-employment

Advantages And Constraints Of Self-employment


Those who choose self-employment as a career usually do so for five basic reasons: personal satisfaction, independence, profits, job security and status.
Personal satisfaction: To some people, the chief reward of working for yourself is personal satisfaction. Personal satisfaction means doing what you want with your life; Being self-employed will enable you to spend each work day in a job you enjoy. For example, if you like photography, you may start your own studio. Each time a customer is pleased with a portrait, you will receive personal satisfaction. You may receive satisfaction from aiding the community in which you live. ,Self­ employed persons supply goods and services and create jobs for others. They also buy goods and services from other local enterprises, borrow money from local banks, and pay taxes.
Independence: Another advantage of being a self-employed person is independence. Independence is freedom from control of others. You are able to use your knowledge, skills and abilities as you see fit. When you are self-employed you are driven by spirit of self-reliance and individual survival. Compared to those who work for others, self-employed persons have more freedom of action. They are in charge and can make decisions without 'first having to get the approval of someone else.

Profit and income: One of the major rewards expected when starting a new business is profit. Profit is the amount of income left after all expenses have been paid. Profits go to the owner of a business. Being self-employed, you would be able to control your income. Very often, increased time and effort put into the enterprise results in increased income. This is not often the case when you work for someone else. How much do you want to earn each year after your business is running smoothly? Do you want to make 2, 5, 10 million naira or more a year? It's important to decide on income because different types of businesses have different income potentials. A fast-food restaurant has one income potential while a small manufacturing business may have quite another. It's probably tempting to set your goal at a very high level - say 15 million naira a year. Many businesses have the long-run potential of being successful; however, many businesses don't become profitable very quickly. One way to establish a personal income goal 'is to answer the question "How much do I want to be making (per year) six years from now?" .

Job security: Many enterprises are created by persons who are seeking the kind of job security that is not available elsewhere. Job security is the assurance of continued employment and income. Self-employed persons cannot be laid off, fired, or forced to retire at a certain age.

Status: Status is a term used to describe a person's social rank or position. Self­ employed persons receive attention and recognition through customer contact and public exposure. As a result, they may enjoy status above that of many other types of workers. Closely related to social status is pride in ownership; most people enjoy seeing their names on buildings, vehicles, stationery and advertisements. To some degree, all people seek status. Businesses have their status too. There. are high-status businesses and low-status businesses. For example, garbage collection is a low-status business. Some people are very interested in the status of their business and others are not interested at all. It may be an important consideration in selecting the type of business for you. The key is to choose a business that has a status that you'll feel comfortable with.

Flexibility: Individuals who become self-employed have options to start enterprises in all categories and sizes depending on their capabilities. Self-employment also gives the individual the job of being an employer and a leader rather than an employee and a follower.
Constraints Of Working For Yourself
In addition to knowing the advantages of self-employment, you should also be familiar with the disadvantages: possible loss of invested capital, uncertain or low income, long hours and routine chores.
Possible loss of invested capital: One risk of being self-employed is the possibility of losing your invested capital. The term vested capital refers to the money the entrepreneur put into starting the enterprise. As a general rule, the riskier the business, the greater the profit potential. If the enterprise succeeds, profits may be high. If the business fails, invested capital may be lost; the entrepreneur stands to lose a lifetime of personal and family savings. It may take years to repay banks, suppliers and individuals who loaned the money to get the business started.

Uncertain or low income: Another disadvantage of owning your business is the possibility of uncertain or low income. Unlike the salaries of employed workers, profits usually vary from one month to another. This is true even in well­ established businesses. When income is available, there still may not be enough to meet personal and family needs. This is often the case during the first six to twelve months of operation.

Long business hours: Entrepreneurs do not work just forty hours a week; they do not punch time-clocks. Many self-employed persons work fourteen or more hours a day, six or seven days a week. The owner is often the first to arrive at the business in the morning and the last to leave at night. Business hours are set at the convenience of customers, not the desire of the owner. For example, many market shops are open from-5:OO a.m. to 9:00 p.m. Some entrepreneurs feel they cannot leave their-businesses for more than one or two days at a time.

Routine chores: Running your own business may involve routine chores you do not like to do. You also need to be a jack of all trades. This can sometimes be a challenge if you do not join' with others in a partnership or you cannot raise sufficient funds to allow you to employ other people.

Risks: A risk is always a risk. However, you stand the best chance of success if you are prepared to take calculated risks. Calculated risks allow you to estimate the chances of failure or success without taking a gamble. Very low risk ventures have less reward in terms of profits and may lead to limiting your ideas and their follow­ up.

Time involvement: Starting a small business takes a lot of hare work. In fact, it may consume most of your day in the first few years. But in the long run, work effort, and personal involvement on the part of a small business owner can vary greatly. In many established small businesses, day-to-day activities can be turned over to a manager. Decide on the personal involvement and work effort you would like to put into your business in the future (six years from now). Quite conceivably, you'll want to continue to be fully involved, or maybe you'll prefer to be only partially involved or not involved at all.

People contact: How do you feel about working with people? Do you really enjoy it, or do you wish you could always work alone? Or are you somewhere in between? There are really three types of people contact in a small business:  contact with-customers, with erpp1oyees, and with suppliers. Most small business owners don’t mind the contact with employees and suppliers, since the owner is usually on the most comfortable side of the relationship. The owner customer relationship however, differs greatly depending on type of business  you're In. For example, in selling real estate, personal aggressiveness is important. If you don’t enjoy personal selling, don’t choose a business where it’s required. Many businesses have a much more impersonal sales approach. In most retail operations, for example, successful selling depends more on, good merchandise, fair prices and advertising than it does on personal contact with the customer. An extreme example of impersonal selling is mail order, internet or e- mail, where you never even see a customer (the customers send in orders and the owner sends out the merchandise).