Being self-employed is one of the best decisions you can make in life. From freedom to job satisfaction, self-employment offers a myriad of benefits.
Despite the perks, self-employment has its fair share of challenges.
In this article, we are going to look at the various challenges entrepreneurs face in their line of work.
Let us dive into details.
- Lack of proper financial planning
As surprising as it may seem, many self-employed individuals are not prepared in case of emergencies or calamities.
Take an example of the current coronavirus (COVID-19) crisis. The pandemic has been brutal to businesses. A few months after the deadly virus broke in December 2019 we saw and are still seeing many businesses go bankrupt and others are closing down. Most of those that are still operating are hanging by the thread. In America, the government had to intervene and offer stimulus relief for self-employed persons.
That alone is enough proof that most self-employed people are not prepared to handle catastrophes. Additionally, research has shown that most of them have no healthcare or retirement plans. Such a lack of emergency savings has a detrimental effect on the business when financial crises happen.
- No guaranteed income
Unlike employed persons, self-employed individuals have no guaranteed income. Thus, many people working for themselves do not know how much money they take home at the end of the month.
If they are lucky, they will take home a substantial amount of money and enjoy life’s luxuries. On the other hand, when business is undergoing a crisis, they may have little or no money at the end of the month.
Also, people who work for themselves have problems coming up with their salary amount. As a self-employed person, when you overpay yourself, you risk putting your business in a financial crisis. With little pay, you cannot cater to your personal bills, putting you in a bad state of mind and unable to conduct business processes as they should.
Over the past few years, we have seen various campaigns that advocate for self-employment. Coupled with the lack of white-collar jobs, men and women are quickly jumping ship from seeking employment in various institutions to self-employment.
With the increased number of self-employed people, the competition also saw an upward trend. Now, entrepreneurs have to think outside the box to be competitive. From marketing to the innovation of quality products, self-employed persons are under constant pressure to come up with the best products and services in the market if they are to establish themselves as authorities.
- It can have a detrimental effect on your personal life
Unlike your normal 8-5, being self-employed requires you to spend extra time working on your business. Especially for startups, entrepreneurs tend to devote all their time to their business for the first few years of operation. As much as this is to ensure the continuity of the business, it can be stressful and take time away from your family and friends. Over the years, this might cause a strain in your personal relationships, among other things.
Starting a business is great. However, it comes with its fair share of stresses. Self-employment means that you have to come up with the capital to finance the business. Also, you need to break into the market and build a client base, which is never a walk in the park. All these stresses might wreak havoc on your physical and mental well-being.
To avoid such unwanted effects, it is important to understand that a business takes time to flourish. You will also need to prioritize your time to make sure you attend to your business as well as spend time with your family and loved ones.
- Financial management
Only a few self-employed people venture into business having a clear understanding of finances. A majority of them that understand the basics of handling money are self-taught.
Financial management is a sensitive topic in running a business. Entrepreneurs need to understand how to create budgets and stick to them, how to reduce debts, pay taxes, pay themselves, and review their finances.
Also, considering that the self-employed need adequate capital to finance their business, it is advisable to apply for a loan. However, with inadequate financial education, businessmen might not use the money wisely, landing the company into further debt and eventually dragging it into bankruptcy.
As much as being self-employed makes you susceptible to facing the above-named challenges, it is a worthwhile journey that is full of fulfillment. However, it is by addressing the above challenges that you position yourself for a successful journey as a self-employed professional.