Before you take the plunge, make sure you have a plan and clearly understand whether you're well suited to entrepreneurship.
We all know someone who's self-employed and seems to be successful and enjoying the lifestyle. So is self-employment right for you too? After all, the number of self-employed people in Canada is growing rapidly. Part of this is due to a strong economy. But even downturns can create opportunities because when people find themselves unemployed, they may choose to set up their own businesses.
According to Tara Gilbert, CEO of Small Business B.C., which is part of the federal government's Canada Business Service Centre Network, 98% of the businesses in Canada are small businesses. About 80% of those are micro-businesses, meaning fewer than five employees. And three-quarters of that number are service-based businesses, which is where most self-employment opportunities can be found. "Some of the strongest areas are in business services, health services, information technology and culture industries," Tara says, "For example in health services, opportunities would include consultants, personal home care attendants and alternative health care providers. These can be home-based businesses or they can be services delivered in clients' homes."
So the opportunities exist, but are you a good candidate for self-employment? "People choose self-employment for many reasons," Tara says, "These can include increased independence, flexibility, autonomy, and the ability to be more creative and innovative. There are also taxation benefits that attract some people to self-employment."
Independence, flexibility, autonomy, and the ability to be more creative and innovative.
"It really comes down to the lifestyle you're looking for," she says, "You may want to earn a living while being close to your family, and to achieve that lifestyle, you're willing to earn less money. It's true that some self-employed people actually make more money, but when you consider earnings per hour, they generally make less than salaried employees. But regardless of what you earn, the satisfaction levels of self-employment can be quite high. It's great for people who like to see the direct impact of their efforts. Instead of having your contributions diffused in a large corporate environment, results are personally attributable."
But before you decide to go into business for yourself, it's important to be prepared and research your concept beforehand. "First and foremost is knowing yourself," Tara says, "You have to decide whether self-employment is a good fit for you. To succeed, you should be the kind of person who has vision, is idea-oriented and innovative. You also have to be persistent because it takes an awful lot of work to get your ideas into reality."
Other desirable attributes include a tolerance for risk and ambiguity, since you have to be able to deal with the ups and downs of the business cycle. You also have to be able to anticipate markets, trends and customer wants and needs. "Discipline and organization are incredibly important," stresses Tara, "If you're used to an employment environment, you've likely had a fair amount of direction. But as a self-employed person, you have to set your own direction. And beyond setting the direction, you actually have to get it done. It's an interesting blend-not only do you have to be conceptually-oriented, you also have to be a doer."
Not only do you have to be conceptually-oriented, you also have to be a doer.
Of course, there are also downsides to self-employment. "You may think you're going to start a business and be this incredibly creative force-which in fact you can be!-but many people experience some challenges," Tara points out, "While you don't have a boss in the traditional sense, you have a new boss: your customer or client. Also, when you're starting a venture, often you're the accountant, secretary and doer of all things. That means more than a 40 hour work week, with no paid vacation time or the other benefits that come with employment."
One fortunate statistic is that your chances of succeeding as an entrepreneur are equally good regardless of whether or not you were pushed into it by circumstances. "Even if you were downsized and this led you to become an independent consultant," Tara says, "This in no way impacts your likelihood of success."
Are you a "seniorpreneur"?
Seniorpreneurs-usually retired people who start up a business after retirement-are a fast growing segment of the self-employed sector. Since they're generally 55+, Seniorpreneurs may not actually be retirement age, but they may have retired early and are now working as private consultants or service providers. Seniorpreneurship gives them the opportunity to go into business for themselves while continuing to use the skills they used in the workforce.
Where to go if you're considering self-employment.
The federal government's Canada Business Service Centre Network operates Business Centres across the country that provide information, advice and support for new and existing entrepreneurs. This free service can help you decide whether or not you have the personality, skills, knowledge and abilities for self-employment. Resources include information on setting up your business, taxation, financing, regulations and more. Visit cbsc.org for more information.
How to avoid the pitfalls of self-employment.
The unfortunate reality is that there's a fairly high failure rate among self-employed people. "After five years, 50% of small businesses will no longer exist," says Tara Gilbert of Small Business B.C. (www.smallbusinessbc.ca), "Of course, not all of these are actual business failures. Sometimes the economy or a certain sector will improve and lead people from self-employment back into the job market."
The best way to stay self-employed for the long term is to avoid some of the mistakes people often make. "The most common pitfalls relate to finances," Tara points out, "You may be generating enough revenue, but what often happens is that you're not managing the flow of funds very well. Maybe you're not collecting on your accounts receivable and managing your payables effectively. Or maybe your business was undercapitalized in the early planning stages."
Another problem is inadequate planning. "It's hard to succeed in business if you haven't taken enough time to do the research and planning," Tara says, "This gives you benchmarks that let you know when your business is going off track. Often, by the time a small business is in trouble, it's too late. If you have an effective plan in place, you can recognize the warning signs much earlier."
"The entrepreneurial ego can also lead to trouble," she says, "This is when entrepreneurs do everything themselves, grow really quickly and don't bring in the required expertise early enough to move the business forward. This can lead to uncontrolled growth and failure because there's no plan, and no one's in place to handle things like managing the cashflow properly."
