Little lessons on self-employment

After having been self employed for sometime, I decided to write something about the subject. Interestingly there were many things that I have learned – among which is the debate that's going on in socio-economic circles that self-employment is a symptom of a disease while others argue that it indicates initiative and drive of people to chart their own destiny towards financial freedom.    

Wikipedia defines self-employment to be “someone who works for himself/herself instead of an employer. The gains or income of a self-employed person usually come from a trade or livelihood that he or she operates personally. Self-employment can be considered as a form of business on a very small scale. However, it is not to be understood that one is already a “business owner” in the formal sense. Unlike self-employment, a business owner entrusts many parts of the business to employees on a day-to-day basis.

A self-employed takes care almost every aspect of the business -- from purchasing to processing, to pricing and to marketing and selling. He/she does this almost every single day that to get sick is a price that he/she has to pay dearly. Thus, to be physically fit is not only a requirement for those who are employed but even more to the self-employed.

I learned that there are two types of self-employees -- those who work for themselves to make a living and those who work for themselves with goal to make a gainful living. Those who are self-employed for survival are categorized by economists as informal traders or part of the “informal economy.” They are those who make their living out of selling e.g., as cigarette vendors, newspaper boys, fishball and peanut vendors, shoe-shiners, eatery owners, fruit and vegetable retailers or those offering blue-collared services for a fee such as mechanics, carpenters, plumbers and the like.    

There are those who are self-employed but who do not fall under the informal category. They are usually skilled persons or professionals who offer services with a fee but (unlike the informal economy) are paying their taxes and permits to practice their trade like doctors, accountants, real estate brokers, insurance agents, salon owners, lawyers, consultants and etc.

Whether you are in the formal or informal category, to be self-employed has its many disadvantages. And as I’ve mentioned, getting ill is one of them. A day’s absence could mean a day without food for those who are in the informal economy; a lost in opportunity for the professional practitioner. 

Since health is an important issue for a self-employed, investing in health insurance is not only expensive but difficult. HMOs (Health Maintenance Organizations) usually frown applications for health insurance to self-employed persons. The reason being, HMOs make better profit from group insurance than for personal coverage. And getting a health insurance thins out your chances when you’re above forty. 

Self-employment is risky. That is also the reason why most creditors have second thoughts on extending a clean credit facility to them. Unlike in a corporation (where financial responsibility is spread across the investors of the company), creditors can run after the owners of the business. A self-employed person is usually left with no choice but to assume the cost of putting up a business. He/she assumes hundred percent of the risk. That’s why it is often difficult for a self-employed to recover from a crisis than for a business that’s owned by several people.

To be self-employed means having to be your own boss but to be your own employee as well. Yeah, you are the CEO, the CFO, the CTO…you have all the ABCs in your name but you’re there to also do EFG’s job including XYZ’s at the same time! When you’re self-employed you’re in charge of the wheel but you need to put up the tires and fix the engine!

To be self-employed means sacrificing much of your social life. Imagine having to sit all day, do all the work yourself without seeing a shadow of a human around you. If you feel like giving up your eight-hour job in order to be your own boss, think again.

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