Being your own boss, hanging out your shingle, striking out on your own. In a society that reveres rugged individualism, self-employment has always had a certain allure.
In fact, each month from 2002 through 2007, just under 300 of every 100,000 adults in the US started a business, the Kauffman Index of Entrepreneurial Activity indicates.
When the economy is strong, people may try self-employment because the opportunities seem plentiful and financing is easy to get. And in harder times like these, it can seem a tempting option for people who have just been laid off — or are watching as colleagues all around them lose their jobs.
But mystique aside, is self-employment always an attractive option?
Working for yourself offers distinct advantages and they go beyond the ability to wear slippers to work. You can say goodbye to that usually pointless 10am sales meeting, for example. Your schedule is often your own.
If a one-person business succeeds — well, owner takes all. And when opportunities surface, there is no bureaucracy to slow response time.
Brian Wilkerson, global practice director for talent management at Watson Wyatt, experienced the pluses and minuses of self-employment when he owned and ran a consulting business.
Among the pluses, he says: “If I have five big service lines in a big consulting company and a client comes with a request, we go through a whole big process. If I’m on my own, I can respond right away.”
He said he used to get two or three calls a month from people thinking about starting a business. But in the last six months, he has heard from two or three every week. He suspects that some are weighing self-employment as a stopgap, not as a long-term choice.
All his callers may find, however, that being their own boss is harder than they expected.
Preliminary results indicate that the rate of people going into business for themselves actually declined last year, said Robert Fairlie, a professor of economics at the University of California, Santa Cruz, who developed the Kauffman survey. He said that may be because new businesses found financing harder to get.
Apart from the money, switching from corporate functionary to swashbuckling entrepreneur isn’t nearly as simple as it seems. Isolation and loneliness are possibilities and the risk of failure is high. Fewer than half of all startups survive five years and only 25 percent last 10 years, said Ari Ginsberg, professor of management and organizations at the Stern School of Business at New York University. Moreover, a failed stint in self-employment is not exactly a plus for a resume.
What helps, experts say, is thinking of self-employment as a business problem and adjusting corporate management skills to a one-person operation.
Consider performance measurement. An independent marketing consultant needs a set of business goals just as much as a mid-level corporate marketer needs performance objectives. A writer I know sets goals for how many words she will publish each year, how many publications she will approach for assignments and so on.
“Self-employed people need to create a structure for themselves and a schedule,” said Howard Seidel, a partner at Essex Partners, an outplacement and career counseling firm specializing in senior executives. “They need to create measurements for themselves. If you have a business plan to map against, you can look at what you’re doing.”