What to consider before going self-employed

Is going self-employed right for me?

Being self-employed isn't for everyone. 

It has both its benefits and drawbacks, and there are a number of important questions you should ask yourself before you proceed. 

For example:

• Do you have the financing you need to get a new business off the ground?
• Do you have a plan for how you'll attract clients/customers?
• Do you understand what's involved in managing a business, when it comes to things like record-keeping, paying tax and controlling cashflow?
• If necessary, do you have premises from which you can operate?
• Can you do without the benefits that come with being employed by someone else (for example, paid leave, sick pay, pension contributions)?
• Do you have the equipment you need, or the money to buy it?
• Is it the right time? Do you have things going on in your life that might affect your financial situation (for example, a house move or a wedding)?

Pros and cons of being self-employed

Pros

• Run your business the way you want
• Set your own working hours
• More flexibility when fitting work around your home life
• Better earning potential - rates for self-employed workers are typically higher than salaries paid to employees
• You take home all of the profit you make (after tax)
• Base yourself where the work is - no need to commute if you don't want to
• Often more variety if you're working for different clients at the same time
• Benefit from certain tax deductions
• Good if you like working alone

Cons

• Long hours, particularly in the beginning as you establish yourself
• Can be difficult to find clients
• Setting up a new business can be expensive, so you'll need that initial start-up cash
• Income can fluctuate, making it vital that you stay on top of your finances
• You must handle the admin that comes with running a business - paying taxes, keeping records, complying with the law
• The business's success or failure is your sole responsibility
• No paid leave, sick pay or company pension
• Can make getting a mortgage a little more challenging
• Sometimes hard to maintain a proper work-life balance
• Can be lonely if you're used to working alongside other people

What does it cost to go self-employed?

The cost of going self-employed depends on what it is you'll be doing and how you'll operate.

If you need premises, equipment or to hire staff, for example, these are all expenses that you'll need to factor in when working out what it will cost to start your own business.