Self-employment: the opportunities and risks at a glance

Self-employment: the opportunities and risks at a glance

No one to tell you what to do and when to do it. No involvement in ossified structures of a business that may have been around for decades. For this the knowledge that every handshake you do is only for you, every cent earned is for your benefit. Admittedly, self-reliance exerts very powerful attractions. But where there is a lot of light, there is also shadow, as is well known.

The big opportunities

Every self-employed person is likely to have their very own list of benefits in their head, stating what they are striving for. In general, however, there are a number of different favorable perspectives in every type of self-employment and in every possible profession.

Being your own boss

Since probably the most important reason is that of being accountable only to themselves. Ultimately, self-employment is the only way to achieve professional success without being told what to do from "above. True to the quote of the poet Jean Paul. "Go not where the road may lead, but where there is no road, and leave a trail".

Of course, the self-employed person will also have to adhere to guidelines – from his hopefully numerous clients. But, and this is the big difference, as your own boss, if you don't like something, you can just turn down an assignment without being immediately cited to the HR office.

Working only on your own account sounds pretty tempting to quite a few people. But self-employment is a coin with two sides. Photo: ©Gorodenkoff/Fotolia.Com

Define a profession from scratch

There are certain well-worn rituals for every profession. And anyone who wants to start their own business is, maybe just deep down, a bit of a revolutionary, too. Because at the end of the day, opening your own business is also an expression of your desire to do differently what you've previously experienced elsewhere, in your own way.

Not everyone wants to or has to reinvent the wheel; most people are already satisfied with improvements in detail. But it can also be completely different – if you think, for example, in the direction of the visionary Elon Musk, who, with his car brand Tesla, is currently taking a completely different approach to everything that was previously considered to be cast in concrete for the automotive industry, and who is not even afraid to launch one of his cars into space by rocket as an overly clear statement.

Of course: money

Whether with a collective bargaining agreement or a salary grade. The vast majority of working Germans are classic "wage earners" – completely value-neutral. And unless you're in a profession or a company that pays bonuses, you'll find the same amount in your account every first of the month. Of course, that gives security. But in good times and no matter how hard you try, the sum does not get bigger.

This is where the self-employed perhaps have the most visible advantages. Because the harder you work, the more jobs you complete, the more clearly it is reflected in your bank account. Of course, the self-employed must keep their accounts in order. But everything that remains beyond that belongs to him.

Showing others that things can be done differently

"Others". This is a broad term. For the purposes of this article, these can be direct and indirect competitors – but also customers and potential employees. But no matter how you define "others," they all have something in common: the opportunity to prove to them, through his work as a self-employed person, that typical behavioral patterns, as much as you might associate them with this industry, don't always have to be the case.

The master craftsman can show that the unhealthy overtime mentality of this industry can also be regulated in other ways. The hotelier that trainees can be more than cheap labor in this profession. And the IT manager, that especially today it is no longer necessary that employees, who only sit at the computer, have to come to the company every morning for it.

Self-employed people have the power to change things – including, for example, employee responsibilities. Photo: ©bernardbodo/Fotolia.Com

There are thousands of ways to make every industry a little bit better. But only the self-employed have the power to do the same. Loosely based on Robert Bosch: "I don't pay good wages because I have a lot of money, but I have a lot of money because I pay good wages".

Showing social responsibility

And at the end of the day, one thing must always be kept in mind: In Germany, outside of the public sector and the churches, there would not be a single employee if there were no self-employed people. Even the nation's largest employers, with thousands and thousands of employees, were often founded by no more than a handful of courageous individuals.

Therefore, not only today, but always, self-employment is also social responsibility. First of all, of course, if one brings others into wages and bread – even if it is only a part-time employee for the office. But already the one-man business takes responsibility – alone, because the tax burden is quite high.

The undeniable risks

The first chapter has put an extremely strong hand on the table. However, it is also a fact that self-employment comes with a whole series of risks. Risks that can be quite enormous.

The boss bears all the burden

If you own a car, you alone pay the taxes, the insurance – and if you cause an accident, you alone bear the damage. The situation is no different in self-employment. Of course, after taxes, the profits belong to you. But if the money is not enough, the boss comes last. And then it is not surprising that failed self-employment is one of the most frequent reasons for insolvency. Times of crisis or a weak start not infrequently require additional loans to cover running costs.

Of course, there are several ways to avoid such a situation beforehand. Often unnecessary expenses can be reduced through debt restructuring. Depending on the credit agreement, the potential to reduce costs differs. And also by the fact that the company is founded with consideration as "limited liability company" and/or "entrepreneur company (haftungsbeschrankt)", the financial risk can be minimized somewhat.

Founders will always have more overtime than their employees. Photo: ©Alina/Fotolia.Com

But: If a company moves towards insolvency despite all countermeasures, the employees are "only" unemployed. The boss, on the other hand, is sometimes faced with a mountain of debt – even if it's just his contribution to the company.

It's never Nine to Five

It's already in the concept of self-employment – self and constantly. And this is more than just a founder's joke. Even though your own business gives you theoretically and practically all the freedom you need to manage your time, the reality is that the vast majority of self-employed people spend far more hours of their lives on their business than any employee.

In part, of course, it is due to passion – the company is the "own baby", with which one likes to deal and which therefore often does not feel like work in the classical sense. The other part, however, is necessity. Especially in the difficult first years, so much has to be managed that many founders can only dream of 60 hours per week.

But even if this initial surf has been successfully navigated, for many bosses it often doesn't get any less. These can be busy months or even years that you simply have to take to secure yourself for the long term. But it can also be the recurring standards that require boss presence and thus ensure that no workday ends when it does for employees.

Self-employment requires more skills than the actual profession

This point is dangerous because so many founders forget it. Because no matter in which area one settles, one will never work as a self-employed person exclusively in this field of activity, but do things that are completely unrelated to one's profession.

Self-employed people should often have skills that go beyond their original training. Photo: ©audy_indy/Fotolia.Com

Of course, the master roofer has to master accounting, the architect has to be his own IT technician, the baker has to know the tricks of credit negotiations. The only way to get around all this is to spend money – either by outsourcing the work or by hiring your own people. And often enough, these tasks take up more space than the actual job itself.

When the boss is sick, the company is sick

Self-employed have it hard. Not only because, for example, they can only get loans under difficult conditions and have to observe a lot of laws. But also because illnesses are a problem.

The normal employee goes to the doctor in case of illness, gets a sick note and is then entitled to six weeks of continued payment of wages. This in itself is a natural burden on one's employer. But the boss himself also runs the risk of falling ill.

In many cases he already has to take out private health insurance – only in exceptional cases is it possible to remain in the GKV (statutory health insurance). And no matter how he is insured, if the self-employed person is sick and has no employees, the business stands still. The GKV pays only from the 43. Sick day. And many PKV (private health insurance) want proof that the insured is unable to work at all. In addition to the fact that the sick self-employed person cannot generate any income, he has to support himself out of his own pocket for a longer period of time.

Responsibility is a heavy burden

Every ship has a captain on whose shoulders the burden of command rests. And it looks the same in self-employment: The boss commands and bears the responsibility for everything that results – even if others cause mistakes.

Now you don't have to sketch out scenarios of employees having accidents. It is enough to consider that the boss has to make decisions every day about the weal and woe of the company and his team. And this responsibility of always being the one who has to say yes or no is too much for quite a few people. If one looks in self-employed forums in the net, this load emerges abundantly clear.

Which factors make the decision easier

Both the positive arguments weigh heavily, as do the negative ones. However, there is a way to weight at least certain points more or less strongly – by working through the following tasks for yourself.

The big view over the edge of the plate

The first job here is to take a big look outside the box. That means practically to throw off the blinkers and not to look only at the idea of the Selbststandigkeit as listing of Positiva.

But the view must go much further. It includes the own life situation as well as it requires to deal with absolutely all realities, both self-employment in general and the professional field in particular. All too often it is precisely this that is lacking.

Many founders in Spe do not think through possible situations to the end. A good business plan not only contains figures, but also answers to the question of how to deal with responsibility, working hours – and of course how to cope with the problem that you will be confronted with an enormous number of things in your self-employment, which you never had to do in your previous life (keyword architect as IT technician).

Is the world really waiting for my idea??

Not every founder ventures into undiscovered worlds. On the contrary, most people look for a niche in a more or less strong industry. There's nothing wrong with that in the first place, after all, competition is good for business. But always the question should be in the room, how dangerous the competition can become to one here.

If you open a plumbing business somewhere in Brandenburg, you may be the only one in a radius of dozens of kilometers. If, on the other hand, you want to set up the same business in Hamburg, you have to compete against countless rival companies in a very small space.

But even those who want to venture into completely undiscovered territories with their business idea should ask themselves very critically: "Does anyone really need this??"Even funders are often overly hasty here and history is full of actually great inventions, which however failed colossally.

What about capital?

Apart from a good idea, start-up capital is the central point on which every company is built. And, of course, the financial aspects must be planned down to the last detail. Not only the financing of the startup in and of itself. But also an extremely sober cost calculation, which also takes setbacks into account.

But capital is not just what you borrow from the bank to get your company off the ground. It's also the income, the rent, the equipment – and ultimately the money that you want and need to put aside "for later".

And the biggest mistake you can make would be to say "it'll show in the business" at even a single point. Lack of plan, even for things that seem harmless, is a possible factor that can lead to failure.

Who really supports me?

Many founders in Spe believe that the bank's backing is all the support they need. An understandable cowboy mentality, but also provided with classic cowboy loneliness. The fact is, self-employment often poses a great threat to interpersonal relationships. Both of the romantic and amicable kind.

It is not only the time you will put into your business. The fact that its welfare will naturally also take up a large part of free time also plays a role. Whose business is currently in the process of initiating an important deal cannot simply "not" think about it after hours. And every self-employed person will be able to confirm it: Even on vacation on the other side of the globe, not a day goes by without wondering "if everything is working out back home?".

Self-employed people should have a relationship where overtime and extra work is accepted – otherwise it becomes difficult. Photo: ©zinkevych/Fotolia.Com

All this needs strong support. You need a relationship partner who doesn't nag you every evening because it's getting "a bit late" again. It needs friends who don't withdraw more and more because you don't have time to spend the night with them.

And, of course, you need a certain network of people who can help you unbureaucratically where you would actually have to hire external companies. Only a true friend will give up workdays and weekends to do the electrics in the office for his founding buddy free of charge.

Is there a plan B?

This final point is actually contrary to one of the most important principles of self-employment: if you want to be your own boss successfully, you have to have a real killer instinct. A "will to win", whatever the cost. Failure is not an option.

So much for the theory – a very good theory, by the way, which is also fully valid in practice. However, with a small but: every self-employed person should have a plan B and better yet C in their jacket pocket for everything that can happen to them along the way. This can be limited to very mundane things like what happens if you can't rent the premises you want after all.

But it should also extend to veritable disasters: What to do when weak periods come? What to do when you can't do everything on your own after all, the way you were planning to do it? Yes, and also what to do if the company fails and you are heading for insolvency? Because this is also a self-employment risk: after four years of self-employment, all previous claims for unemployment benefit I are forfeited. And although unemployment benefit II is of course also available to (formerly) self-employed people, the problem often arises that they are not eligible for it because of their reserves. And if a GmbH fails and "only" the deposit is gone, this risk is comparatively high.

Summary and conclusion

Self-employment is not for procrastinators. It is a job that needs real doers like no other – capable people who accept the risk but don't shy away from it just because it exists. Not everyone is cut out for self-employment. There's nothing wrong with that either. The only really bad thing is to have all the prerequisites and still deny yourself the happiness that comes from going to work for "your" every morning.

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