On my way into the office this morning, I was listening to news radio and was treated to a good news story – Canada’s labour market added almost 36,000 jobs in April. [READ] After months of major job loss announcements, this was music to my ears. He also said that self-employment accounted for a good portion of this growth – a fact that caught my attention. Then the announcer stuck his foot in it. He said “self employment is often seen as a sign of desperation in a weak economy”. I just about choked on my coffee. WHAT? Is this guy for real? I brought it up to my client when I got downtown and she said “I agree. Self employment is a sign of desperation.”

With all due respect to these narrow-minded individuals, self-employment is absolutely not an act of desperation. Anyone who thinks that starting your own business when the chips are down is a way to solve your problems needs to reassess that view. I think there are advantages to being self employed and risks that make it a hard road for anyone considering the move.

First and foremost, let me be clear – becoming self-employed is the hardest option out there when you need money to live. It takes in many peoples’ estimation; 10,000 hours or 3-4 years to build up enough experience and a reputation that will land you work consistently. There is no way to shortcut this. In the meantime, you could be making better money doing just about anything else. The money is not why people should become self employed.

I think that self-employment is a strategic decision and it’s not for everyone. There are definite advantages and disadvantages (taken from the Ontario Council of Agencies Serving Immigrants):

Advantages

• Independence, control and freedom from routine: Companies or individuals you work for are your clients, not your employers. As clients, they can state what results are expected from you, but cannot direct your work. You will want to satisfy your clients if you wish to receive more work, favourable referrals or better rates. But you are your own boss – you decide when, where and how to work to get the job done.
• Financial rewards: A business may become very profitable. Companies are willing to pay more to independent contractors because they don’t have the expensive, long-term commitments that they do with permanent employees, such as benefits, unemployment compensation and pensions. Independent contractors may also deduct business expenses from their taxes, which may increase their net pay.

Disadvantages

• Less security. It will be your responsibility to make sure you always have work to do. This means you may sometimes be without work and therefore income.
• No free benefits. You will have to pay for your own sick leave and vacation, fund your own retirement plans, and buy dental, disability and life insurance. Self-employed people are generally not entitled to receive Employment Insurance benefits.
• Paying your taxes. As a self-employed person, you are solely responsible for doing all the paperwork and paying your taxes on time. If you are an independent contractor, you will pay estimated taxes quarterly to pay your Canada Pension Plan contributions and income tax.
  

These are the kinds of things that someone needs to consider before becoming self employed. A cursory web search will turn up these results. Given these facts, how could someone turn to self employment out of desperation? You’d have to be desperate and naive. I think there’s a real opportunity these days for those who are brave enough to go the self-employment route:

1. Turmoil in the economy creates opportunities for project work that needs to be done quickly and effectively. Many organizations are laying off staff or do more with the staff that they have. This doesn’t mean that new projects stop coming up. When they do, many organizations turn to self-employed people to fill those human capital gaps.
2. There was a labour shortage before the economic downturn and in many fields, there still is. Anytime demand outstrips supply, there’s an opportunity for the more entrepreneurially-minded among us to profit.
3. Sub-contractors come cheap. Because there are more potential hires on the market these days due to economic turmoil, your selection of sub-contractors is greater now than ever. You still need to source quality people to help you grow your business but chances are they’re going to be cheaper now than when the economy is at its peak.

That’s my rant. I invite anyone who thinks that “freelancing” or “self-employment” is the easy route to comment here. I double-dog dare you.