Being your own boss: The good, the bad & the unknown

Most people have to work to live. Some toil their entire lives in non-management positions. Others move up the corporate ladders into middle management or executive level positions.

Then there are those brave souls who take a chance on self-employment.

According to Yahoo, more than 500,000 businesses are started each month. Roughly half will last five years or more, according to the Small Business Administration (SBA).

If you’re thinking about business ownership, do plenty of research. You can start with the following information about how to be a business owner, the unknowns you will encounter and the advantages and disadvantages of this choice.

How to be your own boss

Traditional small businesses

The traditional model of a small business is the full-time venture that requires a considerable investment of time, money and energy.

These businesses often require a physical location and equipment. The owner(s) typically need funding, either through a commercial lender, family members or outside investors. The average SBA loan for a business is $417,000.

Because of the funding requirements, this type of enterprise needs a business plan that explains who is involved and how the company will make money.

Examples of a traditional small business include restaurants, retail, auto repair shops, and beauty/wellness spas.

Home-based and skill-based businesses

There are a number of skilled professions that can easily turned into a small business with minimal upfront investment.

According to SBA, about half of all U.S. businesses are operated from homes. Also, a third of small businesses are founded with less than $5,000 of startup capital.

Businesses that fall into the category are typically service firms that require little to no equipment and can be done from just about any location. Examples include:

  • Real estate sales
  • Home inspection
  • Financial services
  • Photography
  • Attorney
  • Cleaning services
  • Consulting
  • Personal trainers

A number of trade businesses can be started relatively small and be headquartered from the owner’s home, but may require more capital investment and employee costs as they grow. These include:

  • Plumbing
  • Carpet cleaning
  • Pest control
  • Construction and remodeling
  • Moving
  • Electricians
  • HVAC installation and service

A number of major corporations, especially in technology, started out of people’s homes and garages before they grew into global enterprises.

Freelance, contract, and ‘gig’ work

This type of self-employment is similar to the previous category. What makes it different is that you can use this type of work as supplemental income rather than your primary income. Also, freelancers and contractors often work for companies as if they were employees, but have a little more freedom than the company’s staff.

Startup costs are minimal for these entrepreneurs.

Examples include:

  • Freelance/contract writers and artists
  • Freelance/contract web designers
  • Virtual assistants
  • Uber/Lyft drivers
  • People who buy and resell items on eBay or other method
  • People who rent property on Airbnb
  • Social media influencers
  • Tutors and non-school teachers

Learn more about the gig economy.

Pros and cons of self-employment

Who’s in charge?

Pro: The most obvious advantage of being a business owner is the absence of a boss. You don’t have anybody telling you what to do, how to do it, or when to have it done. You call the shots.

Con: You may not have a boss, but you do have customers or clients — at least if you want a successful business. Customers can be every bit as unreasonably demanding — if not more so — than a manager. They will often tell you what to do, how to do it, and when to have it done.

With flexibility comes fewer boundaries

Pro: You can make your own hours. You don’t have a manager insisting you be ready to work at exactly 8 a.m. and not letting you leave until 5 p.m. There is nobody to reprimand you if you want to take more than 30 minutes for lunch.

Con: Though you can make your own hours, you will likely have to work more of them if you want your business to thrive. According to a survey by small business lender Fundera, 81 percent of small business owners work nights and 89 percent work weekends. About 19 percent work more than 60 hours a week.

There are also no paid sick days, paid holidays or paid vacation time for business owners.

The sky’s the limit…but so is the basement

Pro: Self-employment enables you, within limits, to determine your worth. No more groveling for a raise or promotion. Plus, you get to keep all the profits (except the portion you owe to your state and federal governments).

Con: You don’t get paid just for showing up. No customers means no money. Business owners have to complete a job or sell an item before money flows through the door. Depending on the business, it may be weeks after a project before payment arrives. Your income will likely fluctuate, especially during the early years.

And there may be times you get a job done and still don’t get paid because of a dissatisfied or unsavory client. Sure, you can take legal action to get the money you’re due, but that may cost more than what the client or customer owes you.

Fundera research showed that 86 percent of small business owners earn less than $100,000 a year, while 30 percent don’t even take a salary.

Pursue your passion…after you finish your paperwork

Pro: For many, self-employment is not about the money. It’s about pursuing their passion. They want to create something in their own image AND own it, not just give it away.

Con: Entrepreneurs often find they dedicate less time to their true passions than they realized. Owning a business requires more than just making a product or providing a service. There are sales calls to make and marketing campaigns to develop just to get business.

Business owners often have to do their own invoicing and accounting. They’re also responsible for figuring and paying the state and federal taxes owed on their business. That means either hiring somebody to handle that task or getting personally familiar with terms like depreciation expense.

And if you’re large enough to have employees, there are a number of tasks (recruiting, training, evaluating) that take you away from doing what you love.

There are benefits, and there are benefits

Pro: Self-employment rescues people from the trivialities of work. These include pointless meetings, clogged email inboxes, conflicts over cubicle etiquette, unenforced dress codes, and half-day sensitivity training.

Con: Business owners also miss out on the benefits of being an employee. These include subsidized health insurance, group life and disability insurance, and retirement plans with employer matching funds. These benefits are available to the self-employed, but the business owner bears the full cost.

It’s quiet, but maybe too quiet

Pro: People who separate themselves from corporate environments are not subjected to “corporate speak.” They never have to hear about “breaking down silos,” “creating synergies,” “thinking outside the box,” or “having a plate that’s too full.”

Con: Without co-workers, you may spend more time talking to yourself. Self-employment can be lonely and make one long to discuss how to “circle back” on some “low-hanging fruit” in order to “level the playing field.”

3 unknowns of self-employment

Will I turn a profit? When?

If and when you turn a profit depends on a number of factors, some you can control and some you can’t. How much did you invest to start the company? How much do you advertise? Are you pricing your products/services correctly? How much of the company’s revenue do you use for your own income and how much do you put back into the business?

Most entrepreneurs will tell you that they made much less in their first year of business than they did in their last year of employment. Those whose companies broke even in the second year considered themselves fortunate.

How big should my business become and how fast should it grow?

This is another question that will depend on a variety of factors. Much will depend on how much time you spend in your business and how comfortable you are with growth.

The larger your business becomes, the less time you may get to spend on the passion that drove you to start the company in the first place. Growth often means devoting more time to operational aspects of the business.

Entrepreneurs also have to consider whether they want to invest in growth. More business means bringing on employees and even more investors.

Expanding your product line or geographic area will also require additional capital investment. Therefore, you have to treat these expansion opportunities the same as starting up a business. Make sure you have a plan for how to generate a sufficient return on the investment.

What if I become unable to work?

What happens if you lose the ability to run your business due to an injury or illness? Even if it’s temporary, the loss or reduction of your ability to work could cause financial hardship.

According to the Social Security Administration, about 25 percent of 20-year-olds will become disabled at some point before reaching age 67.

Disability insurance covers the potential loss of income caused by injury or illness. If you are unable to work because of a covered disability, the policy will replace part of your income. You will receive these benefits for as long as you’re disabled or up to a maximum period of time spelled out in the policy.

Having long-term disability insurance means being able to buy food, pay bills, and cover household expenses while you’re unable to work.

Business owners may need additional coverage beyond an individual disability policy. They should consider insurance that protects their business. This is called business overhead expense (BOE) insurance.

Whereas regular disability insurance covers individual income, a BOE policy will help cover your monthly business expenses if an injury or illness impacts your ability to work.

BOE policies typically only cover the cost of your business overhead. The amount the policy pays in benefits will be based on the company’s monthly overhead expenses each month, up to a cap. If you’re part of a partnership or multi-owner corporation, the BOE policy will likely cover your share of expenses.

Expenses that are typically included are:

  • Rent or mortgage payments on your business facilities
  • Utilities
  • Taxes
  • Employee salaries and wages
  • Business loan repayments
  • Business insurance premiums
  • Equipment maintenance
  • Building maintenance and janitorial services
  • Office supplies

If you have a business loan, your lender may require this type of insurance coverage. Lenders do not forgive business loans just because an owner is unable to work. But they also need to protect their capital investment and ensure they receive loan repayments if you can’t work.


Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

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