To start, a self-employed individual, a micro-business and entrepreneur have different rewards and risks associated with their chosen business models. In this post we will share the differences between each model and some of the rewards and risks for each.
The self-employed
A self-employed person is somebody who is very much involved with the day-to-day operations of their business. Basically, the business could not survive without them running it.
A self employed person typically loves what they’re working on. Their main objective is simple, to continue to work on the projects they love while sustaining or growing their lifestyle.
They may work on a contract, project to project or subscription basis. They typically have many different hats and will tolerate the business administration and sales responsibilities for finding their preferred projects.
Rewards of being self-employed
There are some terrific rewards that come with being self employed. Doing what you love for hopefully most of the time is a tremendously satisfying reward. For instance, If you love travelling and writing, you could make this your source of employment. A source of employment that can eventually sustain that career path.
Another special reward is the significant creative control you can have over your projects. You can oftentimes choose who you want to work with and what types of creative content you’d like to produce. These are very empowering elements of being self-employed.
The low risk with potential high reward is especially intriguing. In order to be self-employed, you typically can expect a low capital investment to get things off the ground.
The potential amount of business one can do in a year makes for an attractive reason to consider self-employment.
Drawbacks of being self-employed
So loneliness is a drawback that’s not often chatted about. It’s easy for a self-employed individual to get stuck within their personal bubble. External interactions can be personally and professionally healthy and important to keep up with.
Another drawback is being bogged down with less desirable business responsibilities. The time required to do the administrative duties can really add up. Thereby taking time away from the very things you that made you decide to be self-employed.
Not knowing where your next pay deposit will be coming from can also be stressful. The peaks and valleys of income can make it tough for planning.
The micro-business
A micro-business is a business that technically has one employee, the owner. The owner develops a network of skilled contractors and adopts powerful technologies, such as apps, AI and cloud based computing to effectively enhance their service and/or product offerings.
I think of the micro-business owner like they’re Tony Stark or Pepper Potts. A person who is able to augment their capabilities with the use of the iron man suit, the suit being the skilled network of people and technologies in this case.
After listening to an interesting podcast featuring Elain Pofeldt, a writer and editor studying micro-business, there were some amazing statistics that she was able to dig up regarding how many single person businesses annually report over a million dollars in revenue. As it turns out there are quite a few (41,666 as of 2018 in the USA alone). Sounds like super hero stuff to me. This brings us to the…
The rewards of being a micro-business
There seemingly isn’t a limit to how much you can grow your revenue. There isn’t a glass ceiling and the model is totally scalable. If you get busier or sell more product, you can simply add more team members, commit more dollars to existing vendors and find more effective technologies etc. It works in reverse as well. If the owner faces some lean months, they can scale back quickly. This flexibility is very attractive.
Another reward is the community benefits associated with teaming up with external talent. It can be a two way street. For one project you bring in, you may need assistance and for a project your team member brings in they may need your assistance. This spreads the wealth and creative opportunities. There are also opportunities to trade services more easily as well. If you need warehousing, distribution etc. there’s no need for you to invest in large brick and mortar operations.
Finally, the ability to make team adjustments quickly without it interfering with the productivity of the other team members is a great advantage as well. You could even make adjustments mid stream as the rest of your team members have their heads down working away.
The drawbacks of a micro-business
I would imagine one drawback is the spectre of one of your team members dropping out in midstream of a project. I suppose that keeping the team together could be a bit more volatile.
One scenario could be that a bigger project comes in for one of your team members that requires them to bow out so that they can grow their own business.
Another drawback could be quality control. Everyone has strengths and areas for improvement that differ from each other. As such, I’d imagine the quality from one project to the next to swing quite a bit from great to needs improvement. For product based businesses this could be issues with fulfilment due to your fulfilment partner being spread too thin over multiple accounts.
I’m sure there are other drawbacks, but they are probably less significant than what’s been mentioned above.
The entrepreneur
So an entrepreneur as best as I understand it, is basically a business owner who adopts a business model of building a company that can operate without any input from the owner. I think entrepreneurs much like people who build electric toy train sets. They lay down the tracks, get the train running, smooth out any poor connections and leave it to run on it’s own.
The rewards of being an entrepreneur
I’d have to say the accomplishment of being able to build a company that offers something significant to its chosen market, contributes to employment and can operate without the owners input would be an incredible high.
The legacy that has the potential to outlive the owner over generations to come is also a huge reward. The idea of leaving your mark is a powerfully motivating factor.
I believe there’s perhaps more personal and professional growth related to being able to develop a thriving business from scratch that people depend on. This could be why so many entrepreneurs sell their companies and move onto starting up new ones with the proceeds.
The drawbacks of being an entrepreneur
The main drawback I can think of would probably have to be risk. For many of the entrepreneur examples I can think of, there was significant capital invested of their own and others to get things off the ground. A quick search on Google will inform us of the general chances for success.
Another drawback could be the inability to quickly “pivot” or course correct. It could be difficult to get buy in from early investors who have a stake in your business. They may impose their beliefs of what direction you should be taking.
Constant stress could be another drawback. Potentially more stress than self-employment and micro-businesses. There are typically more moving parts with higher risk and I can understand how this can put someone in a perpetual state of anxiety.
Wrapping things up
As you might imagine the differences between being self-employed, a micro-business or an entrepreneur are quite different in terms of approach and the required commitments, but yet they share many similarities.
In conclusion, I believe an owner’s honest assessment of their personality traits, skillset and preferences would quickly make the choice for which business model to adopt quite clear.
I hope you enjoyed this post and I look forward to sharing our next post about maximizing productivity and what tools exist to help you with this.
