Self Employment Versus Paid Employment

Self-employment is where a person is in a business by ones self.

Paid employment is where one is employed, instructed and paid by the business management.

Factors to be considered in becoming self-employed :

(i)   Opportunity cost: This is the cost related to the next best choice available to someone who has picked between several mutually exclusive choices (choices that cannot occur at the same time).

(ii)  Types of businesses: Looking into possible types of businesses within the various classifications.

(iii)   Market: A place or a situation where there are sellers who have products and services to sell and buyers who have the capacity and willingness to purchase.

(iv) Government policies: policies affecting small enterprises such as location, taxation, pricing, licensing, loans etc.

(v)   Location: The factors to be considered when deciding where to locate a business includes: the community profile, communication, roads, water, buildings, sources of raw materials, competition, etc.

(vi)   Resources: These include labour, raw materials, source of finance and equipment, etc.

Advantages and Disadvantages of Self-employment and Paid    employment

(a)               Advantages of Self-employment

(i)  Personal satisfaction: This is doing what one wants with his/her life. It enables one to spend each working day in a job that is enjoyable. For instance, if one likes hair dressing and beauty care, he can start his own salon. Hence, he will be getting personal satisfaction when a customer is pleased with his work.

(ii)  Independence: This is the freedom from control by other people. One is able to use his/her knowledge, skills and abilities as they deem fit. There is freedom of action as decisions can be made without approval of someone else.

(iii)  Profit: One enjoys the profit left after meeting all the business expenses. One is able to control his own income and also to increase it. This is not often the case when you work for someone else.

(iv)  Job Security: Self-employment enables assurance of continued employment and income. Self-employed persons cannot be laid-off, retrench, fired of forced to retire at a certain age.

(v)  Status: Self-employed persons receive attention and recognition through customer contact and public exposure hence enjoy status above others. They also enjoy pride in ownership, enjoy seeing their names on buildings, vehicles, stationery and in advertisement, e. g. Kuguru Food Complex Ltd

(b)  Disadvantages of Self-employment

(i)   Loss of invested capital: In the event that the business does not do well, there will be loss of invested capital i. e. money used in starting the enterprise hence the problem in repaying banks, suppliers, and other persons.

(ii)  Uncertainty: Any entrepreneur is faced with uncertainty of the future. One has no idea of whether the business will continue thriving in future or not. In case the business collapses, it renders the owner jobless.

(iii)    Long hours: Many self-employed persons work fourteen or more hours a day, six or seven days a week. The owner is often the first to arrive in the business in the morning and the last to leave at night.

(iv)   Routine chores: Running a business may involve routine jobs you do not like to do.

(c)  Advantages of paid employment

·                    Specific/ fixed responsibilities

·                    Steady income

·                    Fringe benefits e. g. housing allowance, medical cover, tuition reimbursement, vacation (paid and non-paid), etc.

·                    Fixed hours of work

·                    More certain future

·                    Set span of control

·                    Minimal risk

(d)  Disadvantages of paid employment

·    Strict following of orders

·    Set income

·     Limited responsibility

·    Difficult in implementing ideas

·    Dependency on employer

            Reasons for business failure

·   Neglect: This may result from bad habits, poor health, marital difficulties, complacency or laziness.

·   Fraud: This may be a problem in which workers are involved or the owner fails to guard against it.

·   Disaster: Entrepreneur sometimes fails to insure against disaster e. g. fire, burglary, etc.

· Lack of experience and competence: This is whereby the owners of a small business lack technical knowledge or personal skills to run the business. To counter this, they can employ other people as managers.

·   Lack of customers: Part of an entrepreneur’s job is to find and keep customers. Customers avoid certain businesses for a variety of reasons e. g. poor services, indifferent attitude of employees, failure of business to settle arguments/complaints, lower prices offered by competitors.

·    Selling on credit: Lack of a clear-cut credit policy and method of collection.

·    Unreasonable expenses: Expenses not kept to absolute minimum levels.

·    Excessive fixed assets: Too much money is kept or tied up in buildings, land equipments, etc.

·  Poor stocking: Overstocking or buying slow moving goods can be costly hence leading to a business failure.

·    Location: Poorly located businesses i. e. away from customers may be inaccessible.