Friday, November 2, 2007


Welcome to the new economy!

It seems that more and more people today are becoming or desiring to become entrepreneurs. There are whole sections of newspapers, news information shows and small business fairs going on to try to encourage and guide those that wish to become self-employed.

First, if you have never been self-employed, you probably think being self-employed is wonderful:

  1. You believe that self-employed business people can deduct almost all of their business expenses and hardly pay any taxes. For the self-employed, that is true - but you have to EARN then money first before you can deduct it. If you are in business and have all of these expenses, the bills must be paid whether or not YOU get paid.
  2. You can work when you want, how you want and for whomever you want. Again, nice in theory, but doesn't work in practice. For every hour I can bill a client for, there are at least two or more hours of work that I can't bill that client or anybody else for. In my line of work, I have to maintain three business-related accounts, including a trust account. The trust account must always draw off to zero after subtracting the monies clients put in for advance payments. If you are a penny off, you better find it and reconcile the accounts, including all client sub-accounts. While employed people clock out and go out for a beer, I am still trying to balance the trust account and do transfers/reconciliations in the general account. There are lots of other bureaucratic disasters to prevent and look after too: GST, PST (for some businesses), invoicing, collection, marketing, production of marketing materials, attendance at various networking functions, as well as client record keeping and filing functions. This does not include the endless phone calls, many of which do not result in business ...
  3. You can work from your home. Do you REALLY want to work from home? Do you really want to be sitting at home watching the hockey game, cracking open a beer and then receiving a phone call from an angry customer? If you run the type of business where customers come to see you, do you really want to have to keep your home sparkling clean all the time, fearing prospective clients will walk past your dirty laundry, the kitty litter and a sink full of dirty dishes on their way in to see you? Also, in some types of businesses, if you are dealing with individual situations (e.g. personal counseling), do you really like the idea of some of your less balanced clients knowing where you live?
  4. You can charge whatever you feel your worth, or what the market will bear. That's true. You CAN set your own fees; however, many critical factors go into setting that fee. What are your competitors charging? What are your suppliers charging you? How much does it cost you to engage in your business? Do you live in a region like I do where people expect you to work for nothing, or next to it? Are there aspects of your business that set you apart from your competitors? If so, you can set your fees accordingly. However, while you can set fees all you want, ten percent of your clients will cost you eighty percent of your time ... and these people may not want to compensate you for it. There are also others that may bounce cheques, skip town or otherwise refuse to pay you. People who are not self-employed do not understand that if they engage your services, they have to pay for them - period. Doesn't YOUR boss have to pay YOU the wages that YOU signed up for, including any benefits and bonus?
  5. Customer service is all you need to worry about ... it's a free market. Forget this one - period. My business is highly regulated. It is expensive to operate because I have to pay regulatory fees, licensing fees, related practice fees, continuing education, conference fees, membership dues, insurance (errors and omissions, liability, commercial, etc.), office, transportation, search/court/filing fees, subcontracting fees, professional fees, etc. This adds up to a "pretty penny" (and oh boy, a penny is nothing!). Add this to the regular business fees of office supplies, telephone, advertisements, stationary, computer technology, reporting service, etc. Without any profits or paying any salaries, I am already $40,000 - $50,000 in the hole! I have to pay these costs whether I get paid by my customers or not. If you are employed, after some taxes, the rest of your paycheque is YOURS! I still haven't paid ME yet!
  6. What about benefits? If you are employed, you probably get medical and dental benefits, and possibly long-term disability benefits and/or retirement. Guess what? I get NONE of that. First, I am un-insurable on my own (as individual coverage is very hard to get unless you are perfectly healthy, young and are as free as possible of other health risks, such as being a non-smoker and your work being relatively low risk). In a workplace, your health history usually doesn't matter. Second, even if I could get this type of insurance, I don't have the cash - period. I have ZERO retirement savings.
Still want to be self-employed? I am because the region that I live in does not have the jobs available that will pay me much more than minimum wage and will totally discount my entire education that I paid over $50,000 for and my work history, which was most recently at the executive and mid-management level. I don't mind what I do or the people that I work with at all, but I NEED to be paid for it too.

I hope that those that are reading this that use professional services at all in any market begin to understand where I am coming from.

Your thoughts?

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