Self-employment is increasingly be seen as a mainstream option for many facets of the Canadian workforce. Today’s independent workforce is larger and more powerful than ever before. It’s no doubt this trend towards entrepreneurship is driving economic growth. It’s also creating structural change in the way we define work. As a mentor for many small business owners, I am witnessing this directly.
Despite this small business evolution, there are still many misconceptions about the motivations, expectations, and goals of entrepreneurs. I have read and reviewed many articles on this topic and will share some of the general trends and statistics. This month, I will tackle some of the common myths about self-employment and the truth behind them.
It wasn’t my choice
A common misconception is that the trend towards self-employment stems from a lack of worthy, meaningful, full-time traditional jobs. In reality, most people choose to become independent. Only about 10% report their move to independent work was due to factors beyond their control, such as a layoff, downsizing, or illness.
In fact, the majority say self-employment was their choice entirely. Better work-life balance, a desire to earn more money, or a plan to start a new business are just a few reasons people find independent work so attractive.
I’m not satisfied
The power of entrepreneurship is that it allows people to pursue passions they might not be able to as part of the traditional workforce, either on a full or part time basis. People choose to become self-employed for many reasons, but chief among them is to be in control of their lives and careers or because they want more flexibility.
As a result, the overwhelming majority of small business owners find their work to be quite satisfying. Most report being highly satisfied with their work. Many choose self-employment for reasons beyond lifestyle choices as well. Much of this group is composed of motivated self-starters who simply see a viable way to earn a living using their unique and valuable skills. Entrepreneurs are content and secure with their choice of work; they are happier working on their own, and note that they’ve always wanted to be their own boss.
It’s riskier
One of the most surprising figures to consistently emerge is the risk profile of entrepreneurs. While small business owners view the upsides, such as flexibility and control, there is a significant varied opinion on the relative risks associated with owning your own business. The belief is that self-employment is very risky with the majority citing the lack of predictable income as the single greatest risk.
The common belief is that entrepreneurship is not as secure as permanent employment and that starting your own business requires capital that they’d have to invest personally. Some view the fact that they would have to invest their own money, to be successful, as a negative.
In fact, small businesses owners don’t apparently feel the same. Investing one’s own money does not even make the top issues in terms of challenges. Entrepreneurs seem to have a noticeably different attitude toward risk. Almost half of those in a recent survey feel that self-employment is more secure than traditional employment.
I’ll make less money
Rather than having a set salary, small business owners can more easily diversify their income streams with varied business interests and by working with several clients. Not only does this make owning a small business less risky but about of entrepreneurs say that they make more money working on their own than they would in a traditional job. The number of self-employed individuals reporting six figure annual earnings has grown by more than 50% in the last five years.
Average gross income for self-employed individuals rose to about $64,500 in 2015, up 30%. By contrast, median family household income in the Canada was about $53,500 according to Statistics Canada. Given these figures, it’s no surprise that a small percentage of entrepreneurs report they’d rather have a traditional job.
It’s all task based work
Much media coverage centers on the low economic end of the self-employment spectrum - the Uber drivers of the world. There are certainly many people who make their living in this or a similar way. In fact, this is one of the fastest growing forms of self-employment. About half of all self-employed individuals are part-time or occasional workers. Certainly, many of these people pick up additional work to supplement their income or to learn a new skill and this may include driving for ride-sharing services or other task-based providers.
But still many other small business owners turn to professional services, such as marketing, IT consulting, and more. About 80% of self-employed individuals deliver services to their customers; whereas 15% offer products to their customers. Given the specialized careers many entrepreneurs pursue, it’s not surprising that many also have higher education. About 40% have a post-secondary education including 20 percent with advanced degrees.
That compares favorably with the 35% of Canadians who have a post-secondary and 10% who have advanced degrees, again according to Statistics Canada. The younger the entrepreneur, the more education they bring to the marketplace. Nearly 60% millennial self-employed individuals as post-secondary education and/or advanced degrees compared with 35% of non-millennials.
I’m going to return to a job
A common myth about self-employment is that it’s temporary - something to tide you over until you can return to traditional work. The large majority of small business owners plan to stick with self-employment or build a bigger business.
The average tenure for those working full-time is about 10 years. The reality is that the world of work as we know it is rapidly evolving. The era of traditional work is only started in the late 19th century, as workers began to shift from farms and skilled crafts to factories and the office. Self-employment isn’t a new phenomenon. It’s a centuries old practice that fell out of favor in the last century and is fast returning to popularity thanks to the technological revolution.
The benefits of traditional employment are still realized by even the savviest of entrepreneurs. Most of these benefits, such as health care plans and retirement savings can be easily replicated independently. As the infrastructure supporting small business continues to grow, self-employment will increasingly be a mainstream option for many facets of the Canadian workforce. So, as you see, the common misconceptions about owning a small business, are just myths. Self-employment is not new. Its rejuvenating. It’s the way we used to be. In fact, some people are just seeing it as a way of Keeping Life Current.
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