Self-employment and small-scale entrepreneurship
This lection will introduce you to the concept of self-employent and small-scale entrepreneurship. It will explain what small-scale businesses can be like, including advantages and challenges, and what the profile of entrepreneurs can look like.
Defining self-employment and small-scale businesses
Self-employed individuals work solely for themselves and contract directly with clients. This means, they do not work for a specific employer who pays them a consistent salary. Self-employed individuals can be considered entrepreneurs when they run a small-scale business (with or without a few employees).
Self-employed persons/small businesses may be involved in a variety of activities, but generally are highly skilled/highly specialized at a particular kind of work. Craftspeople, takeaway owners, nail artists, electricians, graphic designers, florists, may all be self-employed persons/run small businesses.
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According to the number of employees and annual turnover of a business, the European Union distinguishes between different kinds of small to medium sized businesses (SME’s):
Table 1: https://ec.europa.eu/growth/smes/business-friendly-environment/sme-definition/
The distinction is important as there exist many regional, national and EU business-support programs targeted specifically at SME’s (see more on funding opportunities in module 7 of this training).
Advantages and Challenges of self-employment
In a study conducted within the European Union, self-employed people assess their work situation quite differently. The majority of the respondents became self-employed because they prefer this option. However, one in five report that they only became self-employed because there were no alternatives open to them.
A great deal of job flexibility and enjoying autonomy are considered two of the main positive traits associated with entrepreneurship. However, not all enjoy being their own boss or find it easy to bear the responsibility of having their own business. This seems to be linked to becoming self-employed out of necessity rather than opportunity.
Some of the main challenges of self-employment are:
- Being responsible for every aspect of your business: While this is a benefit for many, it can be tiresome and lead to burn-out. It is important to plan time away from the responsibilities.
- Instability: The number of your clients or sales can vary each month, and so can your income. Also, many self-employed face financial uncertainty in case of a long-term sickness. Financial plans, backups, and insurances are important to help tackle the challenge.
The study also shows that those who genuinely choose to become self-employed are more likely to enjoy the challenges that come with being their own boss. This can lead to more sustainable forms of self-employment.
The profile of an entrepreneur
An entrepreneur is commonly understood to be a person who sets up a business, taking on financial risks in the hope of profit. An entrepreneur can have employees, but that is not always the case. In most European countries, in order to set up a business and be considered an entrepreneur, a self-employed person has to enrol on a business register. However, for earnings below a certain level, the self-employed person may not have to enrol. Additional requirements (like special permits or certificates) to register a business can be added for certain groups.
Who can become an entrepreneur?
There are no limits on who can become an entrepreneur. You do not necessarily need a university degree or business experience. However, an educational foundation (like this training) can be useful to start a successful business.
There are no limits on who can become an entrepreneur! (created by rawpixel.com)
One of the most important aspects for becoming an entrepreneur is that you have a strong plan and also the motivation to see the plan through. A strong determination, organisational talent and willingness to tackle and overcome challenges also help.
You can take an online test that may help you assess your entrepreneurial potential (click on the picture):
References:
https://www.entrepreneur.com/article/297899
https://gruenderplattform.de/inspiration
https://www.ifm-bonn.org/definitionen/kmu-definition-der-eu-kommission/
https://www.investopedia.com/terms/s/self-employed.asp
https://www.theselfemployed.com/article/daily-worries-self-employed/