“One of the huge mistakes people make is that they try to force an interest on themselves. You don’t choose your passions; your passions choose you.”
— Jeff Bezos
“Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.”
— Albert Schweitzer
“Never give up on something you can’t go a day without thinking about.”
— Winston Churchill
“The only thing worse than starting something and failing… is not starting something.”
— Seth Godin
“Luck is what happens when preparation meets opportunity.”
— Seneca
“Stay self-funded as long as possible.”
— Garrett Camp, founder of Expa, Uber and StumbleUpon
“The best education you can get is investing in yourself, and that doesn’t mean college or university.”
— Warren Buffet
“The three great essentials to achieve anything worthwhile are: Hard work, Stick-to-itiveness, and Common sense.”
—Thomas A. Edison
If you are among the millions today seriously considering self-employment or starting a business, you are in good company. No longer is this a solitary, risky step out into the unknown. It is now mainstream.
Probably good to do a bit of benchmarking before running off in all directions. According to Forbes, there are roughly 44 million people in the U.S. either fully self-employed or working at least part-time as an independent contractor. That’s about 30% of the workforce. As noted in a previous post, this upward trend is strong and long term.
“Self-employed” definition according to the IRS
The IRS classifies a taxpayer as “self-employed” If they:
- Carry on a trade or business as a sole proprietor or independent contractor
- Are a member of a partnership that carries on a trade or business
- Are otherwise in business for themselves, including part-time
Note that this definition also includes members (owners) of a limited liability company (LLC) because they are usually taxed as sole proprietors for a single-member LLC or as a partner in a multi-member LLC).
Sole Proprietor: A one-person business that has not registered with a state as a business entity, such as a corporation, partnership, or LLC. If you start a business, count business income and expenses separately from personal income and expenses, and do nothing to register your business with the state, you pay your taxes as a sole proprietor.
Independent Contractor: A person who works, typically under contract, for someone else and provides services but is not an employee (W2), is an independent contractor for tax purposes. Examples include creative or technical professionals like a designer, consultant, or web developer. These workers are typically paid for work done, on an hourly or daily basis, and reported on a 1099-MISC form. Payroll taxes are normally not deducted, making the contractor liable for paying self-employment taxes as well as income taxes.
Freelance or gig worker: These are typically non-contract workers who provide services and even products on an informal, occasional basis. Many do this as a “side-hustle” while being regularly employed full- or part-time. It does get complicated.
So, which one might you be if you were to become “self-employed” in some manner? Almost any, or even in a few circumstances, all. It depends on your individual path and your current work situation, and may well vary from year-to-year.
Rather than get further involved in this messy classification digression, this post will deal with only full-time sole proprietors, freelancers, and independent contractors where you are your own boss. Whatever this means in practice.
Industries using these one-person businesses
It takes many larger businesses to absorb 44 million self-employed workers. Data on independent contractors by industry (SIC codes) is available only through 2016 for some reason. The following figure is from an IRS publication and covers only recipients of 1099-MISC tax forms.
Use of non-employed workers exploded globally as a result of COVID-driven office restrictions and various lockdowns. Growing resistance to back-to-the-office mandates seem likely to drive many employees into becoming self-employed. This is a huge movement.
Source: https://www.irs.gov/pub/irs-soi/19rpindcontractorinus.pdf
How to tell whether you are self-employable or entrepreneurship-ready
You will not be surprised to hear that far from everyone is well-suited to either self-employment or entrepreneurship. In fact, those who are likeliest to succeed have some rather uncommon sets of traits, abilities, skills, and experience. Plus such enabling situations flowing from external factors like getting fired.
One proven but often painful method to assess your own suitability for self-employment or entrepreneurship is to go for it – just become self-employed (your own boss) or an entrepreneur (business-builder). You will gain firsthand knowledge of your strengths and you may well end up succeeding. You will never know for sure any other way.
Learning – typically the hard way – is often painful and necessarily so. But jumping into the pool’s deep end to determine whether you can swim is, well, definitely the hard way and probably much too risky for most of us. There has to be a better way.
Baby steps. You may have encountered this approach in Bill Murray’s dark comedy film “What About Bob?”. Applying the “baby steps” approach to self-employment or entrepreneurship, you would start with some side-hustles or gigs in a field of work that particularly interests you – but remaining in primary, “full-time” employment while you see how things work out. Becoming a remote or hybrid worker has become a well-established practice for testing the water via baby steps.
Pre-baby-steps. If you are presently employed but have started thinking about moving out on your own in some manner, you may want to figure out your potential suitability and success likelihood even before embarking on baby steps. What can you do upfront without uncomfortable risks or efforts being required?
Self-assessment. Assessment is measurement of some kind, and the “self” part indicates that you are the measuring instrument. Do you feel accurate today? Such tests have been around for a long while, despite some obvious weaknesses and limitations. If well-designed however, they can be accurate and reliable enough to use for guidance on a vast number of subjective questions. Not perfect but certainly adequate for many purposes – like getting a sense for whether a person, like you or I, is a suitable self-employment or entrepreneurial candidate.
Self-employment and entrepreneurship are different
You probably already know this but making the distinction in the context of self-assessments is very important. Self-employment is simply working for oneself. Entrepreneurship is business-building. Very different in so many respects.
You should also be aware that many sources offering advice on what it takes to become self-employed or entrepreneurial confuse the two paths. I suspect that this is often due to writers having zero personal experience in both areas. Having spent many years in both, and helping others in both, I can assure you that the differences are real and significant.
Self-employment means working for oneself, most often without employees. Nothing to own here but yourself. Entrepreneurship means starting a business that will almost certainly – maybe immediately – employ workers but a business that the entrepreneur owns (at least early-on) and runs.
The kind of people most suited to being self-employed may well be entirely unsuited to business-building. I learned, the hard way as usual, that I am not a very good entrepreneur. I am by nature and abilities a much better self-employed person. Having worked with a number of real entrepreneurs over the years, the success factors are very different and I’m not anywhere near what makes a successful business-builder in many ways.
So, it is very important that you test each of these to see which one best fits your personal strengths and interests. I think that it is very unlikely that you will show solid strengths in both.
This means, among other things, that any self-assessment tool designs must be different for each.
What are self-assessment tools?
Self-assessment tools offer a method for gathering information about yourself from someone who knows you best: yourself. Self-assessment tools or tests are not tests in the traditional sense of the word. There is no desired outcome or mastery of something to measure. There are no right or wrong answers.
Typically addressed by self-assessment tools are:
- Values – The things most important to you
- Interests – What you enjoy doing most
- Personality – Your individual traits, needs, attitudes, motivations
- Aptitude – Activities you are good at, be they in-born or skills you’ve acquired
The real challenge here is to figure out which of these are reliable predictors of suitability and success potential for self-employment and, separately, for business-building (entrepreneurship).
Self-employed: What it takes to succeed
Business publisher Forbes offered a list of “signs” that indicate whether a person may be successful as self-employed: “13 Signs You’re Meant To Be Self-Employed”:
- You want flexibility in your schedule
- You want more control over your ideas, your projects and the work
- You don’t play well with others
- You have passion for what you do
- You are a good listener
- You are comfortable being “the decider”
- You have a support system
- You are a disciplined self-starter
- You are able and willing to attend events alone
- You are able to compartmentalize work and private life
- You have an ability to let things go
- You can go with the flow
- You are resourceful
… Umm – okay. But maybe not so much. Most of these could just as easily characterize a strong, effective, employed manager or executive. Or maybe even an entrepreneur (business-builder).
Why does anyone – by choice – become self-employed? My list would be quite a bit different:
- You can live with and overcome income risks and uncertainty
- You have valuable, saleable: experience, expertise, and skills
- You are comfortable with, and may prefer, working mostly alone
- You are highly motivated by whatever you decide to do
- You want to be your own boss with control over your work-life
- You are highly creative, innovative, resourceful
- You value highly your personal freedom
This list could probably be much longer but these few drivers come from my years of direct personal experience and from observations of others who are successfully self-employed.
Entrepreneurship: What it takes to succeed
Susan Ward writing in the Balance Small Business identified six traits that are vital for success as a “self-employed” individual (which looks to me more like an entrepreneur or business-builder): “6 Traits You Need to Be Self-Employed”:
“Despite the finding that new business owners have an average of 11.5 years of experience within their field before starting a venture of their own, almost two-thirds of businesses with employees will only survive their first two years, and about half [of the rest?] will fold within five years.”
“Flexibility. If you start a business, you no longer have one job with clearly identified duties. By necessity, entrepreneurs have a multitude of responsibilities during their first years of operation, and these various work streams will often be interrupted by an unforeseen crisis (particularly while in the startup phase). While employees are used to having days filled with relatively predictable tasks, self-employed people don’t usually enjoy this kind of regularity. Once you start a business, there’s nowhere to pass the blame in terms of why a certain process isn’t working, or why a task hasn’t been completed. As a business owner, you’re the one who will have to deal with whatever arises during the workday, and people will look to you to solve problems.”
“Self-Motivated. When you’re self-employed, you have sole responsibility for taking charge of what happens next. Creating a plan of action and setting goals are your responsibility. No one’s going to schedule appointments for you or point out what needs to be done in order to make a profit. For many people who try to become self-employed and start businesses after having a long-term full-time job, self-motivation is the hardest adjustment to make. Self-discipline, motivation, and passion are all necessary qualities for growing a successful business of your own. The first question you should ask yourself is not how to start a business, but if you should start a business at all.”
“A Salesman: Apart from sales-driven positions, most employees are not specifically trained to look out for client opportunities. Many jobs focus on the creation of a product or providing a service while a sales department or a managerial team tackle the search for new customers and strategies to grow the business. If you start a business, you will need to close sales on your own. This may be a small order with a new client, or a large opportunity to get your product on the shelves of a large retail chain. To land either opportunity, you’ll need to keep scanning the horizon and positioning yourself to close deals that come your way.”
“Forward Thinking. If you want to start a business, you need to develop expertise in both short-term and long-term goal setting. One of your first tasks will be to develop a business plan, but as your business becomes operational, you’ll likely find that this original strategy needs to be adjusted. Goal setting will make sure that despite iteration and improvisation, your business remains true to its original objectives.”
“Consistent. Starting a business takes energy, and to keep the business afloat for longer than five years, you need to be fully focused on consistency. You can’t afford to coast along or just go through the motions; your customers must be consistently reminded that you’re devoting all the business’ resources, talent, and attention to serving their needs.”
“Risk Taker. Most small business owners feel only “somewhat prepared” for the challenges ahead. As a business owner, there’s no guarantee that the products or services you offer will be in demand six months from now, or that your employees will show up for work, or that your customers will pay their bills on time. Even if you have a big client, who regularly patronizes your business and seems to be perfectly happy with your work, they could drop you with no notice. Revenue and actual income can drastically fluctuate from month to month, and for someone who’s used to having a paycheck arrive regularly every two weeks, the uncertainty of being self-employed can be too difficult to deal with.”
Again, this list, although helpful, confuses being self-employed – where “self” is a permanently small-business having just the owner and perhaps a few other employees – with a business started and run by an entrepreneur who aims at building a substantial, multi-employee business. Or maybe even a unicorn.
Think of a tradesman (excuse me, tradesperson) who owns the business but employs a varying number of skilled workers. This person would be a business in IRS terms and would typically be an employee of the business. The difference of course is that the “employee” is now the boss and probably major or sole owner (sole proprietor) of the business. This is typically not an entrepreneurial business.
Very important to keep in mind the “self-employed” and “entrepreneur” distinction as you think about what you want to do with the rest of your life.
Figuring out which one you are and how likely you are to succeed
This is really the bottom line in thinking about leaving a (somewhat) secure, regular paycheck and work doing whatever your employer wants you to do. As noted earlier, self-assessment is a good, low-risk first step. If you rate low across characteristics of a successful self-employed person or entrepreneur, then you may want to rethink your situation as an employee – for which you may well be especially well-suited and highly likely to succeed if you hang in there.
There are many self-assessment tools available to help you with this important step. One that I ran across seems kind of interesting but addresses (or, more accurately, confuses) self-employment with entrepreneurship.
Just to see what it covers and what relevance it might have to an actual person, I took the assessment myself. Results are summarized below. Kind of interesting. Seems to say that I’d make a decent entrepreneur but I can assure you from painful experience that this is definitely not the case.
But, if you interpret the results in the context of a typical self-employed person – like me for many years, the picture seems quite a bit more accurate. The sum of “maximum scores” is 200 so my scores adding to 169 places me well up in the overall potential scheme of things. I’d give that score a fairly high rating for accuracy based on my actual experience doing this kind of self-employment stuff.
Anyhow, give it a try to see how it works for you.
Bottom line:
Big questions for many today: Would you hire yourself as an independent contractor? Or, would you fund your entrepreneurial business-building idea? How would you go about assessing potential in either of these for a person like yourself? If you are among the millions today seriously considering such a life-changing step, you really need to honestly rate yourself on what it takes to make the jump and succeed. Some ideas on doing this were offered here.
Related Reading
Remus Serban posting on hubgets.com looks at Meyer-Briggs Type testing for entrepreneurs: “5 Most Successful Types of Entrepreneurs and Personality Testing”:
“Myers-Briggs Type Indicator (MBTI) is, well, notorious. It is perhaps one of the most known personality tests. It therefore had its share of criticism. Many have called it ‘unscientific’/ ‘a joke’/ ‘questionable’/ ‘a fad that won’t die’/ ‘totally meaningless.’ Yet, more than 2 million people take the test every year. And that is hard to argue with.”
“The point here is that one day you might be tested against the MBTI. And, scientific or not, your answers will be part of a profile that might mean yes or no. Conversely, think of all those entrepreneurs you admire. All those profiles that inspire you. Each of them might have taken the MBTI at one point or another. Ever wondered whether Elon Musk is an INTP or INTJ? In fact, we’ll follow in a bit with some of the most successful types of entrepreneurs.”
“But first, a bit of MBTI and what it all means. MBTI proposes a personality typology covering 16 personality types. Each type is the result of your answers to 93 questions that rate your preference on 4 opposing pairs of personality traits. How you rate in each of these traits wins you a 4-letter code:
> Extraversion” or “Introversion”, with E and I, respectively;
> Sensing” or “Intuition”, with S or N, respectively;
> Thinking” or “Feeling”, with T or F, respectively;
> Judging” or “Perceiving”, with J or P, respectively.
“Overall, you can have a total of 16 combinations. Each of these types stands for an unique personality. Some are more frequent than others. Of all 2 million testers every year, the rarest is INFJ, followed shortly by ENTJ. The most common are ESFJ and ISFJ. The rarest by gender is ENTJ, there are only 0.9% ENTJ women.”
“The most successful types of entrepreneurs are ENTPs, ESTJs, ENTJs, INTJs, and ISTJs. This means that the majority of successful entrepreneurs predominantly fall within these 5 types.”
“First of all, we can see all these entrepreneurs are thinkers. This is highly advantageous for business. Thinkers are more inclined to base decisions on evidence. They are also more capable of making unpopular decisions.”
“The ENTP, for example, is ‘the inventor.’ Loves to challenge authority and will prove you wrong at the risk of inventing time travel. They are one of the types of entrepreneurs that innovate. They create new products.”
“ESTJs are nicknamed ‘the supervisor.’ Among the most successful types of entrepreneurs, they can draw out order and structure from chaos. They have an amazing aptitude at performing mental tasks. Think Riker from Star Trek. Their introverted counterparts, the ISTJ, are also known as ‘the inspector.’ They make for great CFOs and legal counsel. At least, when you want things done by the book.”
“ENTJs are essentially the highly effective leaders, the CEO’s, the Field Marshalls. Among the types of entrepreneurs, they’re the rarest personality type in MBTI and are most likely to think of options in face of obstacles. Their introverted counterpart, INTJ are nicknamed ‘the mastermind.’ Much like Jean-Luc Picard in Star Trek.”
Some possibly-helpful definitions of what self-assessment tools (aka “instruments”) might seek to measure (aka “assess”):
Traits. In psychology, trait theory is an approach to the study of human personality. Trait theorists are primarily interested in the measurement of traits, which can be defined as habitual patterns of behaviour, thought, and emotion.
Skills. A skill is the learned ability to perform an action with determined results with good execution often within a given amount of time, energy, or both. Skills can often be divided into domain-general and domain-specific skills.
Ability. Power or capacity to do or act physically, mentally, legally, morally, financially, etc. Competence in an activity or occupation because of one’s skill, training, or other qualification.
Aptitude. A natural ability. An aptitude is a component of a competence to do a certain kind of work at a certain level. Outstanding aptitude can be considered “talent.” An aptitude may be physical or mental. Aptitude is inborn potential to do certain kinds of work whether developed or undeveloped.
Talent. Natural aptitude or skill. The main difference between gift and talent is that gift is an inborn skill while talent is acquired and developed. … Gift cannot be hidden from others but can go unnoticed. While talent is an aptitude for a skill. It is a natural ability and it can be cultivated in an individual through sheer hard work.
Attitude. In psychology, attitude is a psychological construct, a mental and emotional entity that inheres in or characterizes a person. They are complex and are an acquired state through experiences. It is the way you choose to see and respond to events, situations, people, and yourself. Your attitude is not something that happens to you. You choose your attitude. Your attitude is created by your thoughts, and you choose your thoughts.
A checklist for self-employed or entrepreneurial assessments collected from somewhere:
√ innovative?
√ knowledgeable?
√ self-motivated?
√ proactive?
√ hard-working?
√ flexible?
√ organized?
√ passionate?
√ curious?
√ competitive?
√ patient?
√ self-confident?
√ healthy?
√ independent?
√ persistent?
√ tenacious?
√ adaptable?
√ resilient?
