Sometimes, I hear a business owner describe themselves as “self-employed.”
And sometimes they are right, but sometimes they are wrong.
Self-employed is typically seen as an interchangeable synonym for “business owner,” but I always take it to mean something different.
If you’re self-employed, you are – as the name suggests – employed by yourself. Like an employee, you are paid when you work. And like an employee, you’re not paid when you don’t.
If you work for yourself, and you are only generating revenue when you’re out there working, you don’t have a business. You’re self-employed.
If you can’t sell your company when you decide to stop doing it, because it’s predicated entirely on you, you’re self-employed.
If you own a business, or you’re a majority shareholder of a corporation, these things don’t apply. If I get sick and can’t work for one, two, three, six, or twelve months, the business (and I) will keep earning money. It will continue going, hopefully indefinitely (some might argue even better), without me there.
If I ever choose to retire, I can sell my business. Because it can operate without me, it has value to someone who might want to buy it. I’m not “self-employed.” I’m a business owner.
Now, while there are some clear advantages to owning a self-sustaining business versus being self-employed, that doesn’t mean that the latter is necessarily a bad thing.
If you make a conscious, thoughtful choice and decide that you love the hands-on art of creating custom carpentry, and you want to build each piece yourself, or you love teaching each student to float with your own hands, or you enjoy installing every pool fence yourself, then there is absolutely nothing wrong with that. Some people don’t want a business; they just want a job they love without having a boss. They’re not planning to sell their business to fund their retirement; they put money into an IRA each month. If you decide this makes you the happiest, there is absolutely nothing wrong with going this route.
The PROBLEM is that a lot of people want to own a business, but INADVERTANTLY have become self-employed. They didn’t make a conscious decision. They didn’t make any decision, so life just happened to them.
THIS is what you want to avoid. Decide what you want your life to look like, and then build toward that intentionally. Every business starts off with self-employed owners. It’s up to you to decide if you want to keep it that way.