The Pros and Cons of Self-Employment

As I sit here typing this, there is a 600 pound gorilla crouched anxiously next to me, cracking its knuckles. The crazy part is, I invited it here, and I haven’t yet asked it to leave. I’m not sure whether I will decide eventually to shoo it away or turn and give it a great big hug while it carries me off in to the jungle.

The gorilla looming over me is the impending choice of leaving my W2 job for the adventure of self-employment.

We’re Going on an Adventure! (Maybe)

The idea of going out on my own as an electrician has been floating around the back of my head since before I had even heard of the concept of Financial Independence (FI). As I’ve said in various other articles, once you become a licensed electrician (or plumber or HVAC tech, etc) people suddenly have all kinds of work they need you to do.

Starting a business on the side has been a no-brainer for me, and the fact that my business has grown rapidly and continuously for over 3 years based solely on word of mouth has really brought the idea of self-employment to the forefront.

Self-employment is a scary concept, at least for me, so I have decided to go against my usual modus operandi of diving into things headfirst without thinking and create a comprehensive list of the pros and cons of going out on my own.

Hence the title.

Pros

I think it’s nice to start with the positive stuff, don’t you?

  • I’m A Boss! – No more dealing with a boss, as the boss would be me
  • Time Freedom – I can fill my schedule as I wish, based on the amount of work I have available
  • Mo’ Money – I can charge a much higher hourly rate than I am getting at my job (of course, I am also getting benefits at my job, but we’ll get more into that later)
  • Dr. Feelgood – The work would be much more fulfilling than the same old day-to-day busy work I’m doing now.
  • Tax Benefits – There are all kinds of great tax incentives for owning a small business, such as being able to write off many household expenses and miles on the vehicles.

Cons

This wouldn’t be a very difficult decision if there weren’t any negatives. Just like everything in life, there is some bad mixed in with the good.

  • No Stability – I have no guarantee of work from one day to the next. Sometimes my phone is ringing off of the hook, sometimes I go over a month without a single call.
  • Real Work – The running joke at my W2 is that we don’t go to work, we fulfill our “employment attendance.” If I went out on my own, I’m not making money unless I’m doing actual work.
  • No Bennies – When you work for yourself as a contractor, if you’re not working you’re not making money. This means no paid sick days, no paid vacation days, no paid holidays, etc.
  • Litigious Douchebags – The liability involved in electrical work, or really any work on someone’s building, can be high. If you’re careful and you do your job correctly, it shouldn’t be an issue, but shit happens.
  • The Buck Stops Here – When you own the company (especially when you’re the only employee as well) there is no one at whom the finger can be pointed other than yourself. If something goes wrong, I am the only one with any possibility of responsibility.

Let’s Look A Little Closer, Shall We?

At this point, as you can see, I have come up with an equal amount of pros and cons, thereby making the decision all that much harder. Did I specifically find an equal amount on both sides to make a more compelling story? You’ll never know! Bwah ha ha!

The truth is, I had to think a little harder to come up with as many negatives as positives, and I think that could be for one of two possible reasons: I am biased toward making this change, and therefore have an easier time finding reasons to help bolster my opinion; or perhaps this decision is not as hard as I am making it out to be.

I have these fantasies of leisurely waking, getting my kids ready for school, then sauntering off to work for between 3 and 6 hours before moseying back to the school to pick them up and frolic in a field for the afternoon. I’m guessing that, in reality, I will have days like that, but probably not as many as I would like.

Actually, that brings to mind another Pro: Having the ability to recognize one of those few precious Gorgeous New England Days, and taking the day spontaneously to go do something fun with my family. Such as frolic in a field for an afternoon, followed by a rousing session of Family Tick Removal. Fun stuff.

Of course, as I mentioned earlier, I wouldn’t get paid for those days, and I could just take a sick day from the W2 when that happens (don’t tell the boss!). Funny thing though; while I have said for the last couple of years that I was planning on taking a beautiful day over the summer to do something fun and outdoorsy with the kids, I have yet to actually do that. Interesting…

Just A Little Closer Now

I’m just now realizing, as I make my way through this, that I have missed the biggest Con of all, though I did allude to it: Health Care. This is the bulk of the giant gorilla, and it is not something to be ignored.

As I am currently employed by the State of Massachusetts, I have excellent health, vision, and dental insurance. This is one of those “hidden” payments that makes my actual hourly wage much higher than what it looks like.

While I could charge around $85 per hour as a contractor and people would be happy to pay it, a good portion of that money would be going to health care coverage. I haven’t yet figured out the exact numbers, but that is a crucial step for me before I take the leap.

How it Would Go Down

Here’s the (very) loose plan I have in my head as to how I would go about this changeover:

  1. Talk to someone who knows stuff about health insurance coverage options for sole proprietors and get a solid baseline of how much I would need to work to cover that expense
  2. Talk to someone who knows stuff about business law and liability to make sure my personal life is protected from my professional life
  3. Make sure Mrs DIY is on board (this should probably be step #1)
  4. Figure out vehicle situation. I still need to be able to cart the family around occasionally, so a 2-seat van won’t cut it. I also don’t want to have way more vehicle than I need, because gas. I’m thinking a small trailer that I can tow with my Rav4. By the way, great car.
  5. Start doing some advertising. So far it has been solely word of mouth, but if I’m going to be filling 20-40 hours per week, I’m going to need to advertise.
  6. Figure out an organization strategy. This should probably be step #2, but at least it’s on the list. Right now I can get away with a fairly loose system as I don’t have too many bars in the air at once, but if this is going to be a full-time gig I am going to have to get way better at keeping track of everything.

Version 2

Is That It?

This has been one of my longest posts, so I think it’s about time to wrap it up for now. We’ve gone over pros and cons, we’ve mentioned lawsuits, and we’ve touched on gorillas, so I think we have covered all of the important stuff.

Are you in a similar position in life? Have you gone through a change like this and have some tips for those of us still in the decision phase? Have you touched a gorilla and lived to tell about it?

Let us know in the comment section below if you have anything to add to the list, or any questions that can perhaps be answered by someone a little farther along than you on the decision trail. Not me, of course, I mean someone else. See? It’s hard to let go of passing the buck!

6 thoughts on “The Pros and Cons of Self-Employment

  1. Good article, Mr. DIY! You could always keep hustling with the independent work until it literally surpasses the W2 work, and then the decision is made for you. The trailer for the RAV4 seems like a solid choice too. A small covered trailer should be easy enough to manage, while also giving you a dry place to keep your tools and equipment.

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    1. That’s what I was thinking, and that way I can just keep everything in there all the time. Of course, I have to find a parking place for it at home that Mrs. DIY would approve of…

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  2. Captain DIY – You mentioned that you work for the State of Massachusetts, have you determined when you will reap the most benefit from its retirement plan? I’m not familiar with Mass. but I believe most states have certain vesting thresholds. If you are close to the next threshold, you may consider continuing your work with the State until you reach that point. Money managers at investment firms should be able to help work through some of these scenarios for you.

    I, myself, am self-employed and one of my biggest challenges is motivation to work. I think for anyone considering self-employment you have to ask yourself if you will actually do the work required. And the work required isn’t just paid time, its time spent doing paperwork, billing, training, and marketing. Are you willing and motivated enough to do all of that?

    Self-employment has many pros and cons, but I love having control over my schedule. Good luck in whatever you choose!

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    1. Jessica, these are some great points you bring up! I will probably have to do an update to this post soon, as I keep thinking of other factors to consider!
      Yes, in my case there is a pension to consider, but at this point I am 14 years away from getting anything. If I stick around another 4 years, however, I will be vested in the retirement insurance plan. What this means is that once I am 65 I will be able to access the retirement health insurance plan offered by the state. Great plan, but that’s a long way away, so I don’t really feel like it’s a guarantee, as the state likes to change stuff like that all of the time.
      As far as the motivation goes, that is absolutely a serious aspect to consider. I like to think I would do what needs to be done, but of course you don’t really know how you’ll act in a situation if you’ve never been in that situation. As it stands right now, I do what needs to be done for the side business, even though it definitely means time away from the fam. I like to think the pressure of needing to support said fam would be a driving factor!
      Thank you so much for bringing up these crucial elements to this decision, and look for an update in the future!

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  3. This is neither pro or con, but something still noteworthy for your list…
    1) If you don’t try to go out on your own, is there a piece of you that will regret the decision later in life? You can always come back to the state with your tail between your legs – you do already have great years of service with them.
    2) Where’s your risk vs reward analysis? Are the concerns about health care outweighed by the potential upside? Any chance your wife has access to health care or could get it?

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    1. Matt, you always have fantastic points to add! I think I may, rather than add an update, have to do an entire sequel!
      First of all, the fact that I have thought about it so much tells me that yes, a part of me would always wonder about how it would have gone if I never do it.
      Second of all, a risk vs reward analysis must be forthcoming. That is a great way to think about it that I hadn’t even considered. Definitely stay tuned for a sequel!

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