Self-Employed or Business Owner?

Anyone who sets out to be an entrepreneur is a hero in my eyes. It takes lots of courage to assume the risk of managing your own financial future. However, many people consider themselves to be business owners when, in fact, they are really self-employed.

I'm not suggesting that one is better than the other.

However, there is a huge difference and it's important to know which you are.

Simply knowing which category you're in will help you be more aware of your business strategy options and how you should approach your business operations.

First let's define self-employed and business owner.

A business owner is someone who owns an asset(s) or entity that provides services and products for profit. A self-employed person is someone who is self-directed and provides a service or product for profit.

See the difference? One asset(s) that are independent of the owner. The other "IS" the asset.

So, are you self-employed or a business owner?

Here are some questions to help you determine which you are?

1. Does the money keep coming in when you stop working?
2. Without your income supporting your "situation" would your "situation" be able to exist!
3. Does your business operation stand alone without you?
4. Do have assets that generate revenue and have value that you can sell to someone else?

If you answered "NO" to any of these questions, you are self-employed.

That's not a bad thing. However, as a self-employed person you do NOT have a business that will allow you to build wealth.

So, what do you do with this new revelation? Here are a few strategies to consider to make your entrepreneurial endeavor more beneficial:

1) Don't let what you do be your only source of income. This is really sound advice for anyone, employed, self-employed, or business owner.  As a self-employed person if you are the ONLY source of income, you are particularly at risk for financial disaster should you become unable or choose not work.  You must have other revenue streams to provide better financial security whether that be passive income like rental property or investment in mutual funds, stocks and bonds, etc. Understanding this one thing could be what keeps you financially secure and helps you build wealth.

2) Instead of spending money, buy assets that generate income which can then be used to fund your
expenditures
. Robert Kiyosaki, author of Rich Dad, Poor Dad, said it best. People who build wealth don't just spend money to live, they buy assets which produce revenue that they use to live. Big difference there. If you don't invest in income producing assets, you will forever have to work for your money.

3) Create information or education products that can be sold over and over again and generate income for you. Nearly everyone who is self-employed has a skill or body of knowledge that other people value. Find a way to bottle what you have or know and sell it to someone who values it. For example, you may have a unique technique for coloring, cutting, or styling hair. Maybe you can produce a video training that you can put on your website and sell. That video product can be purchased while you're working or when you're on vacation, creating more income for you.

hurt woman4) Don't set your prices too low. To compete in the marketplace, many self-employed persons think they have to have extra low prices in order to survive. But, if you're setting your prices too low, you won't generate enough profit to stay in operation, let alone pay yourself when you are on vacation or if you're hurt or sick and become unable to work. So make sure your prices takes into account you total cost to operate, a fair salary for yourself, and enough to reinvest in yourself and your business objectives.

 

5) Live on about 80% of your income and save and invest the rest. The income that I'm speaking of is NOT all of service revenue. It is the portion you pay yourself as a salary. You should live on 80% of what you pay yourself and save and invest the other 20% for  vacation, sick days, disability, children's education or retirement.

 

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