"Never settle for less than your dreams.
Somewhere, sometime, someday, somehow, you'll find them

- Danielle Steel, Bittersweet.

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Saturday, November 15, 2014

Beyond Employment: Freelancing, running a Business and Investing.

In partnership with Autumn Men's Collection.

The song Believe, from the February 2000 album Times & Seasons by Commissioned starts with sweet voices of kids saying what it is they'd like to be when they grow up.
Years later, some deviate from these lofty dreams and aspirations, upon realizing that even the best laid plans of mice and men oft go awry. In other words, plan and reality are usually very different entities.

Despite the challenges, however, a good number do stay true to their stated objectives and with time, determination, self discipline and great effort, realize their goals.

To do all this, every person needs to do gainful work and earn. Formal employment for many, presents the best option to achieve one's goals. To others, business offers one a chance to be their own boss and personally be in charge of life.

To better understand employment, freelancing, running business and investing, we spoke to two seasonal professionals whose insights are worth considering both in areas of personal finance, progress and business development.

The Benefits: Formal vs Self Employment

First off, what clear advantage does formal employment present that is largely lacking in self employment?

Stephen Nzioka is the lead web developer and co-founder of Websoft Development Ltd, a company that offers turnkey web design and online marketing business solutions. He reckons that formal employment guarantees a regular and consistent source of income."In addition, there are fewer risks are associated with formal employment especially so for employees." Steve adds.

"In formal employment, you are assured of a salary every month and your Job description is well defined, The employer cushions you from the real erratic nature of the business," says Sakong Kirui. Sakong is an upcoming business man with interests in Petroleum, Clothing and e-commerce.

He goes on: "There are also quite a number of benefits that come with formal employment, such as medical insurance, business travel, group personal cover among other things."

In view of the aforementioned, one would then be surprised that some guys leave formal employment and either start freelancing or running a business. What makes self employment attractive?

Steve gets straight to the point. "It presents an opportunity to pursue one's dreams to the fullest, enjoy life & make money while at it."

Sakong offers an impressively elaborate answer:
"Being the boss: I think apart from basic needs, a human being draws a lot of satisfaction from making decision that concerns his or her work life. You'll decide your business plan, your procedures, your pricing and marketing strategies—everything. In self employment you make all the decisions and reap the full benefits of such decisions.

Flexible working hours: I greatly value spending quality time with my kids, and self employment allows me to wake up early to work, drop them to school at about 8 am and continue working after that, which is not possible in formal employment. This does not mean you will work less hours....most business people end up working longer hours than people in formal employment

Profits are better than wages: I also believe that you are paid a small percentage of the work you do for the company to make a profit, in self employment you make take 100 percent of the profits, which is compounded when you factor in profits you make from those who work for you.

Leaving a legacy/inheritance: When you build a business that improves the lives of people, this will not only line your pocket, but people will also remember you for some time. It is also possible to hand over a business as inheritance which is not the case with formal employment."

Look before you Leap!

Apparently, self employment is the way to go for those willing to take full charge of their personal and professional lives. The question that begs asking is: Is there ever a right time to leave full employment?

"Any time an opportunity presents itself and you are passionate about it, I guess, is the best time to quit formal employment." says Steve. He then proceeds on a cautionary note. "Of course this should be after doing extensive research & accessing the viability of the venture."

Sakong recommends that one only leap after looking. And the preparation involved takes years.
"You need formal employment for about 5 years, which is important for you to learn how to build structures and systems that will ensure the business will run without your day to day involvement."
Striking the balance, it seems, is the hard part. "If you get into self employment too soon you will find it hard to grow a business beyond yourself, if you stay too long you become too comfortable to take risks."

Speaking of risks, what are the pitfalls that many encounter upon leaving full employment and how does one avoid these?

"The biggest challenge is the uncertainty of the new environment, with no assured salary at the end of the month, no medical covers and other benefits that come from formal employment. Many businesses are not profitable in the first few months, even years and hence the need to be super motivated and determined since only these can keep you going during this dry period." Sakong says.

"Not assessing & mitigating the risks involved in starting a business & working without a clear strategy or plan are some of the common pitfalls. Lack of self discipline also plagues most beginners. Steve reckons. His advice? "Do extensive research, plan and work hard. There are no two ways about it."

To this, Sakong adds: "I am driven by the dreams of a prosperous business empire in my head. I also know that many a multinational brand started off from a dream."

What then, does Sakong recommend to someone who has a dream and is motivated, but still has to put dinner on the table?
"Having sizable savings will keep you going over this period. If your idea is very brilliant you can pitch for a venture capitalist, who will provide a cushion in exchange for a share holding. I will strongly recommend you keep a network of people who are in business for support and mentorship during the transition period."

To Freelance or Run a business?

Anyone familiar with Robert Kiyosaki's cashflow quadrant (above) will realize that freelancing in itself is limited by the fact that you only get an income if you actually work, and as Sakong points out above, freelancing can also mean that you never rise beyond yourself. Is it advisable to freelance or run business?

"To run a business." is Steve's curt reply. Thankfully, he explains: "As early as possible as a business owner, strive to focus on the important things (growing the business) rather than the urgent things (making money). As a rule of thumb, get yourself off the grinding mill (production) & focus on building a team to do the same which gives you more time to strategize on how to scale up the business and/or pursue other things.

Mistaking the urgent for the important is something we should all avoid.

Sakong has similar sentiments, underscoring the value of creating systems bigger than the individual.
"This depends on the business you want to engage in and your passion, I believe in creating systems that can exist without you, freelancing is heavily dependent on you whereas using other people skills is a little complicated but will reap more benefits in form of profits and stable business."

Challenges of Self Employment

Self employment, it must be said, is not for the faint-hearted. It takes courage and an iron will to do some of the things that an entire department in an organization would normally be tasked with. It takes courage to not be held back by rejection and deals falling through. What are some of the challenges both Steve and Sakong have faced?

"The risks involved are too many." says Steve. "Lots of sacrifice and hard work are inevitable for one to make it. It eventually pays off with time if you navigate your course well."

Sakong outlines several challenges:
"Raising working capital: Many businesses start as ideas. Now, the current financial institutions depend on the track record of the business or the asset base to finance any venture. New business lack both, hence a challenge in accessing finances. Many small businesses depends on personal savings or family and friends to raise capital.

Attracting and retaining human resource: Start-up businesses are not able to attract and retain qualified and experience human resource, because most employees look for stability and job security which can only be offered by big, stable businesses. The business will therefore depend on the skills of the owner and employees without experience which has its own disadvantages.

Uncertainty of the business environment: In any business environment there are good season and not so good seasons. Start-ups do not have the financial muscle or experience to handle the not-so-good seasons. A significant number of start-ups do not make it to the 5th birthday.

Building business models: They say there are a number of people out there who can make a better burger than McDonalds, but McDonalds have a business model that the rest have not managed to beat. Small businesses struggle to create business models that will survive beyond the owner."

For those in school. Employment or Business?

We all wish entrepreneurship is taught as a core unit in Kenyan Universities and Colleges. This would dispense with the shenanigans of educated, unemployed youths who incessantly blame society for their sad but avoidable plight.

"Well, there are so many opportunities out there to be explored in whichever discipline. If you are not sure about your area of placement or specialization seek formal employment, learn the ropes and quit when you are ready to pursue your dream. If you are certain about what you want to pursue then delve into it instead of wasting precious time in formal employment." Steve advises.

 We all know the above is much easier said than done. Aware of this, Steve adds: "But in either case, be conscious of the current, emerging and future trends in your area of interest so that you remain relevant and ahead in your field at all times."

What does Sakong have to say to this, having spent almost a decade employed in the oil industry?
"Getting a job in the current market might be a little harder but there is always work to be done. My advice will be to work hard in school and then apply the knowledge they gain to create jobs for themselves and the population looking for jobs. They should think of themselves as a solution to the problems and not victims of the economy and government policies."

This echoes something I first heard in Culture Talk back in the late 90s on KBC English service, where Prof Egara Kabaji emphasized that even if there are no (white collar) jobs, there is always work to be done. And for those who can recognize opportunity even when it comes dressed in overalls, such work is gainful, rewarding and profoundly fulfilling.

Contemplating Resigning?

 It should be understood that this article in no way bedevils formal employment. That said, however, we all know that enterprise is what results in  economic development. If you watch The Men Who Built America, it becomes evident that both employers and employees are important in any economy.
And the more people there are willing to start business and employ others, the more a society progresses.

What then can say to anyone thinking of saying something only Eric Cartman would say, and flying solo in the challenging world of business?
"If you do not take risks, you'll always work for the person who does. They just need to be prepared physiologically and jump." says Sakong.

"If you've done your Math right and weighed the options correctly, then resign and pursue your dream. I also strongly advise seeking guidance from others who've gone before you and are successful so that you learn from their mistakes, so that you can get your big break sooner with fewer challenges." Steve concludes.

* * *

It seems deciding whether to be formally employed or flying solo in business is like walking a tightrope.
So is the game of love, says Kylie Minogue.