Becoming self-employed can be very rewarding. However, at the same time, it is a decision fraught with risks that need to be countered and balanced carefully. The reason for this is that there are many disadvantages of being self-employed. Here are some disadvantages or risks of being self-employed that you should try to avoid.

The underlying principle behind the business needs to be well thought out. Sometimes, entrepreneurs tend to get blinded by their own passion about something. When this happens they think that they can build a business where opportunity does not exist. Building a business when the business concept is poor can lead to disaster.

Funds are needed to not only establish a business but also run it. Most experts suggest that entrepreneurs should have one year’s worth of running funds available to cope with the risks of self employment. Without sufficient funds, the business’s day to day operations will get disrupted. This would naturally cause the business to suffer.

Running a business involves knowing many things. For example, you need to have experience in administration and man management. If you are inexperienced in such simple but crucial aspects of running a business then you need to acquire the experience. You need to constantly educate and teach yourself by reading, researching, and attending seminars.

If you do not have a good business plan then you would not be able to cope with the risks of self employment. Planning is vital for your business to succeed even if your business plan is no longer than two pages. Without a business plan, you would not know what to do when crises arise and problems prop up. You should always revise and modify your business plan on a year to year basis.

Understanding customers and their behaviours is absolutely critical when it comes to nullifying the disadvantages of self-employment. You need to do in-depth market research to figure out what kind of customers or clients you are targeting, whether they are private citizens or organisations, where are they located, how big they are, what age are they, what sex are they, and a number of other demographics as well.

It is very easy for a new business owner to price his products and services too low to beat competitors. Similarly, new business owners are also prone to pricing their services and products too high. Pricing is important for a business owner because it is closely related to two risks of self employment. If your product or service is priced too low then your business would not have the capital it needs to sustain its daily operations. On the other hand, if it is too high then your business would not have enough customers or clients to get capital from. Finding the right balance should be given priority.

It can be convenient to get all orders or work from a single huge client but it is also dangerous. Being at the mercy of a single client is never a good idea as any change in preference or market dynamics can result in your business suffering. It is much better to have a large collection of smaller clients.

Record keeping is as much a counter to the risks of self employment as anything else. You have to keep records of everything from your stocks and manpower to your sales and financial returns. If you do not like doing such tasks or know how to do them then you should hire someone who does.

One of the problems with running a business is that all the associated tasks are not fun. If you are new then this could lead to you procrastinating on some tasks while focusing on others. This is a dangerous game because it could mean that those tasks get pushed to the back of the queue repeatedly. You need to avoid whimsical work management and decision making, if you want your business to succeed.

Marketing and sales strategies play a direct role in how many clients you have and how many you can get. Without reliable and trustworthy sales and marketing strategies, you will find yourself facing many risks of self employment. Once you have devised and put in place your marketing and sales strategies, you also need to monitor them. The ones that do not work need to be removed from the overall system.

Running a business is a full time thing. You will have to be available virtually all the time. There will be crises at all times in the day which will emotionally affect you. If your motivation levels are not right then you will never be able to succeed in your venture. In contrast, you will need to take regular breaks to recharge your batteries. Pacing yourself and keeping the flame lit depends entirely on how motivated you are.

In some situations, some people just end up being unlucky with their businesses. Unforeseeable circumstances are the most common risks of self employment. Because they cannot be predicted, such situations cannot be planned for. This means that they usually catch the business unawares. A vast number of situations can be categorized into this group of unforeseeable circumstances. Examples include death, illness, and sudden market changes.