Lim Kopi Fridays Videos

Ep. 13 - 7 Things I Should Have Paid Attention to When I Became Self-Employed


00:00 :

If you are a self-employed or if you are thinking of becoming one, then this episode is for you. I’ll be sharing with you SEVEN things that I should have paid more attention to before I became a self-employed person. Now, let’s dive right in.

00:19 :

Hello everybody, my name is Adrian and welcome to another episode of Lim Kopi Fridays with Adrian. Self-employment or entrepreneurship seems like a Holy Grail for a lot of people because they feel that they have the right to determine how much they want to earn or they want to have more time that that can spend with their loved ones or even with themselves. However, there are certain threats or certain pitfalls that we may have to think of before you embark on your entrepreneurship journey.

00:51 :

The first thing to think of would be that there is no company insurance to take care of us. If your company used to have a lot of benefits, such as medical benefits, outpatient, General Practitioner, Specialist consultations and all. So, if you are a self-employed all these will be gone. What this means is that when you are sick and you go and see a doctor, you have to bear the cost of it.

01:19 :

And if you are not well, and you may have to see a Specialist, the cost of it will have to be borne by you as well. Dental benefits, no longer there. So when you are in your self-employment or you are planning to be self-employed, then these are some of the things that you may have to take note of in terms of company insurance. Even worse, if you have a pre-existing medical condition that is not covered from your personal plan, then you may have to rely on company insurance, which in most situations they may be able to cover for pre-existing medical condition.

01:53 :

So you may have to assess whether or not your personal plans would be able to cover for these scenarios. The second thing that you may have to take note of would be that there is no annual leave. If you have been in employment for a long time, you probably will be very accustomed to submitting your leave application and to segregate your work life and your personal life. That means when you are working, you spend your time working, you fully concentrate on work and if you are taking a leave, you’re having a personal time then you don’t bother about work.

02:25 :

Now If you are self-employed, in most situations you may have to work even if you’re on leave as well. Not a lot of trades for self-employment will allow you to segregate your life in this way, where you can split your personal life and your work with the exception of a few. So if you are not in those trades, then you must be prepared that even though you may have time flexibility, but you may not probably be able to enjoy the full time when you are on leave.

02:58 :

And the third thing that you have to take note of would be that there is no medical leave. Which means to say even if you are sick and you’re unable to work, you’re not being paid. And if your self-employment job requires you to work every day, every time, that means you will not be paid for their time, you will not be paid for that day. Or even worse, if you are submitting a job and you are not able to present on that day, then you may even lose the opportunity.

03:29 :

So these are the additional things that you may have to look out for, even though it is not apparent from the start. Like medical leave, you may have to build in to your work processes as well. The fourth one would be that there is no CPF contribution, which means to say that even though you are not paying off your monthly income that 20% to your CPF, you are also not enjoying the employer contribution to your CPF as well. So if you’re comparing your income, assuming that you’re earning 5,000 per month now and you’re thinking of coming out of that employment job to become a self-employed, you should not be targeting just $5,000 because you are not getting that additional 17% from employer.

04:16 :

So if you are doing an apple to apple comparison, it should be $5,000 + 17% of that $5,000 have to be included and that will be your baseline for you to choose whether or not it’s worth it for you to come out of the employment job. Of course, that is if money is the main concern here. But if time is the main concern, then there’s probably a little sacrifice that you may have to make that you may judge whether or not is it worth it for you to do that. And the next one would be fixed costs.

04:48 :

For certain trades, fixed costs are apparent from the start. Say, for example, if you’re a private hire driver and you rent a car, they’re running costs. So these are things that are more measurable from the start because you can set aside them. You know how much your rental will be, how much running cost it will be. After probably a few months of gauging that, then you know you’ll be able to build into your fixed costs as part of the business expense. But for some of us, we may not immediately require the fixed cost from the start. Probably when we encounter new opportunities that require us to engage people, that require us to rent an office, rent vehicles…

05:34 :

So these are the additional fixed costs that may come by and if your profit margin is very thin, this may erode your profit margin and in the end you may be forced to leave the self-employment. And number six would be unstable income. I’m sure everyone that comes into self-employment would have anticipated unstable income. However, they may not have anticipated that they may be in this trap or this loop perpetually. So, as what people will normally say, you know, if you are in employment job, you may be in a rat race.

06:10 :

Similarly, if you’re in self-employment you may be in a different kind of rat race as well. It’s a rat race against yourself. That means if you are not careful and you only plan for the next few months, that means when you have a higher income, the higher income is to spread for the next few months, then that will be a cycle that you may have form subconsciously that you are only planning for the short term. And this could be dangerous because if you are only planning for the short term, you are not looking for the future, you’re not looking beyond that six months period, then you will always be inside this six month cycle, and you may be prone to things like new trends coming out, new opportunities or new potential opportunities that may arrive in the future.

07:00 :

It is something that you may have to take note of if you find yourself that you’re in this six months cycle. On the other hand, there is another group of people that fully focus on the future. So they spend 90% of their time planning for the future. Means what the future potential can bring to them and they see that they are able to achieve a desired result if they continue in the same direction and they continue to build for their future. However, before they reach the future, they are actually out of business.

07:36 :

How ironic would it be that you spend most of the time planning for the future, but you do not get to see it? And there’s a trap that some people will have, which is why the concept of the power of now. Which means to say that you may have to plan for the now for what your current situation is, to tide it over while having an eye for the future. So this means that when you are doing your work, you may have to segregate your effort.

08:04 :

Maybe about 60% or 70% you cater for the now and 30% you cater for the future. And that percentages can change along the way, probably as your income becomes more stable, you’ve probably settled the now more, becomes stable and then you can have an eye for the future. So to summarize, self-employment is not all rosy and like what you have heard from other people. There are many things that you may have to look into and as long as you have catered for them then you are able to really let yourself go and explore entrepreneurship, self-employment, freelancing…

08:49 :

And sometimes these can be very rewarding in terms of giving you the time or giving you the additional income that you never dreamt that you could have earned under employment. But of course you may have to look out for the certain things that I mentioned earlier just to ensure that you do not fall short of your own expectations and to allow you to build the business for yourself. I hope this helps and I’ll see you in the next episode.