Life of a Lone Ranger: What makes or breaks the solo self-employed?
Nnamdi O. Madichie and Magdalena Read MCMI
Originally published by CMI.
The United Kingdom is witnessing massive redundancies across every sector – thanks to the Covid-19 pandemic, which brought about lockdowns in March 2020. There seems to be a correlation (not causality) between job losses and uptake of self-employment. In this article we provide a broad overview on what to watch out for when thinking of becoming solo self-employed and encourage debate from practitioners, policymakers and other stakeholder groups. This is with a view to mapping out how to best support CMI readers either wishing to increase outsourcing to freelancers by established firms or for readers seeking the high level of freedom and work autonomy that this way of working offers.
There is a historical precedent to economic recessions. The UK is now facing a sharp economic downturn. Economic experts suggest that the impact of the Covid-19 pandemic will be worst felt in years to come. This will lead to further redundancies, loss of employment and loss of vital services delivered by businesses that would not be able to survive post-Covid19. These challenges could force the growth of solo-employment. Indeed, recent research suggests that solo self-employment accounts for over a quarter of the total increase in employment between the recession in 2008 and the onset of Covid-19.
Looking at the figures between 2008-2017, the number of solo self-employed increased by 34%, contributing to £271bn in the UK economy and 14% of the UK workforce. In a recent working paper by the Institute of Fiscal Studies, Going solo: how starting solo self-employment affects incomes and well-being, the challenges were articulated. Whilst there are opportunities to capitalise on, the need to earn a living could force many solo self-employed to take the plunge without realising whether they have the right attitude, resilience, and skills to withstand the pressure of being solo self-employed. The known most common reasons for the early death of small businesses include poor cash-flow, poor management and lack of marketing. However, the impact of ‘lone management’ in the survival of solo self-employed is often overlooked. The solo self-employed ability to juggle so many balls at once can make or break the business.
What do the figures tell us?
One key reason for the short-term survival of any start-up is the lack of resilience by the business operator. Indeed one study once noted that resilience is strategically important behaviour for survival. Recent study carried out by PR Unlocked suggests that over a third (38%) of self-employed people who work from home regularly have days when they don’t speak to or meet other people during working hours, and 40% sometimes have days where they don’t see or speak to anyone else. The research further found that as a result of working from home, 53% said they had felt unproductive, 49% isolated, 47% lonely and 36% stressed. The majority (80%) of freelancers and small business owners find it difficult to switch off from work, with only a fifth of saying they did not. Some respondents of the PR Unlocked research also specifically said they felt out of the loop with what is going on in their industry, missed having colleagues to bounce ideas off, and wanted people to share problems with. These situations can make running your own business one of the most stressful experiences to go through – not forgetting, of course, its impact on mental health.
The life of the lone ranger
Leading and managing alone is a conspicuous account of what solo self-employed do. The entrepreneur is accountable for everything they do at work. Yet, the ramifications of leading alone are not widely debated. The impact of leading alone on the entrepreneur may vary depending on their personality traits, entrepreneurial motivation, skills (including leadership) and experience. The on-demand nature, and always working to a deadline attributable to solo self-employment implies permanent pressure and high level of stress, which may result in psychological disorders such as entrepreneurial burn-out. It could also lead to an increased risk of suffering social isolation and loneliness which leading support providers of small business support such as the Federation of Small Businesses and The Association of Independent Professional and Self-employed, are beginning to recognise.
Make or break?
So, what is it that makes solo self-employed tick and what lessons can we learn from them? Arguably, resilience plays a pivotal role in the survival of this sector. The entrepreneur’s ability to withstand high levels of stress, cope with setbacks that enables them to overcome failure and crises, constant pressure and their ability to manage or lead alone are key ingredients to their success. Moreover, they must be able to anticipate potential threats and adapt to a changing environment like any other businesses do. Coupled with resilience is the motivation of the entrepreneur to become solo self-employed, whether it is a necessity to earn a living or seizing opportunities nestled among the bad economic news. A recent study on the entrepreneurial performance of solo-self-employed from a motivational perspective suggests that the necessity driven solo self-employed perform worse than opportunity driven solo self-employed. This means that those who set up their business to take advantage of opportunity are likely to perform better than those whose motivation is just to earn a living.
What now, where next?
Those who want to take advantage of increased outsourcing to freelancers by established firms that enables firms to be more flexible and agile, and the level of freedom and work autonomy, need to think twice whether solo self-employment is for them before taking the plunge. Understanding the ramification of ‘leading alone’ allows the entrepreneur to make the right choice. Unfortunately, there are few accessible guidelines available to those who are considering becoming solo self-employed. This could be something that policymakers have to consider when supporting people who have been made redundant back to employment. It will be more equally important to those who prefer to do their own research on what is best for them as not everybody has the courage to seek support or know where to seek support from.