Self-Employed vs. Running a Business: Knowing the Difference Matters

In 2024, personal branding and defining your professional narrative have never been more critical. The names we give things and the titles we assign to ourselves matter greatly. But when it comes to distinguishing between being self-employed and running a business, the difference isn’t just semantics—it’s fundamental.

The Common Misconception

Like most people, when I meet someone new, the conversation often turns to what they do for a living. In an economy dominated by SMMEs (Small, Medium, and Micro Enterprises), more and more people tell me they “run their own business.”

As someone who runs several businesses, I’m naturally curious. I usually ask questions like, “What do you do?” “How long have you been doing it?” and “How big is your team?”

Frequently, I hear responses like “I’m a personal trainer,” “I do freelance software design,” or “I’m a physiotherapist.” What I want to say—but seldom do, because it might be considered impolite—is, “In that case, you’re not running a business, you’re self-employed.”

READ MORE: Take Control of Your Finances in 3 Easy Steps

The Real Difference

This isn’t about belittling anyone’s work. Both being self-employed and running a business are commendable, as long as you’re clear on which one you’re doing and are acting accordingly.

When you’re running a business, it should be able to operate without you. Work gets done, and money comes in, whether you’re there or not. If you’re self-employed, however, the money stops flowing the moment you stop working.

The Impact on Your Life

Let’s take holidays as an example. A business owner only needs to budget for the cost of the trip. On the other hand, a self-employed person has to cover both the cost of the trip and the loss of income—making time off significantly more expensive. The same applies to time off due to illness. I recently had surgery and was out of action for over a week. Despite my absence, my business’s revenue and profits increased that month because it ran without me. If I were self-employed, I would have lost income due to my inability to work.

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Planning for the Future

Your status as self-employed or a business owner should also shape your exit strategy. Everyone dreams of selling their business one day. But if you are your business, it has little to no value to a buyer. If nothing gets done without you, nobody will purchase your business. So, if your retirement plan hinges on selling your business, you may need to either save more aggressively or restructure your operations so that they generate income independently of you.

Managing a Team: The True Test

Even if you have a team, you could still be self-employed rather than running a business. Ask yourself: Are you able to delegate effectively? Are your team members empowered to make decisions, or do they rely on you for everything? Have you taken the time to learn how to manage people and understand the financial aspects of your business?

If the answer is no, then perhaps you’re not really running the business. And if you’re not, who is? As a Chartered Accountant who owns an accounting firm, I do no accounting in my day-to-day work. I can’t remember the last time I submitted a VAT return—that’s not my job. My role is to ensure the business has the systems, processes, and stability to function without my constant involvement.

The Captain’s Role

Think of a business as a ship. If the captain is down in the engine room, who’s on deck steering? Don’t let your business head toward an iceberg while you’re elbow-deep in engine grease.

READ MORE: Take Control of Your Finances in 3 Easy Steps

Join the Conversation

To learn more about managing your finances, whether you’re self-employed or running a business, reserve your spot for the next workshop hosted by Gareth Price here. Guest speakers include Andriette de la Harpe from Mondvol and Liz Bath from Lulla-Buy and Educos Vision Services.