Is employment or self employment "safer"?

Posted on 3rd January 2015 at 4:10pm by Carl Reader in Business

Many prospective business owners are understandably cautious about starting their own enterprise, as it is a leap into the unknown. Traditionally, most children were brought up with the mindset of getting good grades, studying hard, and then finding a “safe and secure” job. This upbringing naturally lends itself to being cautious of change and risk, and in turn starting your own business.

In his personal finance book Rich Dad Poor Dad, Robert Kiyosaki developed a model which he labelled the “Cashflow Quadrant”. In this model he considers those income streams with one sole stream of income (employment and self employment) to be on the left hand side of the quadrant, whilst those with many streams of income (owning a business and becoming an investor) on the right hand side of the quadrant. Kiyosaki’s thinking is that whilst the traditional mindset is that a job or a self employed professional role is “safer”, in fact it is the other side of the quadrant that is safer, as there is no chance of redundancy or other unforeseen circumstances which can cut off your sole source of income.

A question that might arise from the differentiation of self employment versus owning a business is whether they are actually the same thing? Kiyosaki asserts that his definition of a self employed individual is an individual who charges his / her own time and efforts to a client, whereas a business owner has employees to perform the work required. This obviously conflicts with the common perception (and indeed sometimes the legal definition) of somebody being self employed when they own a business, however for the sake of the Cashflow Quadrant model the differentiation is essential.

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