Self-employment still a precarious venture

  • 2006-05-31
  • By Kairi Kurm

SOLITARY MAN: Kikkas realized that, as a photographer, his best chance for success was working on his own.

TALLINN - Starting a company of your own can be a sign of wealth or disaster, depending on the idea and the owner's personality. After the collapse of the Soviet Union, the number of entrepreneurs in Estonia soared. Today, the job market has much more to offer. Nevertheless, many still believe they can manage better on their own.

According to recent data from the Statistical Office of Estonia, 44,500 people - 4 percent of the country's working population - were self-employed in 2004. Most live in the southern and northern part of the country.
In southern Estonia, most entrepreneurships 's one third to be exact - deal with agriculture, hunting and forestry. In the north, self-employed residents work mainly in retail and wholesale trade; repair of motor vehicles, motorcycles and personal and household goods.

Katrin Truumagi, a young broker, told The Baltic Times that the only real estate job she could find was in company registration. The position enabled Truumagi to use the company office and name, but in return she would have to pay a so called "table duty." Rather than work as a sole proprietor, she prefers having a company of her own, as it ensures better bank loan conditions and she doesn't have to worry about losing her personal assets if a company goes bankrupt (which is the case with sole proprietors).

Kaupo Kikkas, a young photographer who opened the studio a few years ago, is quite successful and well-known today. "In this business it is very important to have your own company. People such as artists, photographers and writers sell their own resources and have customers who want to buy their personal creation. For them it does not make any sense to be an employee, because a company does not give any additional value to their work," he said. "On the other hand I would be glad to have well-paid work. The time has passed where people must have their own companies [to do well]. Wages have increased, even in the public sector," said Kikkas. "The responsibilities are very high for the self-employed. You work 60 or even 80 hours per week, not 40. But there is no one to blame but yourself." Surprisingly, Kikkas did not face any major obstacles when opening his business. "The problems arise as you start hiring people and miscalculate expenses," he said. "Many start their own business and pay taxes in accordance with law and then later find that there is no profit at all."

Kadri Akermann, a young lawyer who opened her own consultancy, Acte Konsultatsioonid, a few years ago, mentioned a number of things that people forget to take into account when opening a business. Starting a company takes more time than initially planned, she specified, suggesting that people hold on to their permanent jobs in the beginning to disperse the financial risks.
In 2003, 59 percent of Estonia's self-employed made a profit, while 15 percent ended in the red and one fourth failed to receive monetary income. Half of this number's income came strictly from their own company, while 19 percent also worked for an employer.

The statistics also show that entrepreneurs struggle more than their employed peers. In 2003, more than one third of Estonia's self-employed were living in poverty, which means their income was below 23,300 kroons (1500 euros) per year - the nation's "at-risk-of-poverty threshold." Company employees were much better off, with only 7 percent defined as poor.
Estonia's local governments offer few support schemes for start-up companies, and even Enterprise Estonia's programs are scarce. The support projects that do exist are mainly related to consulting and training. For example, in an effort to create more jobs, the City of Tallinn offers 100,000 kroons of financial support to entrepreneurships if they pass certain criteria.
But if owners try hard enough, financial support can be earned.

Hain Dengo co-founded a furniture business in 2004 and received 160,000 kroons support from Enterprise Estonia for the purchase of new equipment. The company is currently producing design furniture and looking for business partners abroad.
Although his business has created a few new jobs in the area, he and his partners' main motivation was insuring their own future, Dengo said. And this, it seems, is true of most entrepreneurs, whether they realize what they're in for or not.