Last week Get Rich Slowly had a post from a reader Tina about what she did with her lottery winnings. She made very responsible choices, unlike usual lottery winners. What sparked my interest most were the comments. As with any windfall discussion, there were some people who thought investing the windfall into a business would have given a better ROI as opposed to investing in index funds. Entrepreneurship is a dream for a lot of people and a lot of people think “working for the man” is something terribly wrong. Why? Now I am not talking down on entrepreneurial folks, we need them, they create the jobs, but at the same time, just entrepreneurship without good employees won’t work. And if we are talking about monetary benefits, yes, working for yourself has a lot more potential than working for an employer. But honestly, can everyone make it at that level?
Most people dream of self-employment, but not until they take the plunge do they discover the true benefits and the problems with working for themselves. May be I have been with too many people who don’t care much about money or owning their business. I am NOT one of the people who think starting a business is the way to go. Some people should absolutely work for others, some people should most certainly work for themselves, others should do a bit of both.
You should be an employee
There are certain benefits that come with being an employee. The first one being – stability. Stable pay, stable benefits, vacation, health care… If getting paid $5000 one month and nothing the next makes a person freak out, they should be an employee. I was discussing this with a die-hard entrepreneur friend, his comeback was – “well, if that is all you want and you have no drive to go far and beyond… it is your choice”. Are you kidding me? Employees don’t have the drive? Anyone who has passion and love for their job works very hard to excel. Sometimes a job by its nature cannot be spun off into a business. For example take any scientist. A lot of them just want to be at peace doing more science. It is challenging and fulfilling for them. Does that mean they are not hard working? Absolutely not. Their passion is to unravel the mystery of science. If someone gives them a McDonalds franchise to manage, even for free, they would be miserable.
I hate when someone use phrases like “not cut out to” be an entrepreneur. Does that mean entrepreneurs are better than employees? If someone is the best in their field and are happy with what they do without wanting to learn all the other business side of things, why is that wrong? It just doesn’t interest them.
Not everyone hates their job. They have the same passion as entrepreneurs, they just chose a safe and structured environment to work on their passion.
Wrong type of employee : On the other hand if you are staying as an employee and don’t feel like getting up in the morning because you dread the day, you should try to be an entrepreneur and should go after what really makes you happy. If you feel frustrated with life, then what is stopping you from starting your own business based on your passion?
Trivia : Self employed men made $12,000 more per year on average (that amount was $2,500 for self employed women). But the variance in annual earnings was greater among the self employed than the salaried workers [Translation : Not everyone will be better off self employed]. Also Self-employed men and women experienced slower annual earnings growth relative to their wage/salary counterparts for the first few years, their earnings grew faster after a critical number of years. Source : Earnings Growth among Disadvantaged Business Owner
The employee debate:
You should be an entrepreneur
I know some people who are great entrepreneurs. They like wearing multiple hats & taking risks for more rewards. Freedom drives them, they feel suffocated working for others. Entrepreneurship is not easy, a lot of people want to own their company because they think it is easy money. No. Far from it. It is flexible, but it is not easy or less time consuming than working for someone else. You need more self discipline to be an entrepreneur than an employee.
Another caveat in making the leap from employee to entrepreneur is figuring out what your true passion is and what you would like to do for money. Just because you are good at a hobby doesn’t mean you should start a business and try to make money off it. The stress to make money might make you hate the hobby. If you like something and have the passion to go after it, you should be an entrepreneur.
Wrong type of entrepreneur : If you want to be an entrepreneur to only make a quick buck, you won’t be able to withstand the pressure and excitement a business brings.
Trivia : Only 36+% of business owners had an IRA, only 1/3rd of them contributed to their IRA for the 2005 tax year (when this survey was taken). Less than 2 percent of business owners own a Keogh plan. Only about 18 percent of business owners participated in a 401(k)/Thrift plan. Source : Saving for Retirement: A Look at Small Business Owners
The entrepreneur debate:
You should be a bit of both
I think personally I would fall in this category. I really like my career, I like my stable salary, but I don’t like the politics in it. I didn’t grow up in an entrepreneurial environment. I am still learning the ropes. At this stage, I want to do both. Yes, my hours are brutal, but until I start earning a stable income from my other ventures. I won’t give up my career. Even if I start earning more I won’t give up my career, but I would like the freedom of taking a much lower paying job in the same field. I won’t be able to earn as much as a full time entrepreneur while I have day job and that is ok with me. I would prefer to exactly time how much I want to make at what point in my life. I know my strengths and any weaknesses. I want to have a stable income while I work on my weaknesses. Some people might say there will never be a right moment. But I think that depends on the individual too. I know I have enough drive to make it work and I will. The safety of my job makes me take more risks than I would have done if I was solely dependent on my business income. So for me this is the ideal situation for now.
Trivia : About 73 percent of total U.S. firms operated as sole proprietorships in 1997. More than half of the total proprietors were “moonlighters” (part time entrepreneurs) in 1999. Source : U.S. Sole Proprietorships: A Gender Comparison
Each of us have different passions and different things that drive us. There are mediocre, average and excellent individuals in all three categories. There are pros and cons to all 3 situations, but how they are weighted is unique to the individual. One is NOT better than the other as long as the individual is happy with their choice and it is working well for them. It is more important to figure out what is important to you and what works for you. If you are not happy with any aspect of you life, change it!
Now I would like to hear from you. Are you an entrepreneur? Or do you prefer to be an employee? What made you choose one over the other? Have you regretted your choice? What is it that keeps you doing what you’re doing?