Employee or Entrepreneur?

​There are lots of ways to bring your product or service to the market. Out of convenience, we typically label this function based on who we work for and how we receive our compensation. In this episode, we’ll look at the two most frequently compared options: Working as an employee, or being an entrepreneur – and we’ll do it from the perspective of risk versus reward, while comparing the advantages of each.

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Transcript:

There are lots of ways to bring your product or service to the market. Out of convenience, we typically label this function based on who we work for and how we receive our compensation.

In this episode, we’ll look at the two most frequently compared options: Working as an employee, or being an entrepreneur, and we’ll do it from the perspective of risk versus reward, and compare the advantages of each.

Hey, Welcome back. This is Roger Reid with another episode of SuccessPoint 360.

Let’s start with the idea of being an employee:

 There are lots of reasons to work for a large company. For some, it’s the illusion of financial security and the advantage of a consistent income. But for many, it goes beyond the financial. Working for a corporation satisfies a need to be a part of something larger than themselves. They find satisfaction in having a part of their identity defined by being an integral and important member of a successful organization.

Just as there are many who aspire to own their own business, there are many who were born to follow, to fit in, to find a place where they can contribute, and where a positive performance review takes first priority on their list of annual goals.

For example, technical people, engineers, researchers, planners, scientists, computer programmers and other “analyticals” typically find the working environment in a large company to be a comfortable fit. In many cases, these workers are intelligent—some are brilliant—well adjusted, hard-working individuals who are happiest when they can concentrate on assigned tasks with pre-defined parameters, and do it without having to be concerned about every nuance of running a company. They have no desire to deal with company taxes, balancing the budget, or profit margins—unless that’s their area of responsibility.

And then there’s the employee with a management personality, who sees the corporation as a place to be tamed and conquered. These are the competitive, politically savvy fast-trackers who will settle for nothing less than a vice-presidency, access to the company jet, and their picture in the annual report. They go where and when the company tells them, collecting promotions and raises along the way. Often valuing titles more than compensation, they love to chat about internalizing profit centers through divisionalization and departmental micro-managing.  They are the very essence of a “company man or company woman,” and their loyalty cannot be questioned—until they are pirated away by the competition..

Yes, everyone has a different idea of what’s important when evaluating a career choice. Some have their priority on compensation. Others want a flexible work environment. And still others want an employer who grants them a significant degree of independence and autonomy. The list of criteria goes on and on, including things like recognition, status, travel, access to proprietary systems and tools, and the association with other, technologically-minded or industry-specific individuals.

In short, a large corporation provides a defined structure—complete with processes and procedures—in which to create, process, and deliver the value created by those who comprise it. And there are plenty of people who thrive on this kind of organizational discipline, accomplishing their best work under the corporate umbrella while finding a sense of satisfaction in what they do for a living.

 But isn’t working for a large company the very opposite of what most people want to do???

You might think so. Especially with all the current emphasis on entrepreneurship as the preferred career choice. So why would anyone want to pursue their career by working for someone else—and not just anyone else, but a large corporation, with its inherent politics, hidden agendas, and adherence to the herd mentality?

The answer is simple.

And rather than reveal it right now, I’d like to present both sides of the question, and then have you come to your own conclusion.

Because a lot of the information you’ve been listening to and reading may not be one hundred percent accurate.

Even as the media continues to promote the notion that entrepreneurial activities commonly reward those who strike out on their own with unlimited compensation and the freedom of self-direction, there are countless souls who try kick-starting their own business and end up broke.

They may have decided to write a book, open a restaurant, a bakery, a health food store, start a pet grooming business, or offer their photography, paintings, or sculpture for sale, but when success didn’t come in the first year, or the second, or the fifth, they were financially forced to face the ultimate risk of entrepreneurship.

These are the stories you seldom hear about—the folks who ended up with nothing after years of hard work and sacrifice as they worked to keep their business alive. Many times, this included exhausting every dime from their savings and liquidating all their assets (which often included their home).

While motivational speakers, success bloggers, and life coaches are quick to dismiss these business failures as symptomatic of the complacent majority who live in a world of excuses, the reality is often just the opposite.

Many followed the steps, did the work, and fought the competition—seven days a week, sixteen hours a day. They elevated their business activities to the number one priority in their life, often sacrificing family, friends, and personal health for the sake of their new venture.

But for reasons they couldn’t foresee—most of which may have been beyond their control— they failed. Maybe the economy took a nosedive. Maybe the market experienced radical technological change that made their product or service obsolete. Or maybe the competition became an army of cloned look-alikes, and commodity-based pricing began a never-ending race to the bottom.

The point is, they gave it their best shot. But it wasn’t enough. They failed because they didn’t realize (or chose to ignore out of stubborn persistence) one of the most critical factors of business: Some risks can’t be anticipated.

Elon Musk summed up the brutal truth about entrepreneurship by saying:  “The reality is great highs, terrible lows, and unrelenting stress. I don’t think people want to hear about the last two.”

So instead of asking, “Why would anyone want to work for the corporation?” Let’s turn it around, and ask, “Why would anyone want to be an entrepreneur?”

Especially when working for someone else is the default work situation for the majority of the population.

Yes, It’s true, that with a majority of business authors and bloggers touting the advantages of being an entrepreneur, bashing the corporation has become trendy and fashionable. And moving away from the supposed drudgery and unrewarding routine of working for the man is the popular fantasy.

However, for most Americans, that’s exactly what it remains—a fantasy.

In reality, many who crave the independence and financial reward of owning their own small enterprise are feeling the effects of media-generated entrepreneur-mania. Magazines, television, blogs, and social media are continually inundating us with stories of individuals who boot-strapped their way to fame and fortune. You know the ones, typically starting from nothing and now successful beyond their dreams, they instill the hopeful premise that if others can do it, so can you!

It’s a potent motivator. It sells books and magazines and persuades you to subscribe to business blogs that promise daily insight into the rarified world of wealthy entrepreneurs and blue-jean millionaires—in exchange for an email address.

While these stories serve to feed the fantasy, keep in mind that over the top success is a rare exception to the rule.

Let’s Look at the Numbers . . .

The idea that financial independence is just waiting for anyone willing to make the commitment and do the work is a compelling argument. And based on such straightforward logic, we should see a steady and ever-increasing number of new business start-ups annually.

However, the facts tell us otherwise.

Historically, the number of full-time workers starting or running their own businesses is a consistent 13 percent (source: Global Entrepreneurship Monitor). This may jump a point or two in the short term, but after factoring in the number of new businesses still operating after five years, the number doesn’t change much.

(Yes, other sources (the Freelancers Union, Entrepreneur, and MBO Partners for example) claim much higher percentages, often alleging as much as a third of the workforce is engaging in some kind of self-employment. But these higher percentages often include work-at-home or at-a-distance employees, as well as those employed for term projects as independent contractors. These numbers can also be influenced by including those who generate a second or side income by working in the so-called “gig” economy. For those reasons, I’ll focus on data obtained from conservative, longer-term sources that are less likely to be “weighted” with a bias specific to the sponsor’s intentions and objectives.

The five-year failure rate tells an even more sobering story. According to the SBA (Small Business Administration) and the Bureau of Labor Statistics, about 20 percent of all startups fail in the first year. At the end of two years, a third will be out of business, and after five years, only fifty percent will remain. These numbers have remained relatively consistent over the last twenty years, and surprisingly, are not radically affected by the general economy.

These numbers are a cruel reminder of the inescapable risk of being an entrepreneur. Start your own business, and there’s a damn good chance you’re going to fail. In fact, it’s a fifty-fifty proposition by year five.

With that in mind, here’s the question every budding entrepreneur needs to ask themselves . . .

Knowing that after working and investing your capital in your own business for five-years, you face a fifty percent chance of failure, does it still make sense to give up your professional relationship with a large, financially stable and successful company?

For the sake of argument, let’s say you’re willing to take the risk. Then ask yourself this: By comparison, where you will be in five-years on both career tracks—maintaining your corporate career versus pursuing an entrepreneurial business? Obviously, you can’t project the outcome of either track with absolute certainty. However, you can extrapolate—based on the experiences of others in the same or similar industries—the probable likelihood of success.

If you make an honest and realistic assessment of your resources, the projected expansion of your chosen industry, the competition, and a conservative estimate of how long it will take before your activities become profitable, you’ll likely come to the same three conclusions shared by successful employees who have risen to the very top of their industries:

1. A job is a financial asset. It’s the source of your income and livelihood. It funds your current lifestyle, short and long term investments, and your future retirement. And coincidently, it provides the opportunity to explore other interests without the financial pressure of needing to generate income from your off-hour activities.
2. You are never more valuable (to another employer) than when you are currently employed. When you’re ready to move up, there’s no better leverage than being employed. It means new companies must “court” you, presumably offering you an increase in compensation, and often, more authority and recognition to motivate you to leave your current position.
3. Your “insider” status enhances your access to the movers and shakers of your industry. You are part of the picture, and you have the privilege of looking at it from the inside. An outsider will seldom have the opportunity to establish the number of professional and personal relationships that a successful employee can. And it’s the quality of those relationships that can help you advance to the very top of your profession.

There are plenty of other advantages based on the individual priorities of each worker. But most important, deciding between a corporate career and self-employment is a personal choice, and should be based on your goals, ambition, and aspirations—not on the cover story in the latest issue of a national business magazine.

Before we continue, I want to make it clear that I’m not suggesting the corporate environment is the only viable method of finding career success. Instead, I’m advocating the employer-employee relationship can be managed to advantage, to produce the financial and psychic rewards that are supposedly available only from entrepreneurship.

If this exercise doesn’t dissuade you from striking out on your own, then you may have what it takes to be your own boss. You understand the risks and are willing to take them, because the priority of being able to call your own shots is more important to you than any other aspect of your career.

Being an entrepreneur is as much a risk as it is a choice. Saying yes also means saying no to other career opportunities that are only available from a large and successful organization.

Personally, I choose to leave a corporate job and find my livelihood in the open market. But that was me. And I don’t represent the majority mindset. For example, I never balked at the 75 to 80 hours a week required to meet the workload. And I didn’t hesitate to use credit cards to finance equipment or to offset the loss of a consistent salary. But like I said, I don’t represent the majority.

Here’s the point I want to make.  Becoming an entrepreneur is not a cure-all for being dissatisfied with your job. Nor is it a guaranteed panacea or some kind of magic bullet for those seeking financial independence and freedom. It IS a career choice requiring hard work, dedication, sacrifice, commitment, and the assumption of both obvious and unforeseen risk.

Conversely, being successful in a corporate environment doesn’t mean you have to give away your dignity and self-respect. It doesn’t mean conforming to the hive mentality and slaving away at some mindless job like a worker-drone.

With the amount of opportunity in today’s job market, no one should be at the mercy of a draconian employer. The key is to realize that the relationship you have with your employer can be managed to your advantage. How is it done? Those are the topics we’ll cover in future episodes.

I’ll leave you with this;

There’s a large group of dreamers, dreamers who won’t commit, won’t engage with their work, and have acquired the habit of placating their employer by doing just enough to get by, because they tell themselves they’re waiting for the right time, the right set of circumstances, and then life will grant them the opportunity they’re waiting for. And that’s when they’ll give it everything they’ve got. That’s when they’ll show the marketplace what they’re made of.

Living in a state of comfortable frustration, they stay with their job because it provides them with the income to be able to wait for a better situation, a better career, a better life. This is another kind of fantasy, and it’s a destruction one, because it can waste the very best years of your life.

If your dreams of being an entrepreneur are preventing you from appreciating and becoming more invested in your job, then it’s time to determine exactly what you’re putting at risk, and how realistic your expectations are when it comes to starting your own business and being your own boss.

If working for yourself is the ultimate goal, start now. Because it takes time to build a business, and sometimes that means failing first and then moving forward to success.  And that failure, and all the failures that may follow allow the way, is going to add to the amount of time it takes to go from employee to a successful entrepreneur.

So for those who recognize that they’re in a holding pattern, waiting to make a transition from employee to entrepreneur, it’s time to ask yourself when you’re going to start. You don’t have to quit your job. In fact, I recommend you don’t quit until your new venture is up and running and you’ve developed a consistent income to replace your existing salary.

But I can hear some of you saying, wait a minute, that means working twice as hard, first on the day job and then I have to switch gears and work on the new business,,, and that’s a lot to ask.

You’re right, it’s a lot to ask. And it prompts the question – how badly do you want it?

You know how much time you have. You also know how much time you’ve wasted. So answer truthfully. And listen to what you’re telling yourself. If you’re holding back at work, it’s time to get realistic. It’s time to face the reality of your current career situation and what needs to be done to make it rewarding.

That’s it for this episode.

I welcome your feedback and want to hear your comments and questions. And no, it doesn’t have to be a question about a specific episode. If your question is about business, about personal success, or about how to derive more meaning from your work, I want to hear from you. You can contact me by email at roger@rogerreid.com

Thanks for listening and we’ll see you next time.

© 2020, Roger A. Reid