I’ve been in the rat race for almost fourteen years since I graduated from the University of Waterloo with a Mathematics and Business Administration degree. From time to time, my entrepreneurial spirit often wondered about the road that I had not taken. From a very young age, I had been pretty independent and I often wanted to have control over what I do for a living. I want to determine what I do on a daily basis and I prefer to only to answer to myself. This is what the entrepreneurial people called “being your own boss.”
I often hear them say, “if I am my own boss, I don’t have people telling me what to do. I can choose to work whenever I want, at the schedule that I want and however long I want.” It sounded pretty awesome to be your own boss and to have control of your own destiny. As I ponder what’s on the other side of the fence, I started to ask myself, “is the grass really greener on the other side? Would I be better off than my current situation if I become my own boss?” Let’s put on our adventure hat and try to analyze what’s on the other side of the fence.
Pursuing Your Passion
Most people associate entrepreneurship with the pursuit of one’s passion or dream of building a product or offering of a service that will create value for society. The more value that your product or service creates, the better the chance for you to make money. This will, in turn, lead to a better chance for the entrepreneur to build a successful business and to be rewarded financially. This is an ideal outcome for any entrepreneur pursuing his/her passion. For my passion, I would try to open a full-service restaurant because I love food and I like to interact with customers.
Depending on what stage of life you’re in, you’ll be facing a different challenge if you want to be your own boss. For the entrepreneur that just came out of school, the challenge will be securing seed money to start the venture and the lack of initial income. For the entrepreneur that had already worked for a few years, the challenge will be overcoming the opportunity cost of employment income. For the entrepreneur that had an established career and a young family, the challenge will be overcoming work-life balance and financial risks. I am in the third scenario.
Not Reporting To Any Bosses
Many people think that if they are in control of a business, they have no one to answer to but themselves. Wrong. Every entrepreneur needs to answer to at least two important stakeholders – their customers and their family. Sometimes, customers can be just as stressful, demanding and unreasonable to deal with as any boss in any corporation. For your family, you don’t technically have to answer to them. But what if you’ve been in business for a few years, you not only did not make any money and in turn incurred debt due to your business failure? How do you tell them that you’ve failed?
Work When You Want To
Every entrepreneur dream of the two days work week and working whenever they want. It’s achievable if you have already built a successful business and your business is generating a steady cash flow for you. Before that happens, most entrepreneurs would have to put in at least 60 to 80 hours per week at the beginning. Pay from their business may be minimal or non-existence. There is no such thing as weekends, holidays or personal time. Does this still sound great or a 40 hours work week that comes with consistent pay, paid vacation days, holidays and weekends are better?
Work At Your Own Pace
Once you’ve built a successful business, you may think that it’s time to slow down a bit a reap the reward of your hard work. Well, the moment that you slow down, you become complacent. Your business may stop to innovate. You may start to lose your competitive edge as your competitor either have time to catch up to your business or they are able to duplicate your advantage. Your once flourishing business may be struggling to survive (does anyone remember Research In Motion, Sony, Friendster?) because your competitors had taken over the innovation lead and left you in the dust.
There are ways that you can reap the reward by locking in your gains. You can either sell part of or the whole business when it’s successful and diversify your wealth away from your business. Otherwise, your wealth will be closely tied to the success of your business. You’ll either become richer if your business becomes more successful or broke if your business failed.
Knowing Your Odds
I’ve always been a numbers guy. Whenever I do something, like making a bet with a friend for a free meal, building a deck, playing a tennis match, investing in a company or starting a business, I always ask myself one important question. What’s my chance of succeeding or winning? I can be a bit loose and reckless when it comes to betting with my friend or playing a tennis match. The worse thing that can happen to me is buying my friend an expensive meal or taking a hit on my ego when I lose, but nothing that I couldn’t handle.
When It comes to starting a business, knowing your odds of succeeding is important. Based on an article on Fortune.com, “Why startups fail, according to their founders”, 90% of startups failed. That means there is a 10% success rate right? Well, not necessarily. There may be a percentage of businesses that did not fail, but they could be just getting by or not making much money at all. This means that the success rate is even lower than 10%.
So right off the bat, if you want to be your own boss, you have less than a one in ten chance of being successful. Are you comfortable with this odd? Your chance may improve or deteriorate depending on your ideas, products or services, finance, work ethic, and etc.
If you have decided to become an entrepreneur and start your own business, the opportunity cost is your potential salary from full-time employment. Depending on your major in school, the industry that you were trained to be employed in and the number of years you spend trying to build your business, the opportunity cost can be significant. The trade off could be tens of thousands or even hundreds of thousands of dollars. This is just assuming that you missed the opportunity from employment income.
The Cost Of Failure
Another thing to consider is the cost of failure. When your business failed, you get hit from multiple fronts. The first is the loss of income that could have been earned from employment during the time that you were in business. The second is the debt incurred from the business failure. The third is the employment experience that could have gained during the years you spent running a business. The chances of this happening are higher than nine out of ten for any business start up.
Not Being My Own Boss
Once I found out the odds, the time commitment, the financial risks, the dedication required, I started to realize that not being my own boss is not that bad. I may not be able to control what I do, but I can still enjoy my work, make the best out of the opportunity that I have at hand and get rewarded for performing well. There were some bad days at work, but I also had some good days too. The most important thing is realizing that regardless if you are your own boss or not, you will often experience stress at work and that is just a part of your working life.
My Two Cents
To be your own boss or not? That’s a difficult decision you need to make and it may have great impacts on your life. Take the time to understand the demands, requirements, and risks associated with being an entrepreneur. Weight the pros and the cons, and consult with your family and people that you trust. Regardless of which decision that you make, it’ll be a life changing decision. Make sure that this decision will give you the best chance to succeed in the long run.
So, has this post changed your mind about being your own boss? What other factors have you considered that I have missed?