Can You Afford Not to Be an Entrepreneur?

There’s an old adage that says “Entrepreneurs do what other people won’t in order to do what other people can’t.”

The suggestion there is spot on – that the entrepreneurs who get to live the life people dream about did so because they were willing to make the sacrifices it took to make that life happen.

So the question really is: can you afford not to be an entrepreneur?

If the answer is “yes,” your life will probably be just fine doing whatever it is that you enjoy doing. But if you really want a taste for what it means to control your own world and reap the benefits of taking risks, starting off on your own is really the only option.

A Paycheck versus a Payout

Most people equate starting and growing a business to the financial rewards of being the business owner. That’s because business owners enjoy the difference between earning a paycheck and earning the bigger reward – a payout.

You may think those with a big paycheck, like the Celtics’ Kevin Garnett’s $25 million pay stub, are the big winners. Not at all. It’s the guy who can write that check, like Celtics owner and Highland Capital Managing Partner Wycliffe Grousbeckand, who paid $360 million for the entire team.

Even if Kevin Garnett continues to be the highest paid player in the NBA for the next decade, he still won’t be writing the checks that his boss can.

The real cash comes from either the profits of the business on a regular basis or the eventual sale or IPO of the business down the road.  Until your earnings are tied to the performance of the company, not your position, you’ll never be in a position to enjoy the real rewards.

Give Yourself a Raise

As big as they can get, paychecks are inherently limited to what someone else is willing to pay you. If you can’t stand the idea of someone else determining what your pay scale should be, then starting a company is the fastest way to change all that.

The day you start your own company, the only person that will ever determine your income is you. If you’re as good as you think you are, the sky’s the limit.

Most entrepreneurs are financially stifled in their current jobs, particularly among younger workers. Since salaries are often dependent on age and experience, not raw capability, your earnings may not at all reflect what you are truly capable of.

Consider the fact that Bill Gates, Michael Dell, and Steve Jobs were all around 30 when their companies went public. Can you imagine how little they would have been paid (by comparison) if they had stayed in their salaried jobs? Clearly their ages had nothing to do with their capability, and starting their own venture was the only way to prove that.

Don’t Leave Money on the Table

When you’re working for a paycheck, you’re making yourself a bit of money, but you’re also making the company a bit of money. Every hour of your time is putting a dollar in your pocket, but it’s also putting a dollar in the owner’s pocket as well, which is good for him, not so good for you.

The fastest way to double your money is to put both of the dollars in your pocket for the same amount of effort!  Of course, as the owner yourself you may have more overhead than you would as an employee, but long term you’re not only maximizing the payout on your time, you’re creating a business that will one day exceed your own value.

Cumulative Value

Even if you’re incredibly well paid in your current position, it doesn’t change the fact that you’re only one person. You can only earn as much as your own time and contribution will afford you. At some point, in order to get to the next level, you need the company working for you, not the other way around.

That means taking on employees and leveraging the economies of scale. As the employer, you can infinitely scale the size of your income by adding more business and more employees. At some point the cumulative value of their contributions will far exceed what you could possibly earn as a W-2 employee.

Stop the Bleed

No one is ever surprised to hear that you can make a great deal of money as a successful entrepreneur.

What is surprising is to consider how much you’re losing by not being an entrepreneur yourself. When you add up how much value you’re losing by taking a paycheck every week, you start to wonder what was keeping you from taking the plunge in the first place.

In many ways, starting your own company is the only way to eliminate the risk of not being paid enough.