Author Topic: Business Owner vs Employee  (Read 2095 times)

epower

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Business Owner vs Employee
« on: March 20, 2017, 04:12:49 PM »
I've read many personal finance and wealth creation books over the years and many state "you need to be a business owner to be wealthy and financially free."

This is coming from the angle that you can build up the business system and hire employees or contractors to do the work and you can therefore essentially ease your way out of the business. Generally if the business does well, you can leverage time and money also, where as being an employee, you only have 24 hours a day to do the work.

However, everyone I know who is in business for themselves looks stressed out, can never take time away from their business or have a prolonged 2-3 week holiday and feel like the financial risk and uncertainty of opening my own business just isn't for me.

I guess I like the stability, the "leave work at work" when I come home and feel like I'm a lot better for it.

What are everyone's thoughts? Especially from those who have been both an employee and business owner?
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TheAnonOne

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Re: Business Owner vs Employee
« Reply #1 on: March 20, 2017, 04:59:51 PM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.

Obviously, it depends on the business and success...

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Dora the Homebody

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Re: Business Owner vs Employee
« Reply #2 on: March 20, 2017, 05:18:10 PM »
I am the same as you - I would never want the stress of owning a business.   I honestly hate being in charge of other people, as I have found people to be mostly disappointing and not as reliable as myself.

I am quite happy to "punch the clock" and then leave it all behind at 5pm.

VoteCthulu

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Re: Business Owner vs Employee
« Reply #3 on: March 20, 2017, 05:21:54 PM »
Owning a business is usually a much higher risk/reward position than working as an employee. Those small businesses that do make it often do so faster and bigger than someone working a normal job does. Since we hear more from the success stories than the failures, it looks like the best way to make it big.

GU

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Re: Business Owner vs Employee
« Reply #4 on: March 20, 2017, 05:44:15 PM »
Quote
"I guess I like the stability, the "leave work at work" when I come home and feel like I'm a lot better for it."

This is why employee jobs that don't end when you get home, e.g., Biglaw associate, are awful.  You get all downsides of owning a business (stress, "on" 24/7, hard to take vacation) with none of the upsides (profits, autonomy). 

Notasoccermom

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Re: Business Owner vs Employee
« Reply #5 on: March 20, 2017, 05:50:34 PM »
My parents are multi-millionaires. My dad was a truck driver for a grocery store. My mom was a nurse. They saved everything and worked hard and invested.

ducky19

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Re: Business Owner vs Employee
« Reply #6 on: March 20, 2017, 06:13:49 PM »
My parents are multi-millionaires. My dad was a truck driver for a grocery store. My mom was a nurse. They saved everything and worked hard and invested.

I think the take away here is that there is no one single, best way to accumulate wealth. You have to decide for yourself what works best for you. I'm opting for a happy middle ground - I have a low six figure salary in a LCOL area and I'm investing in real estate to build a small rental empire. Add in a couple of side hustles, and I'm happily diversified. The hope is that within the next 8-10 years I can exit stage left out of the relatively high stress 9 to 5 and rely on investment and rental income to do as I please.

Strick

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Re: Business Owner vs Employee
« Reply #7 on: March 21, 2017, 05:39:29 AM »
I have been thru each phase.  My business is now 7 years in.

"hire employees or contractors to do the work and you can therefore essentially ease your way out of the business" -- I haven't figured this out.  The more work that I get and the more people that are working for me the more swamped I get, with both worries of things going wrong that are out of my control, and with dealing with so many things that I don't want to be (client relationships). I was good at the thing I did, and now I just try to run others doing this and handle ever changing client demands.   I can't ever get the work out of my mind, ever. ever. And often it feels like its taken away the joy from my life (which I should have plenty of with such a wonderful family backing me).  When things were slow, and business was "bad", it was awesome, as there would be decent downtime when life would be great and my spirits would return.

I feel such a responsibility to my partner and the amazing people that work for me I'm feeling trapped even beyond personal financial concerns.  I'm basically on the cusp of FI now (maybe just a year away if another good year is had?) and so realize there are options, the recent success of the business has made this possible sooner than it otherwise would have been.  I made a decision 20 years ago to not be a loser and a quitter as my life was not on the best path, and have gritted my teeth ever since.  I work from home the majority of the time so shouldn't have many complaints.  I just can't back away, I panic at every potential thing that could go wrong, even before it does.  I'm lost right now and trying to figure out what to do.  I'm trying to figure out how to ease out of things in a way that doesn't hurt anyone, be it my business or my family.


Linda_Norway

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Re: Business Owner vs Employee
« Reply #8 on: March 21, 2017, 05:57:51 AM »

I feel such a responsibility to my partner and the amazing people that work for me I'm feeling trapped even beyond personal financial concerns.  I'm basically on the cusp of FI now (maybe just a year away if another good year is had?) and so realize there are options, the recent success of the business has made this possible sooner than it otherwise would have been.  I made a decision 20 years ago to not be a loser and a quitter as my life was not on the best path, and have gritted my teeth ever since.  I work from home the majority of the time so shouldn't have many complaints.  I just can't back away, I panic at every potential thing that could go wrong, even before it does.  I'm lost right now and trying to figure out what to do.  I'm trying to figure out how to ease out of things in a way that doesn't hurt anyone, be it my business or my family.

I presume my FIL was in such a situation, having built up a good running company with a partner. When he decided to FIRE, he quit full-time and his partner bought him out, partly in cash and partly in a loan. After my FIL quit, the company went financially downhill and I think it doesn't exist anymore. The partner did pay off the better part of the loan, but not everything. It did hurt my FIL that his selv-made company didn't make it with new leadership, but it was not his responsibility anymore. Just the worry about the loan.
I suggest you think carefully about the situation and look for possibilities for your business partner and other employees to buy you out over a period of time. And as you notice, be careful of anyone buying you out on a loan provided by you.

soccerluvof4

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Re: Business Owner vs Employee
« Reply #9 on: March 21, 2017, 06:10:19 AM »
I can attest to this to a point. I had my business for 25+ years and for the first 8 years while I was building it I never had a vacation day and worked like a maniac. After hiring hundreds if not thousands of employees over the years after that I had people I was able to hire and run things. The problem then became trust and to a certain point of settling for what was already a really good income as to constantly trying to build and expand which took alot of stress out as well. The last 4 years the first 3 I didnt step foot in the office but because I chose to not grow and keep rewarding those that gave my my freedom it never became enough for them so I just took my cash flow and got out of it. So there are things you can do BUT if I worked for a company that was fair and never cut my territory or pay I would void the "stress and worry" of owning a business and lawsuits, employee issues etc...

You can easily make an unlimited income working for someone in the right industry as you can owning your own business. But , finding those companies are the hard part. Also when you get to the level of making that kinda money there are plenty of stresses as well unless you are smart and know its not going to last for ever , save and build up negotiating leverage.
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L.A.S.

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Re: Business Owner vs Employee
« Reply #10 on: March 21, 2017, 06:54:45 AM »
I get the sense that OP meant business owner in terms of a small business owner.  My hat's off to those who undertake to start a business from scratch!   But, one thing to keep in mind is that buying stock in a publicly traded company makes you a business owner of that company.  If you accumulate enough stock, eventually you could live off a growing stream of dividends and from capital gains obtained from selling small portions of your stock back to the market.

golden1

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Re: Business Owner vs Employee
« Reply #11 on: March 21, 2017, 07:08:17 AM »
My husband is a business owner, and I would never want that responsibility.  I have the responsibility of making sure I do my job well and also of supporting my family.  He has that PLUS the responsibility of keeping 5 other people employed and happy, as well as his clients.  Plus, he is in a critical stage of building his business to the next level, so he is just super stressed all the time, and travelling more and more overseas.  Plus, his pay is less than he could make at another company currently - we are doing it all for a big payout (not guaranteed) in the future. 

No thanks.  I'll keep my boring job that pays the bills reliably and has great health insurance.  I would crumble under that type of responsibility, and I can tell it is taking it's toll on my husband.   

Fishindude

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Re: Business Owner vs Employee
« Reply #12 on: March 21, 2017, 07:14:05 AM »
I think everyone should own some type of business.  Easiest thing for an hourly / salary employee to do is own rental unit(s), or some sort of service type business that can be done after hours or weekends.  Good to have an alternate stream of income in the event your regular job craps out, plus gives you options if you get tired of the regular job.  Also some tax benefits and write off opportunities.

Having said the above, some people turn to self employment for the wrong reasons.  They don't like the regular structured hours working for the other guy, want more time off to be with the kids or vacation, grow tired of being accountable to a boss, etc.  Have seen many small business fail from not taking it seriously, not putting in enough hours or effort, and using the business as their personal check book.

Tetsuya Hondo

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Re: Business Owner vs Employee
« Reply #13 on: March 21, 2017, 07:23:29 AM »
I agree with TheAnonOne that being an independent consultant/contractor is a nice middle ground. I have control over what projects I get involved with, how little or how much I want to work or take time off and I don't have to deal with all the administrative nonsense that goes along with being an employee (performance appraisals, mandatory training, BS meetings, etc.). There's not the same potential with it as building and growing a brick and mortar business with employees, but you don't have to deal with the hassles either. And, you can still make more money than being an employee, depending on how you do it.

Chris22

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Re: Business Owner vs Employee
« Reply #14 on: March 21, 2017, 07:33:42 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary. 
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TheAnonOne

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Re: Business Owner vs Employee
« Reply #15 on: March 21, 2017, 07:36:55 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.
Well, full time is about 100 to 120, consulting is 165 to 200+ with OT.

If your wife/husband covers health insurance, there is no benefits "bonus" to the ft guys.

I'd say 60ish grand is "vast"

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Chris22

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Re: Business Owner vs Employee
« Reply #16 on: March 21, 2017, 07:42:43 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.
Well, full time is about 100 to 120, consulting is 165 to 200+ with OT.

If your wife/husband covers health insurance, there is no benefits "bonus" to the ft guys.

I'd say 60ish grand is "vast"

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Consultant, or contractor?  The two things have different meanings as I understand it.  A consultant is at a business to do things that the business doesn't believe they have the skillset to do themselves, thus you aren't apples:apples with the other employees.  A contractor is hired to do a specific job, often as a supplement or short-term fill in and may have the same skills as someone who works or worked at the company before.  I would expect a consultant to be much higher paid, but a contractor not necessarily.
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trollwithamustache

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Re: Business Owner vs Employee
« Reply #17 on: March 21, 2017, 07:49:37 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.
Well, full time is about 100 to 120, consulting is 165 to 200+ with OT.

If your wife/husband covers health insurance, there is no benefits "bonus" to the ft guys.

I'd say 60ish grand is "vast"

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That's just the "top line" benefit. How many of your expenses fully or partially now can be deductions? cell phone, internet, maybe some mileage, new computer ect.

TheAnonOne

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Re: Business Owner vs Employee
« Reply #18 on: March 21, 2017, 07:51:24 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.
Well, full time is about 100 to 120, consulting is 165 to 200+ with OT.

If your wife/husband covers health insurance, there is no benefits "bonus" to the ft guys.

I'd say 60ish grand is "vast"

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Consultant, or contractor?  The two things have different meanings as I understand it.  A consultant is at a business to do things that the business doesn't believe they have the skillset to do themselves, thus you aren't apples:apples with the other employees.  A contractor is hired to do a specific job, often as a supplement or short-term fill in and may have the same skills as someone who works or worked at the company before.  I would expect a consultant to be much higher paid, but a contractor not necessarily.
Both are higher paid.

Your definition is correct and I seem to flip flop between the roles depending on the client.

My "contractor" roles pay anywhere from 50% to 100% more than the full time guys but yes, no benefits. Though, my wife covers me, making almost all of the benefits useless. (Except a few grand for a 401k match)

Litterally everyone has your reaction when they do the math. Full time spots at 100 to 120k are paying contractors 75 to 85 an hour on a W2 basis. 80 × 2000 is 160k.

If the project allows overtime, then the comparison is laughable.

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Chris22

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Re: Business Owner vs Employee
« Reply #19 on: March 21, 2017, 07:56:31 AM »
Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.

Litterally everyone has your reaction when they do the math. Full time spots at 100 to 120k are paying contractors 75 to 85 an hour on a W2 basis. 80 × 2000 is 160k.


$120k x 1.3 = $156k....
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TheAnonOne

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Re: Business Owner vs Employee
« Reply #20 on: March 21, 2017, 08:00:12 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.
Well, full time is about 100 to 120, consulting is 165 to 200+ with OT.

If your wife/husband covers health insurance, there is no benefits "bonus" to the ft guys.

I'd say 60ish grand is "vast"

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That's just the "top line" benefit. How many of your expenses fully or partially now can be deductions? cell phone, internet, maybe some mileage, new computer ect.
Yea, I didn't want to get into every detail, as I think this is pulling the thread a bit off topic.

There are other benefits, changing work environments, you can find nights and weekends work for extra $$$, you can deduct LOTS of things, you can still work W2 through recruiting firms if you want to avoid tax hastle, overtime is paid, and you can up and leave a client at any time, for any reason (helps you mentally on the bad days!)

It's a higher stress path for sure. Jobs have end dates, market has cycles, you need to litterally become 'top talent'. Though, the benefits are there, for sure. (Money... money is the only benefit)

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TheAnonOne

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Re: Business Owner vs Employee
« Reply #21 on: March 21, 2017, 08:06:48 AM »
Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.

Litterally everyone has your reaction when they do the math. Full time spots at 100 to 120k are paying contractors 75 to 85 an hour on a W2 basis. 80 × 2000 is 160k.


$120k x 1.3 = $156k....
In this case 160 is the LOW end and 120 is the TOP end.

Also, it might not be apples to apples but a contractor is really paired well (like a fine wine) with a full time spouse.

I made 210k in 2015, working a ton of overtime, had a blast and skyrocketed my networth to 400k by 26. It's a situation that is litterally only possible because of my hourly status.

30% is an insane multiplier anyway. The only benefit that anyone NEEDS is health coverage and for a family it's about 1k, for DINKS it's much less. I'd really only accept a maximum of 12 to 15k added on for benefits.

It's not for everyone, for sure. It's certainly not all roses.

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Chris22

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Re: Business Owner vs Employee
« Reply #22 on: March 21, 2017, 08:22:22 AM »
30% is an insane multiplier anyway. The only benefit that anyone NEEDS is health coverage and for a family it's about 1k, for DINKS it's much less. I'd really only accept a maximum of 12 to 15k added on for benefits.

There's also potential 401k match, and I think you are wildly lowballing what health insurance benefits cost.  Go buy on the open market what a typical corporate plan covers and tell me it's $1k/yr for a family.  Then there's payroll taxes, 6.2% * 117k = $7300, and 1.45% * $160k = $2300. 

I'm not saying you can't make yourself a better deal, but I think the differential is lower than you think.  And yes, if you do things like forego health coverage to take a spouse's that's different but again, we're trying to go apples:apples here.
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TheAnonOne

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Re: Business Owner vs Employee
« Reply #23 on: March 21, 2017, 08:26:43 AM »
30% is an insane multiplier anyway. The only benefit that anyone NEEDS is health coverage and for a family it's about 1k, for DINKS it's much less. I'd really only accept a maximum of 12 to 15k added on for benefits.

There's also potential 401k match, and I think you are wildly lowballing what health insurance benefits cost.  Go buy on the open market what a typical corporate plan covers and tell me it's $1k/yr for a family.  Then there's payroll taxes, 6.2% * 117k = $7300, and 1.45% * $160k = $2300. 

I'm not saying you can't make yourself a better deal, but I think the differential is lower than you think.  And yes, if you do things like forego health coverage to take a spouse's that's different but again, we're trying to go apples:apples here.
I am quoting w2 hourly rates, to keep the taxes the same.

If we take a contractor who works 1099, has to buy his own insurance for a whole family, never works overtime, doesn't get much writeoff benefit, has 1 to 2 months off a year due to a slow market or bad interviewing skills/forsight, takes 3 weeks of vacation a year and takes mid level roles.

Yes, that person will make equal or less than a top end fte. You are entirely correct.

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.

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Professor Ecks

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Re: Business Owner vs Employee
« Reply #24 on: March 21, 2017, 08:34:57 AM »
Saying "You need to be a business owner to be wealthy and financially free" is sort of like saying "You need to invest in the stock market to be wealthy and financially free." It's just not that simple. Sure, you can get wealthy by investing in the stock market, but just investing doesn't make you wealthy. Same goes for running a business. Sure you can get wealthy owning a business, but just owning a business isn't enough. You have to own the right kind of business, and you have to run it properly.

Most of the books that I have read on the subject are a little more realistic about business ownership. You have to be sure that the business you start can get you to your goals.

If you want a business that makes you wealthy, you have to start a business that can make the owner wealthy. Starting a pool cleaning business in Fargo, North Dakota or starting a car detailing business in some rural Oklahoma town are probably not paths to wealth.

My brother owns a business, and he will never be wealthy. But that's because he didn't start the right kind of business to make him wealthy. He started a lawn and landscape business in suburban Kansas City. There are a ton of lawn and landscape businesses already in the Kansas City area, so his business is not filling an unmet need. He doesn't offer any sort of innovation that makes his lawn care particularly better than his competition. He doesn't offer a price that is significantly more competitive than his competition. So there is really nothing he offers the people of Kansas City that they can't get from a dozen other sources, and therefore nothing to compel a person to do business with him over someone else. He can make a living doing what he's doing, but he won't become wealthy.



« Last Edit: March 21, 2017, 08:49:22 AM by Professor Ecks »
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TheAnonOne

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Re: Business Owner vs Employee
« Reply #25 on: March 21, 2017, 08:38:40 AM »
Saying "You need to be a business owner to be wealthy and financially free" is sort of like saying "You need to invest in the stock market to be wealthy and financially free." It's just not that simple. Sure, you can get wealthy by investing in the stock market, but just investing doesn't make you wealthy. Same goes for running a business. Sure you can get wealthy owning a business, but just owning a business isn't enough. You have to own the right kind of business, and you have to run it properly.

Most of the books that I have read on the subject are a little more realistic about business ownership. You have to be sure that the business you start can get you to your goals.

If you want a business that makes you wealthy, you have to start a business that can make the owner wealthy. Starting a pool cleaning business in Fargo, North Dakota or starting a car detailing business in some rural Oklahoma town are probably not paths to wealth.

My brother owns a business, and he will never be wealthy. But that's because he didn't start the right kind of business to make him wealthy. He started a lawn and landscape business in suburban Kansas City. There are a ton of lawn and landscape businesses already in the Kansas City area, so his business is not filling an unmet need. He doesn't offer any sort of innovation that makes his lawn care particularly better than his competition. He doesn't offer a price that is significantly more competitive than his competition. So there is really nothing he offers the people of Kansas City that they can't get from a dozen other sources, and therefore nothing that to compel a person to do business with him over someone else. He can make a living doing what he's doing, but he won't become wealthy.
Agreed, this whole topic is case by case.

90% of business go bust, dragging the owners to bankruptcy. Obviously, Bill Gates did well.

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Slow2FIRE

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Re: Business Owner vs Employee
« Reply #26 on: March 21, 2017, 09:02:43 AM »
I am quoting w2 hourly rates, to keep the taxes the same.

If we take a contractor who works 1099, has to buy his own insurance for a whole family, never works overtime, doesn't get much writeoff benefit, has 1 to 2 months off a year due to a slow market or bad interviewing skills/forsight, takes 3 weeks of vacation a year and takes mid level roles.

Yes, that person will make equal or less than a top end fte. You are entirely correct.

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.

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I am an employee with a base salary in the range you discuss for an employee.  I get health benefits from my employer, 5% 401K match (with 401K funds that have an ER of around 0.03), $1500/yr in HSA money, pension (1% per year), life insurance, disability insurance, 2.25 months of paid time off each year, internet paid for, up to 14% bonus on base salary and the option to work up to 40% overtime by taking any additional projects I wish to.  Furthermore, I work from home in a LCOL area, set my own work hours and workdays.  I have the downside of reviews, meetings and occasionally being forced to fly back to DC.

To the OPs question:
I cannot personally bring myself to be much more of a business owner than owning stocks and rental properties, because I am under the impression that I'll have to give up all my time and six figure salary for several years while I try to build up said business.  I do have the luxury of taking part time at work (down to 16hrs per week), but I still haven't found a business I really want to get involved in more than just continuing to collect a nice upper middle class income as an employee.

TheAnonOne

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Re: Business Owner vs Employee
« Reply #27 on: March 21, 2017, 09:06:14 AM »


I am quoting w2 hourly rates, to keep the taxes the same.

If we take a contractor who works 1099, has to buy his own insurance for a whole family, never works overtime, doesn't get much writeoff benefit, has 1 to 2 months off a year due to a slow market or bad interviewing skills/forsight, takes 3 weeks of vacation a year and takes mid level roles.

Yes, that person will make equal or less than a top end fte. You are entirely correct.

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.

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I am an employee with a base salary in the range you discuss for an employee.  I get health benefits from my employer, 5% 401K match (with 401K funds that have an ER of around 0.03), $1500/yr in HSA money, pension (1% per year), life insurance, disability insurance, 2.25 months of paid time off each year, internet paid for, up to 14% bonus on base salary and the option to work up to 40% overtime by taking any additional projects I wish to.  Furthermore, I work from home in a LCOL area, set my own work hours and workdays.  I have the downside of reviews, meetings and occasionally being forced to fly back to DC.



That sounds like a sweet deal, that PTO alone is amazing!

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dmd149

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Re: Business Owner vs Employee
« Reply #28 on: March 21, 2017, 09:13:18 AM »


I am quoting w2 hourly rates, to keep the taxes the same.

If we take a contractor who works 1099, has to buy his own insurance for a whole family, never works overtime, doesn't get much writeoff benefit, has 1 to 2 months off a year due to a slow market or bad interviewing skills/forsight, takes 3 weeks of vacation a year and takes mid level roles.

Yes, that person will make equal or less than a top end fte. You are entirely correct.

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.

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I am an employee with a base salary in the range you discuss for an employee.  I get health benefits from my employer, 5% 401K match (with 401K funds that have an ER of around 0.03), $1500/yr in HSA money, pension (1% per year), life insurance, disability insurance, 2.25 months of paid time off each year, internet paid for, up to 14% bonus on base salary and the option to work up to 40% overtime by taking any additional projects I wish to.  Furthermore, I work from home in a LCOL area, set my own work hours and workdays.  I have the downside of reviews, meetings and occasionally being forced to fly back to DC.



That sounds like a sweet deal, that PTO alone is amazing!

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Agreed,comp package looks good. However, have to compare against what you could make as an independent contractor/consultant for equivalent work. The employer is generally getting additional value beyond what they are compensating the employee (generally) so as a contractor you should be able to capture most of that difference.

FuzzyRunner

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Re: Business Owner vs Employee
« Reply #29 on: March 21, 2017, 09:29:07 AM »
I've owned (co-owned) my business for almost 4 years now and before this, worked a 9-5 job.  For me, the biggest difference is not being able to "leave" work.  It is always on my mind, whether it be thinking about people I need to contact or things I need to get done when I get back to work.  I also don't enjoy what I do now compared to what I was doing in my 9-5 but the potential of growth in my 9-5 was bad without a lot more education ($$$).

My plan is to hire someone to take over my day to day responsibilities and some administrative responsibilities.  I would take a pay cut in order to pay them appropriately, then take on a less stressful full time or part time job to cover the pay cut that I took from my business.  I would still be there to "direct" the business but my day to day business dealings and decisions would be on the new manager.  The hardest part with this is finding the right person.  It is extremely hard to find someone to grow and fight for your business as much as you do.  People just don't seem to take pride in a job well done so finding someone to go the extra mile to get something done correctly is hard to find.

In the end, it all depends no what your end goal is.  I would be happy to take a 50% pay cut in my business so that I have the freedom to do something I enjoy more with much less stress.

BlueHouse

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Re: Business Owner vs Employee
« Reply #30 on: March 21, 2017, 10:11:09 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.

Don't forget profit.  There is profit built in to every employee's costs that don't go to the employee, but instead to the employer.  Once you become your own employer, that portion of the costs goes into your own pocket.
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Chris22

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Re: Business Owner vs Employee
« Reply #31 on: March 21, 2017, 10:23:03 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.

Don't forget profit.  There is profit built in to every employee's costs that don't go to the employee, but instead to the employer.  Once you become your own employer, that portion of the costs goes into your own pocket.

If a company purchases your services, you think they are doing so at 0% profit to themselves?  You might capture more profit, but certainly not all of it.
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BlueHouse

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Re: Business Owner vs Employee
« Reply #32 on: March 21, 2017, 10:28:28 AM »
I am a contractor which is a decent middle ground. I can attest that the regular employees, though vastly lower paid, seem more relaxed and generally happy.


Willing to bet the "vastly lower paid" differential is much lower when you consider all the costs a contractor has that an employee does not, such as subsidized healthcare and not having to pay half of the FICA/payroll taxes.  An employee has a "total comp" number that's usually about 30% higher than their pure salary.

Don't forget profit.  There is profit built in to every employee's costs that don't go to the employee, but instead to the employer.  Once you become your own employer, that portion of the costs goes into your own pocket.

If a company purchases your services, you think they are doing so at 0% profit to themselves?  You might capture more profit, but certainly not all of it.

No, I become an expense to them. The only way they can make profit off of me is if they re-sell my services.  I'm in a job that is not on the profit-side of the equation.  My work is legislated and required, not a cost-saver or a money-maker. 
Sometimes nothing can be a real cool hand

BlueHouse

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Re: Business Owner vs Employee
« Reply #33 on: March 21, 2017, 10:30:58 AM »
I was perfectly content as a w-2 employee (working as a contractor) until my dumbass boss threatened my client with walking away.  When my client offered to let me take over the contract, I jumped into gear.  One of the first things my client discussed with me was my rate.  They said "since we're no longer going through [asshat], we thought we should have a lower rate". 

This is the part that I think most independent contractors mess up on.  If my previous employer had to charge $150/hour to pay my salary, plus all my fringe benefits (vacation + insurance), then why should I have to lose out on either vacation or insurance or anything else to do the same work (not to mention the extra work involved in running a business)? 

My response was:  "you've been happy with my work at the rate you currently pay for me.  Has anything with my work changed?"  So I kept billing exactly what my previous employer had been billing, but I could now select exactly the insurance that I wanted to (and I could do it cheaper because I was willing to accept more risk with a higher deductible) and now I pocketed the profit. 

When the next company wanted to hire me while I was still working full-time for client #1, I hated the idea of saying no, so I just threw out an obscene hourly rate.  When they accepted without blinking, that's when I knew this could be a life-changer for me. 

I incorporated as an S-Corp, hoping to hire more people eventually, but I never did it. I was usually too chicken because no one would do the work as well as I would.  No one would care as much, etc.  But I had that same mentality when I was a W-2, so I don't think that has to do with business owner or not.  You're either a workaholic for someone else's benefit or a workaholic for yourself.

ETA:  I only stopped being a workaholic when I joined MMM and saw different options for myself.  Now I have my eye on the end-goal and that's really all I'm focused on.  I'm happy just making a good living and the fact that I can do it faster as a self-employed individual is what keeps me going. 
« Last Edit: March 21, 2017, 10:58:22 AM by BlueHouse »
Sometimes nothing can be a real cool hand

iowajes

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Re: Business Owner vs Employee
« Reply #34 on: March 21, 2017, 11:45:41 AM »

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.


Plan to not have health issues?  How the hell does one do that?

TheAnonOne

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Re: Business Owner vs Employee
« Reply #35 on: March 21, 2017, 12:05:40 PM »

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.


Plan to not have health issues?  How the hell does one do that?
No, plan as in archetect your life to have a spouse cover you under their insurance, and associated items.

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iowajes

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Re: Business Owner vs Employee
« Reply #36 on: March 21, 2017, 12:15:08 PM »

However here at MMM we are the exceptional, the ones who will take OT, get the high rates, plan their situation to not have the health issue. These people, will make a killing.


Plan to not have health issues?  How the hell does one do that?
No, plan as in archetect your life to have a spouse cover you under their insurance, and associated items.

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Sorry- I read "the health issue" as" health issues"

not the same thing.

Tetsuya Hondo

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Re: Business Owner vs Employee
« Reply #37 on: March 22, 2017, 07:07:55 AM »
Consultant, or contractor?  The two things have different meanings as I understand it.  A consultant is at a business to do things that the business doesn't believe they have the skillset to do themselves, thus you aren't apples:apples with the other employees.  A contractor is hired to do a specific job, often as a supplement or short-term fill in and may have the same skills as someone who works or worked at the company before.  I would expect a consultant to be much higher paid, but a contractor not necessarily.

I'm a consultant that is contracted by firms to consult for them.

Capiche? :)


(Your definition is correct in most cases.)