Author Topic: Is owning a business all it's cracked up to be?  (Read 4359 times)

CanadianMustache

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Is owning a business all it's cracked up to be?
« on: December 26, 2017, 09:18:34 PM »
I used to always think I wanted to become a business owner.  There is still a part of me that does..but it seems to me for a lot of people their business owns them.  Anybody here feel that having a high paying job could be better than running a business?

ElleFiji

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Re: Is owning a business all it's cracked up to be?
« Reply #1 on: December 26, 2017, 09:26:57 PM »
I feel that :If your goal is to make and save money, [you may want to]choose the high paying job[based on the two options presented above].

I also feel that: if your business is your passion, choose your business.

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Edited to include I feel statements
« Last Edit: December 27, 2017, 03:18:34 PM by ElleFiji »

zolotiyeruki

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Re: Is owning a business all it's cracked up to be?
« Reply #2 on: December 26, 2017, 09:29:06 PM »
If your goal is to make and save money, choose the high paying job.

If your business is your passion, choose your business.
This.  Every small business owner I know (and my large family is full of 'em) works a TON and worries even more.  They love what they do, but it takes a boatload of effort.

Altons Bobs

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Re: Is owning a business all it's cracked up to be?
« Reply #3 on: December 26, 2017, 11:26:59 PM »
It's harder to just walk away as a business owner, and it's easier to just quit a job. But I'd rather own a business than working for someone else, no one would ever pay me as an employee on what I make now as a business owner.  My time is more flexible as well. It did take a lot of time and effort to get here, but it's worth it.

soccerluvof4

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Re: Is owning a business all it's cracked up to be?
« Reply #4 on: December 27, 2017, 04:01:51 AM »
I was self employed for 25+ years with up to 50 employee's. I always said if the company I worked for before that didn't screw me over by cutting my territory because they said I was making to much money I would of been a lot happier.  I think a lot of it has to do with your personality, the type of business your in and what your goal is. In my business if you weren't growing every year you were dying. Employees were a big pain in the ass though most of mine made over 6 figures because I didn't want anyone to ever experience what I did from my employer. Have an exit plan.

Being self-employed gave me to be in the opportunity I am that being Fire'd BUT i also was a stupid ass spendypants and should of retired with 10x's as much 10 years earlier.  The flexibility was nice but it was easily more than set off with the stress I was dealing with daily.

So end of day there is a lot of good and can be a lot of bad just depending on a lot of things. Good luck to you if you go that route and despite it all I would do it again but I would looking back contain it a bit more and saved a whole hell of alot more.

Imma

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Re: Is owning a business all it's cracked up to be?
« Reply #5 on: December 27, 2017, 04:44:03 AM »
My s/o is a small business owner, I work for someone else.

There are definitely huge advantages to owning a business: you get to make the decisions, you get to follow your passion/dreams, you are often more flexible. But there are also huge disadvantages: it takes a LOT of your time, much more than you'd think, you're never really, truly away. Even if you're at the other side of the world, there's always this responsibility in the back of your head. You have to deal with employees, if you chose to have them.

I have health issues, and while many people say it would be much better for me to work for myself (increased flexibility) I'm sure I'm better off as an employee. I never think about work once I've left the office and when I fall ill unexpectedly, my boss is the one who has to make arrangements, not me. I did inform my employer about my health condition before I started and it's not a problem for him.

ketchup

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Re: Is owning a business all it's cracked up to be?
« Reply #6 on: December 27, 2017, 08:12:30 AM »
If your goal is to make and save money, choose the high paying job.

If your business is your passion, choose your business.
This.  Every small business owner I know (and my large family is full of 'em) works a TON and worries even more.  They love what they do, but it takes a boatload of effort.
Eh, I'd say it varies a lot.  My GF is self-employed (one flavor of "owns her own business") and she'll do 100 hour weeks sometimes, but she'll also take multiple weeks off at a time.

CanadianMustache

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Re: Is owning a business all it's cracked up to be?
« Reply #7 on: December 27, 2017, 09:28:52 AM »
If your goal is to make and save money, choose the high paying job.

If your business is your passion, choose your business.

I donít really think you can make this generalization.

Itís not really as simple as choosing between owning a business and getting a high paying job. Itís not like most people can just flip a coin between the two.

It really depends on your industry, and if weíre even comparing within the same industry.
A lot of people leave day jobs to start completely unrelated businesses because there is no option within their industry to own. Likewise, there arenít many high paying jobs in a lot of businesses dominated by small business. There are no high paying coffee shop jobs, but some coffee shop owners do very well.
Often itís comparing apples to oranges.

Also, a lot of high paying jobs involve A LOT of hours and stresses that could be even worse than being a business owner. What we define as ďhigh payingĒ will influence this as well. Jobs paying ~200K tend to be enormously high stress, if weíre calling 75K ďhigh payingĒ, then yeah, a lot of those jobs will be less hours and stress than a lot of less profitable small businesses.
Itís all relative.

I donít agree that the decision to go into business is primarily about being passionate, I know plenty of people who are passionate about their careers who are employees. I donít want to own a clinic *because* Iím passionate about dentistry and donít want my energy distracted by the bullshit of owning. Owning would only make me more profitable, but it would be a distraction.

I think itís more about valuing autonomy, but autonomy comes at a price. When all the decision power is yours, so are all the risks and consequences. Some personalities thrive like that, some crumble.

I like this answer.  My job pays well but if I went into business ownership it would be something unrelated.

Cpa Cat

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Re: Is owning a business all it's cracked up to be?
« Reply #8 on: December 27, 2017, 10:44:58 AM »
It probably depends on the industry.

In my own experience, when I worked in the accounting industry for "the man," I sat in a windowless cubicle all day, alienated from my work, never interacted with clients, and participated in a morale-killing annual review process. The entire system seemed designed to convince me that I wasn't good enough - not good enough for a raise, not good enough to talk to clients, not good enough to control my own schedule. Then when I tried to take my paid vacation or sick days (which did not roll over to the next year if unused), I was always told it wasn't a good time, or treated like management was doing me some kind of favor for "letting" me go to my grandfather's funeral or whatever.

I have a completely different experience with working for myself. I actually make more than I did previously, but I do work harder because I'm more emotionally invested in my work. My clients like me and give me a lot of positive feedback. It's still never a good time to be sick or take a vacation, so I often end up working a little bit when I'm "out of the office." My morale and self-esteem is much higher.

But I've advised some of my clients to quit and get a "real job". It most often happens with trades - where they don't do a good job managing their billing, expenses, cash flow, so they're working a 40+ hour week, but they're not making as much as if they would just go get a W-2 job with benefits and paid overtime. Plus they have more stress.

It all depends on the person and the industry.

ChpBstrd

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Re: Is owning a business all it's cracked up to be?
« Reply #9 on: December 27, 2017, 02:04:12 PM »
I suspect the market for talent is usually semi-efficient, with caveats. If you have the talent to earn $50k for 40 hour weeks at your employer, you will likely earn a similar amount as an entrepreneur for the same hours, effort, and financial risk. I also think we prevent the market for our labor from being efficient when we

(a) fail to shop around periodically for higher-paying W2 jobs,
(b) perform work we do not excel at (for many business owners, this means peripheral activities such as payroll, taxes, accounting, procurement, contracting, marketing, etc),
(c) commit to a business for a long time or with significant sunk costs even if it proves to be a mistake,
(d) deciding to work for less so as to "be one's own boss".

These are all reasons not to go into business. Unlimited upside potential is the reason to do it, and is self-explanatory.

NeonPegasus

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Re: Is owning a business all it's cracked up to be?
« Reply #10 on: December 27, 2017, 03:11:11 PM »
It probably depends on the industry.

In my own experience, when I worked in the accounting industry for "the man," I sat in a windowless cubicle all day, alienated from my work, never interacted with clients, and participated in a morale-killing annual review process. The entire system seemed designed to convince me that I wasn't good enough - not good enough for a raise, not good enough to talk to clients, not good enough to control my own schedule. Then when I tried to take my paid vacation or sick days (which did not roll over to the next year if unused), I was always told it wasn't a good time, or treated like management was doing me some kind of favor for "letting" me go to my grandfather's funeral or whatever.

I have a completely different experience with working for myself. I actually make more than I did previously, but I do work harder because I'm more emotionally invested in my work. My clients like me and give me a lot of positive feedback. It's still never a good time to be sick or take a vacation, so I often end up working a little bit when I'm "out of the office." My morale and self-esteem is much higher.

But I've advised some of my clients to quit and get a "real job". It most often happens with trades - where they don't do a good job managing their billing, expenses, cash flow, so they're working a 40+ hour week, but they're not making as much as if they would just go get a W-2 job with benefits and paid overtime. Plus they have more stress.

It all depends on the person and the industry.

THIS. DH is a tradesperson. We own our own business. There'd be no business if it weren't for me, not for all the love and passion and skill in the world. Running a business is its own skill. Just because you can do something doesn't mean you can run the business of doing it.

My job was similar to CPA cat's above, working for the man. So jumping ship to work full time for our business was great for me, especially since it gave me a lot of flexibility to be a mom of 3 at the same time. I work probably 25 hrs a week. Sometimes more is required but if I knuckle down, it's usually not. We would probably be making a little more as W2 employees, especially if my old company is still covering health ins 100%, but we'd have to pay more for childcare (due to less flexibility) and we'd both be very frustrated. Also, we wouldn't be providing a good living for our employee. More than anything, we'd be very unhappy as we both got very tired of people running our lives.

ElleFiji

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Re: Is owning a business all it's cracked up to be?
« Reply #11 on: December 27, 2017, 03:19:48 PM »
If your goal is to make and save money, choose the high paying job.

If your business is your passion, choose your business.

I donít really think you can make this generalization.

Itís not really as simple as choosing between owning a business and getting a high paying job. Itís not like most people can just flip a coin between the two.

It really depends on your industry, and if weíre even comparing within the same industry.
A lot of people leave day jobs to start completely unrelated businesses because there is no option within their industry to own. Likewise, there arenít many high paying jobs in a lot of businesses dominated by small business. There are no high paying coffee shop jobs, but some coffee shop owners do very well.
Often itís comparing apples to oranges.

Also, a lot of high paying jobs involve A LOT of hours and stresses that could be even worse than being a business owner. What we define as ďhigh payingĒ will influence this as well. Jobs paying ~200K tend to be enormously high stress, if weíre calling 75K ďhigh payingĒ, then yeah, a lot of those jobs will be less hours and stress than a lot of less profitable small businesses.
Itís all relative.

I donít agree that the decision to go into business is primarily about being passionate, I know plenty of people who are passionate about their careers who are employees. I donít want to own a clinic *because* Iím passionate about dentistry and donít want my energy distracted by the bullshit of owning. Owning would only make me more profitable, but it would be a distraction.

I think itís more about valuing autonomy, but autonomy comes at a price. When all the decision power is yours, so are all the risks and consequences. Some personalities thrive like that, some crumble.
Edited above to include I feel statements!

Lemme know if I should add in "when you say" statements too

neil

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Re: Is owning a business all it's cracked up to be?
« Reply #12 on: December 27, 2017, 05:10:38 PM »
If it's a service-heavy field, I wouldn't expect 1099 to pay more than W-2.  You might be able to log many more billable hours on your own, but you can't ignore the time spent doing business-related tasks that can't be outsourced effectively.  Personally, I'd rather please one boss than many customers, though there are people who prefer the opposite.  And both sides come with different perks.

But if you can build one of something and sell it a million times, it might be worth a shot.  Even better if the only cost in doing so is opportunity cost.  Even in the worst case, you can take your experience into job interviews if it doesn't pan out.

I would not, under any circumstance, buy a job simply to avoid having a boss.  I think this is where people get in trouble - they try to build some engine to create cash flow but can never truly detach from it and maintain a more passive income. 

Retire-Canada

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Re: Is owning a business all it's cracked up to be?
« Reply #13 on: December 28, 2017, 08:42:22 AM »
I used to always think I wanted to become a business owner.  There is still a part of me that does..but it seems to me for a lot of people their business owns them.  Anybody here feel that having a high paying job could be better than running a business?

I've done consulting work for a bunch of business owners and never once have I ever wanted to trade positions. I like working and then being done for the day. I also like being able to leave a business and if it burns down overnight I just find a new client to work for. I'm not tied to one specific venture in one specific location/industry.

That said I have never been passionate about work. I do it to earn money. The minute I hit 4%WR I'll FIRE.
« Last Edit: December 28, 2017, 08:52:31 AM by Retire-Canada »

ysette9

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Re: Is owning a business all it's cracked up to be?
« Reply #14 on: December 28, 2017, 08:50:58 AM »
Personally I feel the comments about risk tolerance are spot-on. As a kid I had a million schemes to sell stuff to people and make a bunch of money. Produce from our garden, mail-order Christmas wrapping paper, candy, lemonade stand, babysitting, piano lessons, and so forth. I learned that it is really, really hard to get people to part with their money, even to a cute little kid. That lesson has stayed with me in a powerful way and i have zero desire to be responsible for bringing in revenue. I would much rather work hard in the way I can and have someone else worry about monetizing what I can bring to the table. I am also risk-averse enough that I prefer a more guaranteed lower paycheck to the risk of either making little money or striking it big. Slow and steady is how I win this race.

ChpBstrd

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Re: Is owning a business all it's cracked up to be?
« Reply #15 on: December 28, 2017, 09:15:31 AM »
I would not, under any circumstance, buy a job simply to avoid having a boss.  I think this is where people get in trouble - they try to build some engine to create cash flow but can never truly detach from it and maintain a more passive income.

I think a lot of small business owners buy themselves a job to avoid having a (presumably bad) boss. This is one of the only explanations I can think of for the large number of low-margin, non-scalable, high-maintenance little businesses that own their owners.

I have a boss, but if they were rude to me I'd take a hike and probably get myself a raise in the process. I think many people fail to expect respect and think buying a cafe or lawn service is the only way out of an abusive situation. The paradox is that if more people shopped around and told their bad bosses to F-off, bad bosses would become scarce because they would fail. If they can't retain employees, they can't be bosses, can they?

Maybe there's also a desire to get very rich instead of just FIRE.

As ERE and MMM point out, we're all lucky bastards and being FIRE is 5-10 years away if we make a few key choices. The timeframe to build a business and then sell it is usually much longer than the career-to-FIRE path (though the risk/reward is much higher). So given the choice between a W2 job and being worth $1M in 10 years with high certainty vs. starting a business and being worth $2M in 20 years with low certainty, you have to ask yourself how much labor and risk that extra luxury is worth?

Freestyler

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Re: Is owning a business all it's cracked up to be?
« Reply #16 on: December 28, 2017, 04:30:11 PM »

I donít agree that the decision to go into business is primarily about being passionate, I know plenty of people who are passionate about their careers who are employees. I donít want to own a clinic *because* Iím passionate about dentistry and donít want my energy distracted by the bullshit of owning. Owning would only make me more profitable, but it would be a distraction.

I think itís more about valuing autonomy, but autonomy comes at a price. When all the decision power is yours, so are all the risks and consequences. Some personalities thrive like that, some crumble.

Posting to follow as it's SO pertinent to my own situation and the choices that I'm confronted to.

I mainly agree with all Malkynn has said. We somehow share industries (let's say healthcare) and apparently also some personality traits. Flexibility is key for me.

AnnaGrowsAMustache

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Re: Is owning a business all it's cracked up to be?
« Reply #17 on: December 28, 2017, 07:15:19 PM »
Unless you're my previous employers, owning a small business is hard work. First in, last to leave, HARD work. Or you could just swan off for holidays every five minutes, underpay your staff and then blame them when things that are ultimately your responsibility go wrong. Can't wait to see the whole thing fall over when the person picking up the slack is no longer picking up the slack.

terran

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Re: Is owning a business all it's cracked up to be?
« Reply #18 on: December 29, 2017, 04:49:50 PM »
I'm a self employed web developer with no employees, so realize that's the lens through which I'm saying this. I'd be curious to learn if it's different with employee's and/or selling a product (I have this thing I'd like to sell, would you like to buy it?) instead of service (would you like to pay me to spend some time doing something you want me to do?).

People often say something like "it must me great being your own boss." I would reply that it's true you don't have a boss making demands on your time, instead you have lots of bosses making demands on your time and they don't care what demands the other bosses have made. On the other hand, you can fire one of your bosses (ie quit) without losing all your income.

BlueMR2

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Re: Is owning a business all it's cracked up to be?
« Reply #19 on: December 30, 2017, 07:47:10 AM »
I've chosen to work for others because:

1) The math on owning our own business is pretty bad.  A few make it really big, but many fail losing everything.  Those that do neither tend to just struggle on working way more hours for less money than working for an already successful business.

2) All the extra work.  You've either got to spend a good chunk of what you do make on lawyers and accountants for big $$$, or you're taking big risks PLUS spending tons of time on non business related things.  I had the interest in my own business, but the sheer governmental overhead was the straw that broke the camel's back and made me decide to work for somebody else.

AK

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Re: Is owning a business all it's cracked up to be?
« Reply #20 on: December 30, 2017, 09:20:30 AM »
I'm self-employed, have no employees, and work remotely. I've been doing this since 2016 and absolutely love it! So far things have been really good and I've never been happier and less stressed while making more income. My first month in business I was able to see my DD take her first steps outside walking towards me. If I kept my regular job, I would've missed that. That's one moment I'll never forget.

As others have mentioned, it's high-risk, high reward. Getting started was the biggest challenge for me but now things are moving smoothly. I choose which projects I want to work on and keep my workload to about 40 hours a week.

Challenges
  • Keeping the sales pipeline going can be challenging but it gets easier with repeat business over time as long as you keep providing value.
  • Professional loneliness. Sometimes I miss socializing with other professionals at the office but this has gotten better by participating in online communities and local user groups.
  • There is a decent amount of overhead to keeping the books, paying yourself, budgeting, complying with various laws and regulations, etc but I probably don't spend more than 5-10 hours per month on it.
  • Health Insurance is a PITA. Depending on your income, ACA subsidies may be available but if you're income is too high, individual plans are expensive

Bottom line, it can be worth it.

SwordGuy

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Re: Is owning a business all it's cracked up to be?
« Reply #21 on: December 30, 2017, 10:30:52 AM »
Owning a business that does what you would be doing anyway for fun is most definitely worthwhile.

Tools, etc., become business expenses instead of hobby expenses.   It's like getting your marginal tax rate as a % off sale.

Chuck Ditallin

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Re: Is owning a business all it's cracked up to be?
« Reply #22 on: December 31, 2017, 08:16:41 AM »
I once read that the only purpose of owning a business is to be able, in due course, to sell it at a profit. In effect, giving yourself a job in the meanwhile is just a pleasant side-effect.

I wasn't initially convinced this was true, but after 20 years of self-employment/business ownership, the sale of my business will take me well into low WR FIRE territory (hopefully in the next year). Suddenly, taking the risk of branching out on my own, followed by modest expansion, seems to have been a very good idea indeed...

tralfamadorian

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Re: Is owning a business all it's cracked up to be?
« Reply #23 on: December 31, 2017, 09:49:19 AM »
I think like many questions- it depends. What kind of business? What are the profit margins? What's the structure? Etc, etc.

When I started my company I purposely looked for a business 1) with high profit margins, 2) scalable without a corresponding increase in my hours needed, 3) low barrier to entry, 4) that I wouldn't hate doing, 5) and a fast ramping up period. I make low six figures and work an average of fifteen hours a week.

SeaEhm

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Re: Is owning a business all it's cracked up to be?
« Reply #24 on: December 31, 2017, 12:05:58 PM »
I think like many questions- it depends. What kind of business? What are the profit margins? What's the structure? Etc, etc.

When I started my company I purposely looked for a business 1) with high profit margins, 2) scalable without a corresponding increase in my hours needed, 3) low barrier to entry, 4) that I wouldn't hate doing, 5) and a fast ramping up period. I make low six figures and work an average of fifteen hours a week.

What business is this?


tralfamadorian

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Re: Is owning a business all it's cracked up to be?
« Reply #25 on: December 31, 2017, 12:31:12 PM »
What business is this?

Online retail.

FiftyIsTheNewTwenty

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Re: Is owning a business all it's cracked up to be?
« Reply #26 on: December 31, 2017, 08:51:30 PM »
I used to always think I wanted to become a business owner.  There is still a part of me that does..but it seems to me for a lot of people their business owns them.  Anybody here feel that having a high paying job could be better than running a business?

Realistically, can the business you have in mind pay more than the high paying job you could get?

What about saving?  Given the same pay (see above), if you're willing to live on less, you can probably sock away more, tax-free, as a business owner.