Most people start their working life as an employee. Even some of the world’s most successful entrepreneurs worked for a measly salary in less than glamorous jobs before they made the switch to work for themselves. Oprah Winfrey was a grocery store clerk. Amazon.com founder Jeff Bezos worked at McDonald’s.
Whether to keep on working for someone else for the rest of your life or to make the jump to entrepreneurship is a big decision. There are certainly advantages and disadvantages to both. You may not want to lose the security of a guaranteed salary. On the other hand, you may hate the predictability of an 8-hour workday.
Let’s take a look at the pros and cons of being an entrepreneur vs an employee to help you decide whether you are more suited to one or the other.
The Pros of Being an Employee
1. Stable Income
If you work for a salary, you are assured of a stable income each month. Employees with fixed salaries (and who know how to budget) don’t have to worry about where the money to pay the rent and other expenses will come from. They even come to depend on an annual bonus which pays for their holidays and Christmas gifts.
2. Guaranteed Leave Benefits
Employees are legally entitled to annual leave and other leave benefits such as maternity/paternity leave or bereavement leave. This means you are guaranteed time off to take a holiday or for special occasions like weddings and funerals. And the best part of all? Most leave while working for an employer is paid leave. So, your salary will appear in your bank account as usual even if you spend three weeks on a beach in Spain.
3. Predictable Working Hours
The working hours of an employee are stipulated in his or her employment contract. For example, full-time employees may be required to work 40 hours a week from Monday to Friday. While there may be room for some flexibility, daily hours are also normally fixed. As a result, an employee can plan his or her personal life around fixed working hours. Employees can also look forward to their days off each week.
4. Fewer Worries
It may be argued that an employee has fewer worries than an entrepreneur because he must only focus on doing his own job well. Other people’s business isn’t his concern. He doesn’t have to worry about balance sheets, insurance, payrolls and other organisational management issues. In principle, he has the right to forget about work as soon as he leaves the office.
The Cons of Being an Employee
1. Job Insecurity
As an employee, the overall management and financial health of a business are out of your control. If the business goes under, you lose your job. This can happen without warning, suddenly leaving you without a regular income. Finding a new job may not only be difficult but can also result in other challenges such as having to move to a new area. Apart from losing their jobs, employees can never be sure of promotions or salary increases. They’re at the whim of their managers or supervisors.
Employees may be stuck in boring jobs that they absolutely hate. They stay in these jobs because nothing else is available or because they’re afraid of leaving a predictable job for a new one. People in boring jobs hate going to work. The feeling of discontent eventually also spills over into their personal life, especially if they get stuck in a work rut for most of their professional lives.
3. Limited Opportunity for Advancement
Many employees hit a glass ceiling in the organization or company they work for. Some may have been promoted once or twice before opportunities for further promotion dry up. Others never get the opportunity for a promotion or to apply for a different position with higher pay and more responsibilities in the same company.
4. Making Someone Else Rich
Employees work hard to make entrepreneurs rich. Moreover, the employee doesn’t necessarily get to share in the riches they help create. A salary increase of 5% doesn’t compare with profit margins of 50%, does it? The feeling that they aren’t rewarded for their efforts in a business’ success can lead to bitterness and mediocrity.
The Pros of Being an Entrepreneur
1. Master of Your Own Destiny
One of the biggest pros of being an entrepreneur is that it gives you the freedom and flexibility to become the master of your own destiny. You can act independently and are in complete control. Success or failure is up to you. This realization is often more than enough motivation to give it your all.
2. Flexible Working Hours
Entrepreneurs don’t have bosses waiting for them to arrive at the office. In fact, they strictly don’t need an office. As long as they have a PC or even a tablet or mobile phone they can work where and when they like. They have the authority and power to structure the business around their personal life. For example, a father may take an afternoon off to watch a child’s sports match and catch up on work in the evening. Time is a precious possession and entrepreneurs have complete control over it. They must just learn to spend it wisely.
3. There’s No Limit to Your Success
The sky is your limit when you’re an entrepreneur. Who knows what you can achieve with clever and innovative ideas, hard work, motivated employees, and good business management? Embrace success and see where it takes you! The sense of achievement is enough encouragement to reach even greater heights.
4. A Blank Salary Cheque
Just as there is no limit to how big your business may become, there is no limit to your potential income. The best thing about it? You are making money doing something you love. The financial return for hard work and effort is much higher for an entrepreneur vs an employee. And once your venture is established and depending on the nature of it, you could even make a substantial passive income.
The Cons of Being an Entrepreneur
1. It’s a Risky Business
The risk involved in starting and investing in your own business is one of the biggest cons of entrepreneurship. No matter how determined and motivated you are starting out, success is not necessarily guaranteed. One wrong decision can be fatal while you don’t always have control over external factors such as market trends and economic downturns.
2. Erratic Income
A stable monthly income is not guaranteed. Some contractors may pay up front and some not. Income from commission is irregular. And never lose sight of your own financial commitments such as loan repayments, taxes, and employees’ salaries that could make a difference to your income on a month to month basis.
3. Difficulty to Balance Work and Personal Life
Entrepreneurs may become so focused on their business, especially in the beginning phases, that they lose sight of their personal lives. As a result, relationships with loved ones can suffer. It may even lead to break-ups or divorce. Long working hours and the accompanying stress could also lead to burn-out. The counter productivity resulting from all work and no play is simply not worth it.
4. Mistakes Are Part of the Deal
Statistics show that the majority of first business ventures fail. Entrepreneurs must be prepared to make mistakes. However, they should also be prepared to start over after failure. As Steve Jobs said: “Sometimes when you innovate, you make mistakes. It’s best to admit them quickly and get on with improving your other innovations.”
Employee VS Entrepreneur – Which One Are You?
Do you think you have what it takes to be an entrepreneur, or would you rather stay an employee after reading the pros and cons of both?
Weigh the pros and cons carefully before you decide. The many choices in either direction can be confusing and even have a paralyzing effect. First, ask and answer the philosophical questions before moving on to the practical ones. The smaller details can be managed when the big questions are out of the way.
Possible Questions to Ask Yourself:
- What would I choose if money wasn’t an issue and anything is possible?
- How can my idea or innovation help others?
- What joy and benefits are in it for me?
You must be 100% committed before and after registering your company if you take the plunge to become an entrepreneur. Put systems in place to help you build a successful business and don’t let go of your vision. Perseverance always pays off.