In someone’s employment life, she/he dreams of having her/his own company to beat the thoughts of having a manager or a boss. You know the promise of being your own boss, handling your own time, and $$$ - who wouldn’t want that? It’s “relatively” easy to establish a company compare to the last decades - thanks to technology. There are also a lot of avenues to profit from “the gig economy” that sometimes get big and would need a team to work on.
I believe that every person who dreamed of being self-employed should at least try it, given their circumstances. Obviously, I wouldn’t advise people to quit their job and start a poor-planned business if there is a financial or family obligation at stake. But given if you have the capability and capacity to do so; plan it properly and just go for it.
Here are 5 of my personal reasons why it’s beneficial to be self-employed or at least experience being one in your life.
A real-world training of an MBA
This experience will be a trial by fire. Some would even argue that the money you put in to study an MBA might actually be better worth investing in a business instead. There are a lot of resources on how to run and manage a business (most of them are for free). If your business succeeds or becomes profitable, then you’ve done the right investment; and in case you fail with your venture, you would at least capture what didn’t work and how you can take better decisions next time.
When I ventured having my business, I applied the 20-80 principle: I just need to know 20% of how it works, and I’ll learn the rest of 80% along the way. It’s important to find the balance between “I know nothing, should I do it?” and “I feel like I don’t know 100% about it”. So, for example, starting a business around beauty and car products is a bad idea on my end because I know less than 20% of it.
However, if you are venturing on a familiar domain, such as past work and jobs, then that might actually work. I’ve been in the technology consulting for the last decade, and I have enough experience on my belt to deliver successful project outcomes. So starting a business around this made sense, because I have over 20% knowledge and experience on how it works, I am just learning the rest of 80% like doing sales, marketing, white label products, managing remote workers, collaboration with partners, accounting, etc.
You experience to do the “necessary evils”
Year after year, you deal with expenses, taxes, and cash flows. I think this can also apply to your personal finances, but you become more invested in managing it. The simple coffee expense can become much more visible. This allows you to experience firsthand some of those paper-works and signatures required to file for your quarterly or yearly declarations.
If organising these is too much for you, or taking too much of your time, then hire an accountant. I have an accountant, she’s exceptional. She handles 80% to 90% of the work involved in our accounting books. Even if you have an accountant, the actual money that goes in and out of the company is still for you to handle - carefully. So having that sense of responsibility brings up financial literacy on your end.
This knowledge and experience will become handy if you plan to go back to being employed. You would have a better understanding on how to balance expenses and sales, like “Why can’t I have the best super fast laptop for work?”
“Why is my salary delayed again?”
It’s one step closer to financial freedom
As an employee working in a technology firm (or actually any company), have you ever thought that maybe you can cash in all the money that clients pay for your service? Well, the answer is yes. That’s the whole point of being self-employed. You’re willing to do the rest of the functions of your former employer and get the maximum benefit out of it. You’ll remove a lot of the overhead costs of the people in the company that translate little value for you. Being an employee brings you a “subjective stability” but doesn’t give you much control, being self-employed means having a lot of control but with a higher risk (and potential reward).
In the beginning of your business, you will have no need for a complicated HR structure, cultivating company culture, hierarchy of managers (and middle-managers). You focus on making the company profitable with the least amount of expenses. You build a company, so that in a few years' time you can exit. Exiting means you already gathered enough resources to venture for something new, or the company became big (or get acquired) that you just want to benefit from it without working hands-on day-to-day.
If you’re motivated to make money, then it’s a straightforward decision that you really have to start-up a business. It’s very few who actually get rich from being employed. Not all people who start up a business becomes rich. There are different “survivorship bias” on both ends, so be careful. The advantage of being self-employed is at least you have a very flexible control on where you want your career or “making money” take you.
You’ll realise your “real worth”
Once you venture out in the market, you will understand how much is your actual worth by 2 fundamental principles:
- How much do you think you should earn from your service or product?
- How much do you think clients and customers would pay for it?
The latter being more important than the former. The former is more around building hypothesis and assumptions based from your own experience or research, the latter is more around actual negotiation skills and market margins.
If you’re trying to build a product, you’ll do the basic maths on how much time you’re putting in it. Does it make sense to hire more people? Do you need funding from investors? Or maybe outsource some non-core services? How much should I sell the product for?
If you’re doing a service business, you’ll ask yourself how much should you charge a client. Are they willing to pay $20,000 per day? Or maybe $2000? $200? Should I do fixed-price contracts? How do you scale it so that you get paid in full, but still deliver the expected outcome? All those questions become more relevant to you as you learn to value your actual effort and time.
More opportunity to inspire and touch lives
I think this is one of the best reasons to start a company. You have the option to help others, whether that’s through giving people jobs (or gigs), doing not-for-profit work, company donations, etc. Or simply because you have more money, you’ll have more options to buy from your local butcher or fresh market and not buy from the big companies.
You will meet many people on the journey, and you will share a lot of stories with them. You will write more about your struggles and lessons (like this). Having a company gives you a responsibility to not just think about yourself, you think of a bigger goal. What will your company look like in 5 years' time? How will it affect the surrounding people: your family, your friends, and your peers? How will it affect you?
There is a common misconception that once you become self-employed, always plan for it to be a 1,000+ people’s company or a multi-million business. Although that’s something worth aiming in the long run, if your only reason for starting a business is money and influence, you might also consider challenging “the growth.” Is that what you really want? Well, you would know - it’s your business!
- Starting a business is your actual “on the job” training of an MBA.
- You’ll experience to do the necessities: accounting, sales, marketing, and managing people.
- It’s an opportunity to make more money.
- You’ll value how much your time converts into a dollar figure.
- There’s opportunity to help others.
If you have the right resources and plans to start a business, just go for it. You’ll learn the rest of it along the way. You will go pass by the “What if I…?”. If it doesn’t work, then at least you tried, maybe it’s not yet the right time.
Let me know your story. Have you started your own business? Do you want to start a business? What’s holding you back?