I’ve been in the rat race for almost fourteen years since I graduated from the University of Waterloo with a Mathematics and Business Administration degree. From time to time, my entrepreneurial spirit often wondered about the road that I had not taken. From a very young age, I had been pretty independent and I often wanted to have control over what I do for a living. I want to determine what I do on a daily basis and I prefer to only to answer to myself. This is what the entrepreneurial people called “being your own boss.”
I often hear them say, “if I am my own boss, I don’t have people telling me what to do. I can choose to work whenever I want, at the schedule that I want and however long I want.” It sounded pretty awesome to be your own boss and to have control of your own destiny. As I ponder what’s on the other side of the fence, I started to ask myself, “is the grass really greener on the other side? Would I be better off than my current situation if I become my own boss?” Let’s put on our adventure hat and try to analyze what’s on the other side of the fence.
Pursuing Your Passion
Most people associate entrepreneurship with the pursuit of one’s passion or dream of building a product or offering of a service that will create value for society. The more value that your product or service creates, the better the chance for you to make money. This will, in turn, lead to a better chance for the entrepreneur to build a successful business and to be rewarded financially. This is an ideal outcome for any entrepreneur pursuing his/her passion. For my passion, I would try to open a full-service restaurant because I love food and I like to interact with customers.
Facing Challenges
Depending on what stage of life you’re in, you’ll be facing a different challenge if you want to be your own boss. For the entrepreneur that just came out of school, the challenge will be securing seed money to start the venture and the lack of initial income. For the entrepreneur that had already worked for a few years, the challenge will be overcoming the opportunity cost of employment income. For the entrepreneur that had an established career and a young family, the challenge will be overcoming work-life balance and financial risks. I am in the third scenario.
Not Reporting To Any Bosses
Many people think that if they are in control of a business, they have no one to answer to but themselves. Wrong. Every entrepreneur needs to answer to at least two important stakeholders – their customers and their family. Sometimes, customers can be just as stressful, demanding and unreasonable to deal with as any boss in any corporation. For your family, you don’t technically have to answer to them. But what if you’ve been in business for a few years, you not only did not make any money and in turn incurred debt due to your business failure? How do you tell them that you’ve failed?
Work When You Want To
Every entrepreneur dream of the two days work week and working whenever they want. It’s achievable if you have already built a successful business and your business is generating a steady cash flow for you. Before that happens, most entrepreneurs would have to put in at least 60 to 80 hours per week at the beginning. Pay from their business may be minimal or non-existence. There is no such thing as weekends, holidays or personal time. Does this still sound great or a 40 hours work week that comes with consistent pay, paid vacation days, holidays and weekends are better?
Work At Your Own Pace
Once you’ve built a successful business, you may think that it’s time to slow down a bit a reap the reward of your hard work. Well, the moment that you slow down, you become complacent. Your business may stop to innovate. You may start to lose your competitive edge as your competitor either have time to catch up to your business or they are able to duplicate your advantage. Your once flourishing business may be struggling to survive (does anyone remember Research In Motion, Sony, Friendster?) because your competitors had taken over the innovation lead and left you in the dust.
There are ways that you can reap the reward by locking in your gains. You can either sell part of or the whole business when it’s successful and diversify your wealth away from your business. Otherwise, your wealth will be closely tied to the success of your business. You’ll either become richer if your business becomes more successful or broke if your business failed.
Knowing Your Odds
I’ve always been a numbers guy. Whenever I do something, like making a bet with a friend for a free meal, building a deck, playing a tennis match, investing in a company or starting a business, I always ask myself one important question. What’s my chance of succeeding or winning? I can be a bit loose and reckless when it comes to betting with my friend or playing a tennis match. The worse thing that can happen to me is buying my friend an expensive meal or taking a hit on my ego when I lose, but nothing that I couldn’t handle.
When It comes to starting a business, knowing your odds of succeeding is important. Based on an article on Fortune.com, “Why startups fail, according to their founders”, 90% of startups failed. That means there is a 10% success rate right? Well, not necessarily. There may be a percentage of businesses that did not fail, but they could be just getting by or not making much money at all. This means that the success rate is even lower than 10%.
So right off the bat, if you want to be your own boss, you have less than a one in ten chance of being successful. Are you comfortable with this odd? Your chance may improve or deteriorate depending on your ideas, products or services, finance, work ethic, and etc.
Opportunity Cost
If you have decided to become an entrepreneur and start your own business, the opportunity cost is your potential salary from full-time employment. Depending on your major in school, the industry that you were trained to be employed in and the number of years you spend trying to build your business, the opportunity cost can be significant. The trade off could be tens of thousands or even hundreds of thousands of dollars. This is just assuming that you missed the opportunity from employment income.
The Cost Of Failure
Another thing to consider is the cost of failure. When your business failed, you get hit from multiple fronts. The first is the loss of income that could have been earned from employment during the time that you were in business. The second is the debt incurred from the business failure. The third is the employment experience that could have gained during the years you spent running a business. The chances of this happening are higher than nine out of ten for any business start up.
Not Being My Own Boss
Once I found out the odds, the time commitment, the financial risks, the dedication required, I started to realize that not being my own boss is not that bad. I may not be able to control what I do, but I can still enjoy my work, make the best out of the opportunity that I have at hand and get rewarded for performing well. There were some bad days at work, but I also had some good days too. The most important thing is realizing that regardless if you are your own boss or not, you will often experience stress at work and that is just a part of your working life.
My Two Cents
To be your own boss or not? That’s a difficult decision you need to make and it may have great impacts on your life. Take the time to understand the demands, requirements, and risks associated with being an entrepreneur. Weight the pros and the cons, and consult with your family and people that you trust. Regardless of which decision that you make, it’ll be a life changing decision. Make sure that this decision will give you the best chance to succeed in the long run.
So, has this post changed your mind about being your own boss? What other factors have you considered that I have missed?
About Leo
I started my own business in 96 and ran it for 18 years before selling it. Being your own boss is GREAT. Flexibility is one of my favorite parts. People should understand though: 1) It generally takes YEARS before the business is profitable enough to provide serious income and 2) You work your BUTT OFF when you’re responsible for everything. I seriously did not take a vacation or trip in 15 years without a laptop and doing some work every single day.
@Brad, great job cashing out your business and I hope that it was a great payoff for you. I think the two points that you mentioned have definitely given me a bit of insight into what life is like to be your own boss. I am not sure that I can sustain that level of commitment for that long.
I never dared nor desired to work for myself during my career years. Why take the personal risk when my corporate job paid me far more than I needed to become financially independent and my job entailed no risk to my personal finances. Plus I enjoyed the work and at the end of the day, regardless of what happened to the corporation I’d still have more money than I needed and could get a similar job with another company any time I wanted or needed to. I had several friends that owned their own businesses and it was obvious that they had to work much harder than me for similar rewards but vastly higher risk. Now that I’m early retired I have two day a week highly paid contract consultant gigs that pay 100% of my expenses and also are pretty entertaining. The difference now is that I don’t need the money or the gigs so there isn’t much stress plus they have no financial risk since I’m just renting my clients my brain cells at a high hourly rate and don’t have to worry about other employees, inventory, salees or any of that normal business stuff.
@Steveark, when you are making a great income at your corporate job and you can easily find another position if something happened to your current employment status, there is no need to take any financial risks just because you want to be your own boss. The bonus is that you really enjoyed your job. Congrats on the early retirement and the side gig. I am definitely inspired to follow in your footstep one day.
If you’re a realtor, aren’t you kind of your own boss? I guess if you work for a real estate company you are representing them and still having to report to them perhaps? I am not an entrepreneur but I admire those who are, because I think it takes guts to leave the cushy safety net of gainful employment. Also being your own boss and owning your own small business these days is made worse with the upcoming tax changes from the Liberal government.
@GYM, Being a Realtor is being your own boss in a way. However, unless I own a brokerage, I still feel like an employee. In terms of the tax change, it doesn’t affect me as I don’t pay my family through my business.
“Being your own boss” is simply you feast or famine. Been there, done that.
Imagine for a moment as an employee you find yourself out of work, severance gone, you are living for a short period on EI. The EI is not paying the bills, you are depressed. You are your own Boss, you have responsibility to yourself & loved ones.
Or working for someone & having a second passive income stream you feel great in the sense that if you lose or quit your job all is not lost. Maybe go more aggressive on the passive income, do a hustle
Or perhaps the side hustle/passive income turns into net income to cover expenses, or possibly grow to a million dollar business. It’s not retirement, you still need to hustle to make sure the revenue keeps on coming in.
Or you venture with someone, a partner [trust is a huge factor] , just the two of you the business is a success or failure
Or you have capital to run & operate a business that has employees. What a headache this is, you have responsibility as THE BOSS not only for income & expenses, but also people who are as unpredictable as the weather
Then the ultimate ego is a multinational corporation, you are the boss.
Not everyone can be their own boss, it takes a certain character, knowledge, skill level & finesse – and it’s not always the major that you took in school that makes you a successful business owner/boss in the field of that major.
Leo you keep saying you are a numbers guy, like investing, like being a people person – so would you be a Michael Katchen a Canadian & his business that he started from age 25 in 2014. Wealthsimple is simple with just 75 employees is a ‘robo-advisor service’ with one-trillion under management (AUM)?
This seems like a smart business to be in, there are other smaller competitors with $100 million under management (AUM)
What about a cafe, a real estate brokerage, a Tim’s, Mc’d’s, a software solution company or consultancy. Most folks could do something to be their own boss other than investing for passive income.
It all comes down to the entrepreneurial YOU
@John, these are all great points. At the end of the day, it’s really up to YOU, to decide what is right for you. I had definitely investigate most of the options that you mentioned. Including trying to apply for a Tim’s or McDonald’s franchise. Unfortunately, those franchises are for multi-millionaires and their partners and I don’t qualify. I did fill out their application forms, but I never gotten any reply from those corporations.
@ Leo, since you are self employed, have REI investments & other not within the business (or are they) is there any chance that you can use the ‘cash dam’ to reduce taxes thus increasing your income?
source: mdj….thanks
https://www.milliondollarjourney.com/the-cash-flow-dam-explained-cash-damming.htm
@John, I am using a variation of cash flow damming. Instead of using my cash flow to pay for business expense and claiming the interest on the loan as tax deductible, I did it with my investment. Instead of using a line of credit, I prefer to refinance my mortgage and take out a large amount of money and use the proceed to invest. There are a few benefits to this:
1) By refinancing my mortgage, I lock in the interest rate on my loan for five years (I felt pretty good to know that today’s increase in interest rate did not cost me more interest expense)
2) I can choose to pay off only the interest each month for the investment portion of the loan. Hence, I pay off more of the principal part of my non-deductible part of the loan.
3) I can use the income earned from my investment to either pay off the loan or to re-invest.
I have to agree pursuing your passion and doing what your love is so important and crucial. I think some people prefer to work for others but I personally and doing what I love and sharing with the world.
I’m a freelancer and I get paid to post things at times, so I’m my own boss. I like it that way. I set my own times and schedules, which works for me!
For me blogging has made me my own boss and has allowed me to work again as I can work around when I am feeling bad, if I get up one day and feel like I did 10 rounds with whoever over night I can curl up on the sofa and know it OK. This past week I’ve been pretty bad, but I’ve made it from my bed to the sofa and been able to work, if I had to leave or had a schedule however I don’t think I would have been able to.
I think a lot of people like the idea of being their own boss so they can basically do what they want, but I don’t think people are always as prepared for it as they think they are. While you may not have to be at the office at 8am, usually being your own boss means putting in longer hours for a long time until you’re in the position of cutting back. Not saying it’s a bad thing by any means, but it does take serious passion and dedication for it to be successful.
This is very thoughtfully laid out. I go back and forth about this with myself all the time. But, at the end of the day, I want my time to be my time, so I’m working my booty off to be able to live life by design.
Thank you for sharing some good insights. Well, I do not want to work in an office based environment anymore. It’s so much easier to work at home. I agree that you still need to report to somebody, not just yourself.
I have a few friends that have their own businesses and it is not easy. You always have to answer to someone even if you are the boss. Thanks for the great post.
To be honest, I went into blogging thinking that it was an easy gig that I could be creative with and generate some cash flow. And while it is a creative outlet, and I do generate cash flow … it’s not an easy gig. Their are a lot of competitors in my industry, and a lot of behind the scene work I didn’t take into consideration. Plus my industry is always changing, and I have to be able to change with it or face failure.
That said, I’ve learned a lot building my following and brand, and I’m glad I took the leap and went for it.
I am sure this post resonates with so many people and bloggers. Take control of your life and do what you love as you suggest.
This was a good read… This post would be helpful for all the bloggers who are planning for a start up 🙂
I have to say, answering to bosses was not my favorite thing when I was in the corporate world. I love being my own boss.
I think a lot of people want to be a leader. But being a good leader, few people think.
You bring up some really good points. I’ve considered it in the past, but don’t think it’s for me, not as of right now anyways.
This is awesome information for those wanting to be their own boss. It is not all cookies and cream when being your own boss. Anything you do you should weigh the pros and cons along with doing all research involved in it before jumping into it. Thanks for sharing the information.
This really reminds me that should I become successful that not everything goes back into the business. I will definitely need to be thinking about diversification.
I agree with all of these things. It’s a big reason why I don’t want to have to work for anyone else. Calling the shots means a lot to me.
I’ve always dreamed of being my own boss someday. You have really provided a lot of insight on how one needs to weigh that decision right and consider the greater responsibility that this decision will enlist. The two most important stakeholders that you mentioned customers and family are probably going to be the most difficult to balance.But some risks are worth taking the plunge.
I’m finally my own boss just this year, after quitting to blog full time. I have to say it’s pretty incredible and I’m so glad I took the leap!
You have some really good tips and pointers! I think almost anyone would want to be their own boss and work their own hours on their own time, but a lot are too afraid! It’s great that you were able to map it out a little better! Thanks for sharing!
You have some really good tips and pointers! I think almost anyone would want to be their own boss and work their own hours on their own time, but a lot are too afraid! It’s great that you were able to map it out a little better! Thanks for sharing!
One of the reasons I went into blogging and working freelance was to be my own boss, work my own hours and have some control over my work/life balance.
Being your own bpss is awesome. But also risky challenging, and its good because it could exercise your skills and motivations. Being your boss work twice or thrice than employees with bigger responsibility. And its rewarding if done the right way.