Monday, 14 November 2011

Entrepreneur vs Employee

Since I graduated and decided to not find a job and instead start a business, many of my friends have said to me, on a regular basis, one or both of the following:
"You're making quite a brave (possibly perceived as arrogant) decision to start your own business in these troubled times... I personally couldn't take the risk of not knowing where and when my income will come from". 
OR
"Yes, starting a business is the dream, but I think it is better to go into employment, learn a bit, accumulate some capital and THEN do my own thing".
I used to think these were both reasonable points and wished those who stood behind them the best of luck in their endeavours - after all, not everyone can or is going to be a business owner and many first time business owners start when they are older.

Recently however, I have thought about some valid arguments against both lines of thought mentioned above.

The first of these is based on the RISK element. What is interesting about this risk, unlike say gambling, it is not easily defined or measured. It is definitely a perceived risk and perceptions, as we all know, are heavily biased and influenced by our upbringing and the media.

So, here is my possibly biased perception of both the risk of becoming an employee and that of starting your own business.

(a) Becoming an employee:
  • You risk not being able to develop the skills and capabilities that will make you employable for the rest of your life because you are not always able to CHOOSE what skills you develop in a job defined by your employer. Given the rate at which technology is advancing, people who are not constantly improving and learning may well find themselves the miners in a country that no longer mines 20 (or even 10) years down the line. Then what?
  • You risk loosing your job. In a growing global economy people forget about this risk, but we are currently in a troubled world economy and even if a grand recovery does eventually come, the economic cycle will surely deliver a number of other recessions in each of our lifetimes. What's more, companies go bust or contract for reasons completely unrelated to the global economy, putting all but the most valuable employees at the risk of being retrenched.
  • You risk not being happy. Many philosophers, work psychologists and more recently, behavioural economists argue that a major influence on our happiness is the ability to do meaningful work. In many large corporations it may not be possible to do this. How many people do you know who love their job? 

(b) Starting a business
  • You risk not having enough money to live. However "to live" is a funny term. Sure, if I had a family and was used to a lavish lifestyle, "survive" may mean several thousand pounds per month. While setting up this business, to me, survive means something in the region of £500 per month. An easily attainable amount (even less that what some people in the UK receive in benefits each month).
  • You risk... um, I can't think of any others. Please feel free to mention any you may think of in the comments below.

Of course some people may say, you risk "failure" or you risk "having to sleep less" and so on. Like I said, this risk is a perceived risk and will mean different things to different people.

The second argument I have against being an employee is based on the concept of TIMING.
It seems like a reasonable argument: "Get a job, learn, accumulate wealth, exit, start a business, succeed."

Looking at my dad as an example, I put forward my argument against this type of approach.

My father is a major inspiration to me. During his life he has changed so many jobs, always looking for something better, something to stimulate him and wherever he goes, no matter the industry, he advances within the company at a lightning speed. He is soon going to be 50 and in the IT industry age tends to be against you - not in his case. He is doing better than ever and has managed to do all this while immigrating out of Bulgaria with nothing and then returning to start again many years later.

For the past few years he has been also working on starting a chain of Montessori schools with my step-mom. There is a huge demand for these schools in Bulgaria and they have already successfully opened several. He continues to inspire me with his ability to adapt and take advantage of opportunities. Had my dad been born in a capitalist country and had he not had a son at a young age and immigrated to a country where he had to provide for his family, I think my dad would have become an entrepreneur at a much younger age and a great one at that.

His example shows me several key things:
  • Specialising - great for an employee, but not necessarily the key to success for an entrepreneur. After years of specialising, you might know a lot about the one thing you do really well at company ABC but could you start your own company to compete with ABC? There are natural leaders, but there are also those that are made through effort and learning; and to be made takes time. It is a great (level 5 - Good to Great) leader that makes a business succeed.
  • Family and marriage - your perceived risk increases with having a family as the possibility of not being able to put bread on the table for your wife and kids is riskier than if you are alone. The average age for people getting married in the UK is 27. So once you graduate, on average, you have 4-5 years before you are married. This is a window of opportunity. Go tell your new wife you are leaving your investment banking job to start a business that may fail and see how she responds.
  • The Rat Race - Good employees progress in a company. They earn more with every year and therefore the financial opportunity cost of starting your own business increases. At first this may only be the amount you would earn in a graduate position but it may easily become 6 digits or more before long. This makes the financial decision to leave and start your own business even harder when you have been employed for a few years.
In summary, I think for young people, the risk of being an employee is generally greater than starting your own business. I also think there is a strong inverse correlation between the passage of time and the likelihood and ease with which people can start and succeed at starting their own business.

One possible solution that meets employee and entrepreneur mid-way, could be starting a job in a small company where you can be INTRApreneurial. You still get a salary, you are more likely to do meaningful and creative work and should the business succeed, you are likely to have equity options available to you, helping you make the transition from employee to business owner.



Below is my presentation on Intrapreneurship presented at the Manchester Entrepreneurs: "What's Next" event.



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