The differences between owning your own business and being an employee are dramatic, as shown in the table below.

You are the last one fired. First one fired.
You see problems coming so you have a chance to plan and react. No warning or chance to plan.
Three income streams – salary, tax savings and growth equity. Only one income stream – salary.
Unlimited upside potential on salary and earnings as the business grows. Salary has limited upside potential.
You make the rules. Company makes the rules.
You decide what clothing to wear. Company decides dress code.
You choose which customers to work with. Company decides which customers.
Opportunity for passive ownership role as company grows. Only get paid for work performed.

The opportunity for income and wealth creation is clearly superior under the business ownership model.  In addition to setting your own salary not restricted to a cost-of-living increase or a capped merit increase you benefit from tax code features that reward business owners.  To illustrate, as an employee when you pay $100 for your cell phone bill you have to have $130 in pretax income to get the same benefit as a business owner. That’s because when you own a business you can deduct all or a portion of the cell phone cost as a business expense.  A person that was making $100,000 with a job can have the same or a better lifestyle making $70,000 with a business for this reason.

Further, as a business owner you receive the benefit of the value of the business you created when you sell the business.  To illustrate, assume you have a business that cost you $50,000 up front and you sell that business in 7 years for $1.2 million.  The selling price is 24 times your original investment.

In addition, you get the pride of ownership and experience the passion in what you do.  Your sphere of influence is also different; you can meet prominent figures as a result of your business.  And you get the satisfaction of knowing you help the economy by creating jobs.

Owning your own business is not for everyone.  However, for those with the fortitude and right mental outlook the rewards are substantial.

Leave a Reply

Your email address will not be published. Required fields are marked *