When I was working as a management consultant at Bain & Co., I got married and decided to become an entrepreneur. Here are my top 5 reasons for having my own business:
1) I am in control
2) Better risk / reward on my investment
3) Improved work / life balance
4) Better business education
5) Tax efficiency
You are in control of your destiny. Have you heard the phrase “captains of industry”? Well, having your own business makes you the “captain”. The final decisions rest on you. Where you take the business, whether to profitable path or perilous one, is your decision. You’ll get to decide who to hire on to your team. You’ll get to choose your suppliers, partners, and even clients. The buck stops at your desk.
The risk/reward on your investment is better than when you are an employee. If you are a good business person, the sky is the limit. You will earn profits beyond what was possible as an employee. As an employee you are depending on the decision of others. When working in corporate America, you can get laid off due to a turn in the economy or a bad company decision. You are capped by your salary. However, when you own the business, you get to manage the risks, and if you do well you will be rewarded handsomely.
Your work/life balance improves enormously. As a management consultant, I used to fly around the country every week. I was only home on weekends. My wife hated it. Now, as a business owner, I work from my home office. I don’t even need to deal with traffic. Of course you’d say: “that isn’t fair, what if I had a business that required a physical presence?”. Well, since you are the captain of the business, you get to decided where to put the business. You’ll get to choose where and when to work, and with whom. Life is better because you make it so.
You’ll get a better education. You’ll learn things you’ve never known before. As a small business owner, you’ll have to know a little of every position. It’s like life on a submarine. Every sailor needs to know how to work every position because it is a small ship. If someone dies, another one needs to be able to take over or the entire ship might sink. In a small business you need to know a little marketing, sales, finance, accounting, human resources, etc. In order to hire the right people, you need to know what you need. When I bought my first business, I had to learn how to manage payroll. If I hadn´t figured it out my employees would have killed me. I did almost everything, and I knew enough to know when I didn’t know something. This is very important. Recognizing that you don’t know something that is crucial is key factor to avoid failure. I know many people who didn’t know what they didn’t know. A few were lucky, but overall most of them failed. Believe me: I learned more in my first month as a business owner than my first semester at Wharton.
My final reason for owning my business is tax efficiency. By this I mean that you get to lower your taxes legally. When you are an employee, the IRS gets paid before you. Every paycheck you get your estimated taxes were already deducted automatically and paid to the IRS. This is even before you have filed your taxes. In effect, you are giving Uncle Sam an interest free loan. The paycheck you receive is after taxes. In contrast, as a business owner, you deduct business expenses such as travel, meals, automobile, gas, cellphone, health insurance, etc. before you pay taxes. Taxes are paid after all those deductions. This means that some of your “perks” are pre-taxed. Also, you can create a retirement plan that may help you defer taxes. Since it is your plan, you get to define the benefits. However, when you were an employee your retirement plan was designed to you. Isn’t it better to be able to define your retirement plan? I prefer the options I have as a business owner to be more efficient on taxes.
In summary, my top five reasons for owning a business can be boiled down to the ability to control your financial destiny. Those are my reasons. What are yours? Please share your reasons for owning a business with us in the comment section.
Invest eclectically and have a profitable day! Go out and start or buy a business!