Employment vs Business comparison is vital for an employee looking for a long-term career plan. Shall I get employment or start a business? Not just financial security but financial growth prospect is also a point to consider.
Employment and business are two different types of careers. But both have their pros and cons to evaluate. A calibrated, well-thought plan can help you decide and chart your course of a career.
Employment can offer you some financial security without much risk. You get paid at the end of each month even if your performance is not consistently high. The risk is low.
But today, long-term employment security does not exist anymore. That’s one of the reasons youngsters are considering taking up business as a career.
Business as a career is attractive because only you can fire yourself, and there’s no limit to earning potential. You can earn more money in a month than you could earn as an employee. Very much possible.
I have travelled both ways. What I’m going to tell you is based on my practical experience.
There’s a widespread belief that business is not for everyone. But only one factor can hold you back. It’s called “Mindset.” If you’ve got a persistent dream and keep taking action towards that dream, only the sky is the limit.
With the right mindset, everyone can become an entrepreneur
In this article, I will present a step-by-step guide on how you can realize your dream of entrepreneurship in a fool-proof way.
Why Business is Better Than Employment or Self Employment in The Long Run?
The question should be, “is business better than employment?”
To answer this, we should evaluate employment vs business, and the Pros & Cons with facts. Look at the table below, comparing some important factors in business, profession (freelancing) and employment.
Since the beginning of civilization, human society has been evolving to improve humankind's safety, security, and living conditions. In nature, we see that water always tries to flow from a higher level to a lower level to bring it to equilibrium. Human society is a part of nature. Therefore, we see this natural tendency in action. We don't like inequality and denounce the rich-poor gap. History had witnessed many revolutions when the masses of oppressed people revolted against the more privileged classes and tried to close the gap.
That geopolitical churning of the socio-economic ecosystem is an enormous subject and is beyond the scope of this article. Today I shall touch only the stages that are leading the current trend in the 21st. Century. That will give you a better understanding of the pros and cons of employment and business.
The Evolution of Economy
We can segment different stages of the modern economic evolution into six stages that encouraged employees to launch businesses and achieve financial freedom.
1. Till the end of 17th. Century
The primitive land & agriculture-based economy. Emperors had access to land, and slaves used to work for them. The barter system prevailed during that period.
2. 18th. & 19th. Century
The era of the Agricultural & Industrial Revolution. The money came into existence. Those who had ownership of money became businessmen or employers. The majority of people who didn't have much money became their employees or became self-employed. They provided services or goods to the businessmen against fixed wages or on contract. They used to earn just enough money to survive barely.
3. 20th. Century, till '80s
Beginning of the 20th. Century witnessed two World Wars that involved almost all countries taking sides and send troops and material from one continent to another. Inventions in science and technology accelerated the progress of civilization.
Gradually, the power shifted from owners of capital to owners of technology. To cope with market demand, the education system encouraged professional course curricula; employers were forced to hire engineers and technicians at higher salaries. The society saw the rise affluent middle class.
The gap between the rich and poor became narrower than before during this period. Professionally qualified doctors, lawyers, and management specialists became higher in demand. They either remained employed or started offering their services as self-employed professionals.
A revolution in computing and business automation enabled humans to process information through connected systems. We saw an evolution of the power of Information Technology, known as the IT Industry.
4. 1980 to 2000 – Barrier of Entry to Business Became Easier for Skilled Employees
That is when the internet revolutionized computing when Google came up with its search engine.
The World Wide Web gained momentum. It became easier to earn money through online businesses and affiliate programs.
Everyone started building businesses on the internet and became “dot com entrepreneurs” as most website addresses were suffixed by the “.com” extension.
Honeymoons often don't last long. The dot com bubble also burst, which led many startup businesses to close down.
5. 2001 to 2019 – A Period of Economic Turbulence and Globalized Economy
A deep recession was triggered by the crushing down of banks due to reckless sub-prime lending. The tanking of stocks worldwide forced all countries to take a relook at new strategies to conduct businesses.
With the help of higher technology and cloud computing, the world became connected like never before. Technology made a level playing field for ordinary people with little or no capital to start businesses and become entrepreneurs.
Author Thomas L. Friedman described the rapid development during this time in his bestseller book “The World Is Flat.” He analyzed globalization and its impact on the United States in 2005 in the book.
6. 2020 & 2021 – The Covid-19 Pandemic and The Rise of Work-From-Home
In the early months of 2020, the global Covid-19 pandemic hit the global economy like a sledgehammer. No treatments or vaccines were available. Thousands of people started dying due to the killer Coronavirus.
To minimize infections and deaths, Governments stepped up several preventive measures. A total lockdown has been one of those. The situation compelled corporates to rethink operations and save their companies from closing down.
Growth of broadband internet, 5G technology, and powerful SaaS (Software as a Service) cloud computing made WFH (work from home). Corporates asked most of the employees to stay at home and do their work using the online infrastructure. Yet, there was no guarantee of job security.
This turbulence and uncertainty made people evaluate employment vs business with seriousness.
Understanding Employment vs Business in 2021 and Beyond
The WFH trend has revolutionized the job market.
Employees & Freelancers from the viewpoint of Employers
Companies have understood that letting employees work from home has several advantages.
• They no more need to keep large office spaces in prime locations.
• Operating costs of running the office, like the cost of electricity, transportation, refreshment and other welfare expenses came down.
• Employees can spend more time with families, and last but not the least,
• They could hire stay-at-home moms and freelancers at cheaper costs than regular employees.
Job Market Scene in the Eyes of Employees
Hundreds of thousands of skilled employees have lost their jobs due to the closure of many businesses. That has triggered a crowd of unemployed people looking for jobs.
Today everyone understands that there's no such thing called job-security anymore. At the same time, running companies are recruiting freelancers to deliver the jobs. That has become a win-win situation for both.
Freelancers realize that they won't have job security issues as long as they upgrade their skills regularly and deliver quality work on time. Many companies came up with the business of training and upskilling freelancers.
Freelancing Has Limitations
Freelancers can earn decent money if they specialize in any High-income Skills. But freelancing is not a business. That is because freelancers sell their time for money, and their income becomes limited by how many hours they can work every day. That is self-employment which is a kind of employment after all.
When we compare employment vs business, we see a distinct advantage of the latter over the former.
Freelancers and employees work for themselves while other people work for businesses. A business buys time of others. Businesses work as teams. Hence, those are also known as companies.
Advantages of Being into Business
Income from employment and freelancing is not scalable. Businesses can scale up or scale down at will because they can expand by buying time of employees and outsourcing many routine jobs.
The income of freelancers can stop if they take a vacation. An employee may not even get a vacation at will. But the CEO of a corporation can leave the business to employees for weeks or even months, and the business will run. A well-managed business can retain its growth trajectory even when the Owner, Chairperson, or CEO is not around.
Good So Far, But How Can a Freelancer Own a Business?
As I mentioned earlier, a freelancer with expertise in even one of the high-income skills can become a business owner. I've listed those skills in an earlier article. You can read that post here.
The question is, HOW? Employers or Freelancers may not have a lot of money to bring up front. That becomes a bummer in the minds of employees and freelancers when they compare employment vs business in terms of career prospects.
Myths & Realities
I'm going to tell you why most of those concerns are myths. Also, an ordinary freelancer or employee with skills in any high-demand problem-solving can eventually own a business.
Concerns in the Minds of Employees and Freelancers over Launching a Business:
You need to have access to a large sum of start-up funds to launch a business.
Today you can start a business with minimal or no funds. You can own the knowledge equity, while your co-founder can arrange the funds.
A business takes 2 to 3 years to become profitable. A freelancer must have enough savings to survive during that period.
Thanks to technology, an employee or a freelancer can launch a business part-time, even from home. You don't need a fancy office or too many employees on payroll to run a profitable business.
Nobody knows me well in the industry. How can I get enough business?
You may have a lot of skills as a freelancer or an employee serving only a few companies. But to scale your service to a business level, you need much more clients. They don't trust people whom they don't know.
It's true that as a freelancer or employee, you must have personal credibility, trustworthiness, and contacts to get substantial business. Revenue won't grow otherwise.
At the same time, it's not difficult to become a “trustworthy personal brand.”
I shall discuss how to create a personal brand in a subsequent article.
Now that you can set aside those unfounded worries from your mind let us conclude the topic under discussion.
Why Business as a Long Term Career Weighs More in Comparison of Employment vs Business
Please remember, freelancers are also employees. The only difference is, a freelancer is an employee of himself/herself. But a freelancer or a businessman has some advantages over employees on the payroll.
1. A business has limited liability. That means, in case of litigation, the financial liability is limited to the assets of the business only. The owner's assets are almost immune to business litigation.
2. An employee gets her pay check after deduction of income tax. And income tax on personal income is relatively high. Freelancers and Businessmen can file the final income tax return after deducting the business expenses.
• Your house rent, housekeeper wages, electricity, travel, and many other incidental expenses have some tax waiver. For capital goods like your car and computer system, you can claim depreciation according to permissible laws.
• In the employment vs business comparison, you can build assets faster. The main reasons are a) investment in business assets gets tax benefits, and b) those assets can generate passive incomes. You can re-invest those incomes and earn more tax benefits. It's an ever-growing cycle.
• Technology has made outsourcing at a low cost a viable alternative to keeping employees on the payroll. A virtual assistant in India or the Philippines can service a business located in Europe or the USA. The quality will be the same, if not superior, at a significantly low cost.
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