Transitioning From Employee To Entrepreneur

software development in progress

There is clearly a major difference between being an entrepreneur and an employee. An employee has a permanent job (as permanent as it gets these days, anyway) and gets a paycheck perhaps weekly or bi-weekly. An entrepreneur typically creates a business that (hopefully) brings in money, but making money is not guaranteed.

There is also a third category that doesn’t quite fit into the label of employee or entrepreneur: the freelancer. A freelancer is a Rōnin — an employee without a permanent employer. Freelancers sometimes make the transition to entrepreneur, but even if they don’t they tend to be better off than employees since they diversify their employer base. When you do regular small jobs for many employers, losing any single employer won’t destroy your entire income stream.

Why be An Employee?

The concept of being an employee is fairly recent. It wasn’t until the industrial revolution and enormous urban growth that employment gained massive popularity. Despite being being new it is now completely pervasive in western society.

In the United States employment is so ingrained that most children from a young age are expected to go out and get a job once they are old enough. Entrepreneurship is considered risky and is discouraged or not even mentioned as an option. The question is why does our society value employment so much more than entrepreneurship?

In the early days of the employee growth explosion a job actually was secure. Once hired a person could expect to work for a single employer for 40 years and then receive a pension in retirement. However despite seeing both job stability and pension evaporate in the modern age, many people still associate being an employee with safety and security.

A False Sense Of Security

Although it may feel secure, having a job gives a false feeling of safety since you can be terminated at any time. The only way your job can be secure is if you have a contract of guaranteed employment. Such a contract is highly unlikely to be made however, since no laws require it and the fact that it would be a liability for the employer.

Most jobs in the US are “at will” employment — meaning you can get canned at any time with or without cause. As an employee, the sword of Damocles is ever-present even if you are not aware of it. The only exception to this rule are government employees which generally can stay at their job for life. If being an employee is so insecure, why do so few people start their own business?

It is true that being an entrepreneur is risky, but there is more than this perceived risk that drives people away. It begins with the fact that most of us start our careers as employees. Since our schools don’t exactly teach children that they should go out and start a business, most will go on to get jobs. Unfortunately being an employee is not fulfilling for most people, and at least some of them should become freelancers or start their own business.

Failure Is Not An Option

Some time ago I read that the longer you are an employee, the harder it becomes to start your own business. Back then I thought this was because you get so used to being an employee it becomes hard to adjust to something new. There’s more to it than this however. If you’ve been in the employee world for a while (5-10+ years) you are most likely very, very good at what you do. Plus you probably also have a fancy title like “Regional Manager” or “VP of Marketing” or “Director of Product Development”.

Leaving the employee world means leaving that title and peer recognition behind. It also means starting from scratch in many ways. You might be a top notch Java programmer but that will probably cover 20% of the things you need to be good at as an entrepreneur. Going from a high paying job that you are really good at to making no money at all and starting new skills from zero is not an easy transition to deal with.

To make things worse, American culture is very anti-failure. Failure is frowned upon to the point that failing feels like a crime of some sort. This means that most people are not particularly keen on putting themselves in a situation where they will most likely fail. We all go through failures when we start in anything, including our careers. The problem is that failure is pretty much only tolerated at that point, that first year or two of your career. After that period an employee is expected to not fail at their job.

Becoming an entrepreneur means accepting that you are going to rewind your career back to the beginning and fail. Probably a lot. Way more than you are used to by now, and way more than is culturally acceptable at this point in your life. It’s almost like dating a 20 year old college girl when you are a bald 40 year old man. People are not going to be very approving.

Taking The Leap

It is not a major surprise then that so few people commit to starting their own business. Between losing their status, the recognition of their peers, their high salary, and having to go through a multitude of assured failures, staying at a job seems like the saner thing to do.

Being an entrepreneur or a freelancer is not for everyone. Steve Jobs once remarked that to be an entrepreneur you have to really love what you do. It requires so much work and dedication that you’d be crazy to do it if you didn’t love it. In spite of this those of us who choose this path wouldn’t have it any other way.

This post includes The Choice by Luis Argerich used under the Creative Commons Attribution 2.0 Generic license.

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