Entrepreneur vs Employee?

     Entrepreneurialism  

Everybody wants to be the owner until something difficult must be done.

The above statement is actually only 93% accurate. There does exist a small group of people in the United States who accept responsibility for making difficult decisions. They take the risk. They pour their time and energy into their passion. They take the failures and struggles personally. They make mistake after mistake and remain persistent and committed. And they sign the paychecks. They are the entrepreneurs who employ the remaining 93% of the workforce.

In our business, the sooner someone decides which group they belong to, the faster they can get ahead. Most people want both. They want the upside of being the boss (money, prestige, authority, nice vacations and “easier work”) and the upside of being an employee (take sick days without worry of responsibility, have a steady paycheck whether the company is making or losing money, leave at 5 p.m. sharp and be responsible for your livelihood only).

Here’s a perfect example. Why does it seem like every would-be entrepreneur wants to own a restaurant. Why not a sewage treatment plant? Those are more profitable than restaurants. No, they want to own a restaurant because it would be amazing to have friends stop by at your restaurant. It would incredible to serve the food you like and thrive in a social lifestyle.

A couple other thoughts about restaurant ownership:

1. Someone has to pay for all that inventory.
2. Someone has to hire, train and manage the staff.
3. Someone has to be there all the time because restaurants are open a lot and there is work to be done before and after patrons show up.
4. Someone has to run payroll, deal with a liquor license and get people in the door.

Kind of makes the sewage treatment company look glamorous. The point is being an entrepreneur takes work, just like being an employee. There are different sets of rules to each and there is no third choice. So deciding which group you belong in is the first step to ridding yourself of a great career time-waster … thinking you can have only the benefits of being an employee and only the benefits of being an entrepreneur.

Two Goals: Security vs. Freedom

Robert Kyosaki, author of “Rich Dad, Poor Dad” and the educational board game, “Cashflow,” has made fortunes helping people understand why they should be an entrepreneur and the rules they must learn to thrive in that world. He’s a must-read for people trying to decide which side of the business they belong on.

Kyosaki talks at length about seeking security or freedom. The key word is “or.” It’s not “and.”

It’s “or” because people who seek security are saying that they want someone else to take care of them. Those who seek freedom are saying that they are comfortable taking care of themselves. Yet, people confuse these opposites because of the desire to have both. They want to be taken care of and to have full decision-making authority over their career.

Here are a couple examples that further illustrate the difference:

1. The most secure human being is a prisoner. He gets three meals a day, clothes, shelter and even a doctor is provided if he’s ill. What is forfeited for all this security is his freedom.
2. A car seat is designed to secure a child. It protects the child in case of an accident and restricts movement during a car ride. Mom and dad feel happy to know their child is secure. The child has no freedom.

While there is certainly appeal to both, the goal of freedom more often nets the larger return.

Our recent economic plummet has revealed that many “safe, secure jobs” were not quite that. A lot of honest, hard-working people in the home industry, car industry or many other businesses have found themselves looking for work. After 15, 25 or 40 years doing one thing, they aren’t terribly marketable and finding a new career is difficult.

When seeking the freedom of being an entrepreneur, you are no more or less safe from economic downturns than your employee counterpart. However, as an entrepreneur, you understand you have more flexibility in decision-making. You have choices.

First, you know you aren’t going to lay yourself off. Second, you know that when critical decisions are being made about the future of the company, you’re the final say. So as long as you’re confident, the freedom makes you powerful, especially during the tough times. The person relying on others for security has no voice.

In our management training program, the end game is freedom. Running an office is the freedom to choose who you work with, the freedom to make decisions that impact profit and expansion and the freedom to own your time. A day in the field is no different. There is freedom in choosing to see another business, to having a well-prepared day, to seeking out advice from coaches. Even time frames for advancement are all determined by free choice. The sooner the environment of freedom over security is understood, the quicker you can adapt and advance.

Pay: Commission vs. Salary

Everyone wants to be paid what they’re worth. Unless of course they aren’t worth anything. Then, they want to be paid what someone else is worth.

Pay is rarely a joking matter, but it is interesting to think that if everyone deserved more, where would the more come from? And is it realistic to think that everyone deserves higher pay? The 50% of people who can’t even show up to work on time, they don’t deserve more pay do they? What about the people who spend a ton of time online or stretching lunch breaks? Do they too deserve higher pay?

So who actually deserves higher pay? The answer is those who earn it.

As a salaried employee, it is determined by other people how valuable you are to the company. Other people also determine how much your position is worth. Most companies determine salary by paying an employee what they believe is 33% of what their position generates as revenue for the company. For example, if an employee is earning $50,000/year, the company expects that role to be worth $150,000 in yearly company revenue. By that logic, a “deserved” raise needs to reflect added performance, not added tenure.

The problem is pay is rarely a logical subject. People use words like “loyalty” and “fairness” when describing why they should be paid more when the decision should have nothing to do with emotion. It should be black and white: what do you contribute and what is that contribution worth? Unfortunately for the employee, the final verdict is rendered by the employer.

As an entrepreneur, you eat what you kill. You can spend all day and night talking about what may or may not be fair, but if you produce a profitable business and make sound choices, you prosper. If you don’t, then you don’t. Simple. This eat-what-you-kill mantra is ideal if you’re a talented hunter, and motivated to go after what you want. But if the work seems difficult or you simply aren’t much of a hunter, you’re going to go hungry.

So is salary a good or bad thing? Depends on how good you are and how much you trust the person who is judging your performance?

Is commission a good or bad thing? Well, there’s nothing wrong with commission for entrepreneurs who possess two key characteristics: a distinguishable level of talent and supreme self-motivation. Here’s how having or not having those two traits determine whether you should be an entrepreneur and make money on your performance:

Highly talented + Highly motivated = Must be paid on Performance

Highly talented + Unmotivated = Mustn’t be paid on Performance

Untalented + Highly Motivated = Mustn’t be paid on Performance

Untalented + Unmotivated = Mustn’t be paid on Performance

Being an entrepreneur means you accept that your talent and work ethic are fundamental to your income. These two characteristics are the starting point in our business.

We hire someone based on their perceived talent, and we test their self-motivation from Day 1. Most promotions from entry level to team leader have more to do with motivation than anything else. In fact, most of our promotions work that way. The motivation and drive fill in as the talent is being developed in a new skill area (like sales, training, recruiting, public speaking …).

The pressure of commission can make things tricky, as the right people work extremely hard while their skill is being honed. This is where thinking like an entrepreneur helps. Entrepreneurs are always underpaid and overworked early for the right to be overpaid and underworked later. Our business works the same way.

The pro and con of salary vs. commission can be debated as an employee, but there is no debate for the entrepreneur.

Feedback and Accountability: Credit vs. Blame

This is an easy one to understand, but a difficult one to put into practice for would-be entrepreneurs breaking out of an employee upbringing.

Employees need credit to ensure they have a job. Credit for a good idea or a job well done helps during a year-end evaluation. It can be a major selling point when asking for a raise. Blame works the opposite. It can undue years of hard work or help you lose a key promotion. It is to be avoided at all costs. So it makes sense that constructive criticism brings up a defense system and accountability for mistakes is ducked.

Entrepreneurs need to act the opposite of an employee. Since nobody is looking out for the business more than an entrepreneur, he must be paranoid, looking for kinks in the business armor at all times. Credit is something to be distributed among employees as a motivator. Blame is something to be absorbed by the entrepreneur, processed and built upon to improve business. It is a much more valuable tool.

Besides, looking for credit slows things down. Your bottom line and business metrics make things crystal clear where credit belongs. Your job is to remove obstacles to allow business to prosper. If you’re not looking ahead for those obstacles, you usually find them the hard way.

It is important to have a mindset as an entrepreneur that if a problem arises, the first priority is fixing it. Worrying about whose fault it was can be dealt with later. Also, when examining a problem, if it is 5% your fault and 95% someone else’s, start with your portion. As an entrepreneur, you have to focus on what you can control always before focusing on what you can not control.

This can be difficult when a budding entrepreneur mistakes the path to his success. In an entrepreneurial environment, the numbers properly dole out kudos. The leader needs to focus on the holes in his business that restrict growth. The leader must also deflect credit to those he leads because he understands how much more important that credit is to the employee than the entrepreneur.

Hours: 9-5 vs. Whatever it takes to drive business

Why do you work? Think about this question for a minute. A lot of good answers but one stands out …

To get paid.

An employee works when he is told to work. He expects compensation for those hours. That is the fundamental contract between employer and employee. The employee is not typically expected to do extra without compensation and rightfully so. The employee is also not expected to profit if the company generates an extra $2 million in revenue.

An entrepreneur works whenever working positively impacts his business. And that positive impact may be seen tomorrow or 10 years down the road. And that doesn’t mean he’s getting paid for that time.

That is the short-term downside of being an entrepreneur when it comes to hours worked. It is a classic example of delayed gratification and putting in time now to fully own your time later. Because a very successful employee vs. even a moderately successful entrepreneur have opposite say in who controls their time.

A really successful employee, perhaps a CEO or CFO, must be at meetings he is told to be at and fly to meet a customer when he is told to fly to meet a customer. The most powerful CEO doesn’t own his time. Certainly, accomplishment and success can be fulfilled but true ownership of his time is not.

A small business owner absolutely owns his time and that responsibility is what protects that privilege. An entrepreneur must be responsible for his schedule. With only himself to ensure he’s spending time appropriately, a lot of room for mistakes is created. He must keep himself engaged in aspects of the business that drive revenue and prevent becoming involved in the areas that don’t.

This takes discipline. It takes understanding that doing what’s right for your business first will allow your business to take care of you.  

Vacations and sick days off are perfect examples. Most successful entrepreneurs have numerous stories about fighting through illnesses, personal losses, canceling vacations because it was the right move for business. When business was flourishing, those same sacrificing entrepreneurs took a week in Hawaii.

We get three great tests of our mentality toward time in our management training program:

1. Do you consistently do the right things when nobody else is watching?
2. Do you use your nights and weekends to grow or forget about your business?
3. Do you consider sick days, vacation days or holiday breaks as opportunities to separate yourself from employees or deserved time off?

Time is an investment, just like money. Time spent irresponsibly now nets no return later. Time invested wisely now creates a multitude of choices for your time later.

Risk: Loans and Sweat vs. Not having control

Many view the risks an entrepreneur takes as dangerous. Maybe they’ve gone to the bank and taken out a six- or seven-figure loan. Maybe they’re putting in tons of extra hours at night, on the weekend, and hoping to break through.

The employee, meanwhile, risks nothing, right?

Not at all.

The employee put his career eggs in one basket, hoping an employer will take care of him. So many loyal employees have been laid off or simply replaced by less costly and more recently educated workers. The risk they took with their career was huge. They relinquished career control and hoped good decisions were being made on their behalf.

Is that really a strategy of less risk than what the entrepreneur did? Doesn’t seem that way.

One of an entrepreneur’s risks comes by way of loans or perhaps their own savings. They take that risk based on their confidence in themselves, or an idea, maybe a product, or perhaps a combination of those.

In our business, the entrepreneurial risk isn’t financial, it’s sweat equity. With no financial risk, we invest time doing hard work and putting in long hours for a delayed return in the form of a thriving business. In some ways, the lack of capital investment is a negative for our business model. With nothing financially to lose, many find it easier to quit on themselves when times are tough.

If entrepreneurs risk less than employees, and our business model with coaches and proven success is much less riskier than normal entrepreneurs, then what is it that people find risky with our business?

It is the perceived notion of risk that prevents more people from taking the less-frequented entrepreneurial path.

The perceived risk of embarrassment if your company fails. The perceived risk of wasted time if your efforts don’t materialize. The perceived risk of rejection if others don’t like that you’re not following the traditional employee path.

The reality is our business is the surest option available if you have one entrepreneurial quality. You have to be ok with success or failure, winning or losing, good or bad decisions, riding on you. If not it actually makes sense to take the greatest risk of all and forfeit career control and be an employee.

Sacrifices: There is no option; you’ll be making sacrifices on both career paths

Good employees and good entrepreneurs both work hard. Both groups sacrifice a lot for what they hope is a great return. Neither path is easy.

As an entrepreneur, freedom is coveted. You get a taste of this early in our business the first few days you work with nobody looking over your shoulder. What do you do with this sudden freedom most employees never know?

Compensation is 100% about performance. If you are talented and work harder than the other guy, you make more money. If you want to make more money, nobody will tell you “no.” If you like the compensation further along in our business, nobody will slow you from reaching it sooner.

Credit goes to employees, entrepreneurs seek blame. It is vital to remember that there is no time to give yourself a pat on the back when you could be driving business in another area.

Hours are long either way. Forty hours a week for 40 years = 80,000 hours. Sixty hours a week for 20 years = 60,000 hours. An entrepreneur wants that extra 20,000 hours and views time as an investment.

Entrepreneurs risk quite a bit, but employees risk more. Their risk is that someone else will take care of them or that someone else will come through when a big decision is to be made.

What is important isn’t that you make the choice to be an entrepreneur over an employee. It’s that you understand there are different rules, different goals, different expectations, different risks and different mentalities on these two paths. It’s that you understand you can’t have both and neither comes without sacrifice.