Entrepreneurship vs traditional employment: Which is the right path for you?

Being the boss is a dream for many of us, particularly when we think we have a great idea that could be turned into a business venture.

This is how many entrepreneurs start out. Famous self-made business owners include Richard Branson, owner of the Virgin Group; Oprah Winfrey who set up her own production company, Harpo Productions, to launch the hugely successful Oprah Winfrey Show; and Elon Musk of Tesla, SpaceX and Twitter (now X) fame.

Although most successful entrepreneurs aren’t looking for stardom, they do have the ambition and determination to turn their idea into a successful business. If you’re considering starting a business yourself, you may want to explore if you have what it takes, and what it might mean for your financial security in the short and long term.  

Have you got an entrepreneurial mindset?

Before you take the plunge into starting your own business, it’s worth asking yourself a few questions:

What is your risk tolerance?

As a business owner, you’ll need to be able to deal with uncertainty and taking financial risks, particularly in the early stages.

Are you passionate about your idea?

This strong emotional involvement can help you stay motivated and drive you through the ups and downs you may experience when starting up a new business.

How resilient are you?

Every new business faces unforeseen challenges. How do you react in difficult situations? Can you keep calm and carry on?

Do you thrive on solving problems?

Are you good at identifying problems and coming up with innovative solutions? Entrepreneurs need to be quick to find creative solutions to unexpected issues if their business is to succeed.

Are you self-disciplined?

Entrepreneurs are full of bright ideas but turning them into a successful business takes self-discipline. You might be the boss, but you’ll also be doing a lot of the hands-on stuff too. You need to be able to keep things on track and moving forward, developing a strong business plan and being clear on your mission and vision.

What are the practicalities of being a new business owner?

Many of us think of ourselves as being entrepreneurial but there are points in your life and career when a regular paycheck and job security might seem more important than following your dreams.

Successful entrepreneurs should consider the following:

• Do you have the financial resources to support yourself in the absence of a steady income, while your business gets off the ground? 
• Do you have a support network of business people and advisors who can provide guidance and encouragement when you need it?
• Is there a niche for your product or service? Have you done your market research and validated your business idea, identified your target audience and weighed up the competition? 
• Do you have the necessary skills and experience, or know where to acquire them to be successful?

 

Pros and cons of entrepreneurship vs traditional employment

There are pros and cons to being your own boss and taking on the risk of a business by yourself, or in a small team. Here are a few of the pros and cons of traditional employment and entrepreneurship:

Traditional employment

Pros:

Stable income

Knowing how much you’ll earn each month is a big plus if you have significant monthly outgoings like rent or a mortgage to pay. If you’re freelance or running your own business, there are times when steady paychecks might be in short supply.

Employee benefits

As an employee, the salary line may seem modest compared to the attractive earning potential of running your own business. But don’t forget that for many employees there are benefits like pension contributions and sickness pay that don’t come with being self-employed. Other perks like health insurance and salary sacrifice schemes for childcare and vehicles are also available from some companies.

Training and professional development

Depending what stage you’re at in your career, it could be beneficial for your professional development to work within an established organisation that provides ongoing training and mentorship. This could prepare you for the next step into entrepreneurship.

Job security

Working in an established organisation can provide more job security, compared to working freelance or working in a startup. However, any business could end up at risk, and you could experience layoffs or redundancy.

Work-life balance

Traditional jobs often have more predictable working hours that can facilitate a better work-life balance and give you more time for your personal life.

More structured environment

Having clear roles and responsibilities in a large organisation can provide a more structured environment that suits many people and allows them to focus on specific tasks.

Cons:

Limited earning potential

Within an organisation, you’ll be employed within a particular salary band that will limit your earning potential, although promotion could be a way to increase your salary.

Lack of flexibility

You’ll be guided by the businesses mission and values and have less control over how and when you work, and what you work on.

Limited personal and professional growth

You might feel stifled by the speed at which you can progress through an organisation.

Job security

This can be a positive or a negative depending on your mindset.

Entrepreneurship

Pros:

Job satisfaction

Being an entrepreneur allows you to follow your dreams and turn great ideas into reality.

Being your own boss

You’ll be able to develop the business, work to your own schedule and make your own decisions. Although sometimes it’ll feel like this takes every waking hour and there are lots of external stakeholders who you are having to consider.

Innovating and problem solving

If you’ve taken the step into entrepreneurship, the chances are, you’ll be doing what comes naturally.

Control over work schedule

You’ll be the boss so you can decide where your priorities lie. But to make a success of your new business, you may find yourself working long hours.

Earning potential

The sky’s the limit (theoretically!).

Cons:

Lack of financial security

You may not be able to take a salary during the first few months of establishing your small business, until sales pick up. This can be a showstopper for many people, although you may have a financial backer, or a redundancy payment from a previous role that can give you the financial buffer you need.

Little job security

You’ll have to keep your foot on the pedal to ensure the business is a success, because if it fails, you may be out of a job. If you have any retirement plans, you’ll want to consider paying into a personal pension.

Stress

The challenges of running your own business and the responsibilities and financial uncertainties that come with it, can be stressful.

 

Are you keen to run your own business?

If you want to be your own boss and you have lots of ideas about how to improve or change existing processes, you might be ready to start up your own company. But you’ll need to learn and adapt as you go and seek advice and mentorship wherever you can. 

You may decide to take more gentle steps and start by creating a side-hustle that allows you to develop your business without leaving full-time employment.

Whatever path you choose, one of the first steps could be to study at university to enhance your skill set, generate new business ideas, and develop your entrepreneurship.