Bloomberg Opinion — American workplace culture often puts entrepreneurship on a pedestal. For many, building a successful business so they can be their own boss is the ultimate career achievement. Blame it on “Shark Tank”.
Well, not quite. The fixation on owning and creating something makes sense given our nation’s immigrant fabric and general ethos that sacrifice and hard work will determine your future. Of course, nostalgia for the American Dream ignores the systemic barriers that exist.
It seems that the idealization of self-employment has only intensified during the pandemic. The most striking content on social networks shows former employees of companies who have abandoned the routine for their passion projects. The self-proclaimed business gurus are screaming that you too can quit working for this man. Not surprisingly, 45% of Gen Zers say they are very or very likely to one day start their own business, according to a 2021 Gen Z segmentation study by Ernst & Young LLP.
But before you even consider giving your two weeks notice to jump into your own boss’ life, it’s important to identify what’s bothering you about your current work situation. Will being your own boss really solve your underlying tension? Remember that employees still have a lot of influence and can get concessions on the things that make freelancing so attractive. For example, if you’re looking for the flexibility of working from home, that’s something more employers are willing to negotiate.
When I was 27, I decided to become my own boss after only five years of working as a traditional employee. As a generally risk-averse individual, it took me several years (along with building up a substantial emergency savings fund) to convince me to bet on myself. A big part of deciding to be your own boss and creating success and stability comes down to knowing yourself. Frankly, it’s not as glamorous as the internet and “Shark Tank” led you to believe.
How do you deal with uncertainty and stress? Transitioning often means never knowing exactly how much you’ll earn each year, which can make it difficult to invest for growth or develop a personal financial plan. Do you have the financial resources, time, patience, and management skills to outsource and train someone, or are you more of a lone cowboy, which could stifle growth? Have you been slowly working on your dreams as a side business that has proven to be profitable and is now taking a chance after already doing a beta test? Or are you jumping with no minimum viable product?
But perhaps the biggest consideration for traditional employees: is it okay for you to give up the benefits of being an employee? Yes, it can be an attempt to work for a company, but there are definitely tradeoffs.
Let’s start with the obvious. As a traditional employee, you receive a fixed salary, unless you work on commission. Most people with traditional jobs receive regular paychecks which make it easier to budget and develop a financial plan. It is easier to access credit and loans, especially a mortgage or a car loan. Full-time employment often includes benefits such as health insurance, employer-sponsored retirement accounts, paid vacations, and maternity or paternity leave (or a disability plan that can subsidize maternity leave). maternity or paternity). In addition, you are likely to have access to a computer when your computer breaks down and a human resources department to contact if you have questions about benefits. You may even have access to an administrative assistant if you climb high enough on the corporate ladder.
Maybe only some of these benefits apply to you, but let’s talk about taxes. Working with one job makes filing taxes easier than running your own business, especially with the dozens of potential clients sending you a 1099 tax form. Self-employed people pay self-employment tax. The self-employed tax rate is 15.3% in 2022; 12.4% goes to social security and 2.9% to health insurance. When you have a traditional job, the employer pays part of what is due to Social Security and Medicare.
Let’s just look at social security. A person with a job generally pays a tax of 6.2% and his employer pays the remaining 6.2%. I have paid five times more than any previous employer because in the last seven years I have been responsible for all of 12.4% and earn much more than as a traditional employee . Sure, you can deduct the employer’s share of your income tax, but it’s still an added cost of being your own boss.
Along with the obvious workplace and payroll benefits, there are also relational and emotional benefits to being part of a workplace, such as mentoring. Entrepreneurs can, and certainly should, find mentors, but it often takes a lot more effort. It can be even harder if you don’t live in a city or town with access to networking groups, events, or even a support system for other entrepreneurs.
Isolation is another aspect that is rarely discussed and rarely thought about when moving away from the traditional office environment. Being your own boss can mean long hours and many days of work with no real human interaction. Depending on your personality type, this could be a dream situation or a horror show.
Personally, I don’t regret having made the decision to work alone. However, there are many times when I stress over my career trajectory without benefiting from a more linear path laid out. There are times when I miss happy hours with co-workers or silly conversations in the kitchen at the office. There are times when I wish I didn’t have to deal with all the elements of running my own business with what seems like a much higher risk if I stumble.
While this may all sound like a piece of propaganda for Corporate America, it’s not meant to completely deter the next generation of bosses from taking up their desks and logging out of Slack. Rather, it is a request for you to sit down with your motivation and do the math on the true cost of moving to a country with so few social safety nets. The cost of funding your own health insurance alone (especially if you’re over 30) could be a huge financial burden when starting your business.
There are many days when I am deeply grateful for the flexibility that being my own boss gives me. But there are others where I just get exhausted from the endless to-do list and realize that success or failure rests entirely on my shoulders. If I neglect myself for a few days, I will not charge. On the other hand, I hardly have to endure unnecessary meetings anymore.
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