I Want To Quit My Job And Start A Business. What Should I Do? Part 2

Owning a business for most means owning their life. Business ownership tops the wish list for many Americans, yet for many remains in the “one day” category. It’s an irresistible siren call with an element of romanticism.

Author: Frank Wazeter, Nov. 5, 2020

The unhappy employee spends their day dreaming of a life where they get to dictate the terms. Be the boss. Create their own vision. Yet, for many, the dream seems either just out of reach or harsh reality sets in when they start up for the first time as suddenly they’re faced with a whole new set of challenges.


In part 1, we covered why it might be a good idea to keep your day job. Entrepreneurship isn’t suited for everyone and it’s not a ‘cure everything’ solution. It won’t be the thing that magically makes you happy, if that’s what you’re looking for. 


However, being employed comes with a certain set of limitations that aren’t exactly advertised. 


  1. One entity essentially owns 100% of your income. This is an incredibly risky situation to be in because at any given moment, you’re at risk of losing your source of income without replacement. Lose the job (either due to economy, bad fit, performance or a thousand other possibilities) and you’re out for 100% of your revenue.

  2. Salaries don’t scale in pay well. Except for commission based sales positions, or special positions with performance kickers, salaries typically don’t reliably scale significantly year in and year out. On average, they keep up with inflation at best. In modern times, the most often used strategy to get a significant pay raise is to simply leave for a different company.

  3. Your benefits (security) are all tied up in one entity. Whatever benefit your employer provides, they fundamentally own. Plus, pensions are pretty much as rare as a vegan lion, so there isn’t exactly a retirement plan outside of a 401k provided.

  4. The bigger the company, the lower the loyalty. The key to large companies operating smoothly is that most positions are easily replaceable with another person. There are very few “irreplaceable” personnel in any given organization. It might be a part of Japanese culture where they’d rather the company go out of business than lay people off, but it simply isn’t the case for American culture. 

  5. If fitting into a bigger system where you don’t have tight control over direction and decisions is stressful, then working for someone else is likely to wear you down and burn you out. 


Debunking the “a job is safer than owning a business” myth.


The biggest reason people stay in their existing job, rather than starting a business is because of fear of failure in the new business. That the “job” is safer and more “secure” than owning a business. I disagree.


Let’s roll the clock back to 2008. The Great Recession is just getting started and fears centered around a total collapse of the world economy are in play. People are losing fortunes left and right and the government is forced to step in to stop the bleeding. 


A great friend of mine at the time had been working with a major corporation for some 30 years at that point. He was highly decorated, highly senior and the best worker you could imagine. Loyal, drank the company ‘kool aid,’ as he’d say and was responsible for the successful launch of many highly profitable projects. 


Yet, when the company was squeezed with the recession, despite being a global giant, he was laid off. Not by direct managers or people who knew him, but by a remote department somewhere looking at spreadsheets and calculating costs. 


30 years down the tube with a single pen stroke. Then, like many Americans, he was stuck for some months on the job hunt. He eventually got hired at a different great company, where he’s been ever since, and the original company even tried to hire him back, but in the end, he was expendable. Loyalty meant nothing.


2008, as it happens, was also the time when I first entered the full time job market. Great timing. It took nearly a year and a half to secure a position somewhere, and the salary wasn’t spectacular (although it sure felt like it was at the time!). Why did I aggressively pursue the job market? Because that’s what you were supposed to do after finishing university. 


That was the path, right? Get a college degree, get the job, be hard working and loyal, earn your way up and make bank. 


Except it never happened that way - for one company, I tripled sales at the division I was in charge of through digital marketing and web development. 2 ½ years in I was let go. The next job, I broke national sales records. 2 years in I was let go. The final job, broke sales records, got awards, went on the President’s club trips to Mexico. 


Guess what: 2 years in? Let go. 


I remember being shocked that that kept happening. And I wasn’t alone. Almost everyone else I knew had about a 1.5-2.5 year life span at whatever company they were with before either being let go, or being forced to pursue a job elsewhere for a better opportunity.


Don’t get me wrong, there had been a handful of people I knew who kept a single job for 6 or so years, and the older people I knew (who were more seasoned at the corporate game) seemed to keep jobs on average 5 years plus. But to me, and those I observed around me, the reality became that the idea of working for a single company your whole life, or only a handful of companies your whole life was no longer a part of the American business culture.


Loyalty is a fun buzz word to throw around, but here’s the thing: people’s life directions change. Company directions change. Positions and jobs that were good fits at one point in time can and do evolve to a point where they are simply no longer good fits.


Maybe it’s the economy. Maybe it’s the economics of the company itself. Maybe it’s simply a cultural shift or you just don’t jive as well with the team. It happens and it’s common. 


This all comes back to point #1. Your employer holds 100% or nearly 100% of your income. All relationships eventually come to an end. When that relationship comes to an end, you lose 100% of your income. 


And it’s guaranteed to happen: all relationships are finite. It might be 1 year, it might be 50 years, but they’re finite. Most often they’re somewhere around the 2-3 year mark. 


That means you always have to be ‘looking for the next job’ (which the most successful people who are employees that I know do), get your next job while you’re already employed by someone else, or you end up having to go through a 2-3 month period of no income (assuming it’s just a normal lay off, not broader economy reasons).


When you own a business, clients and customers will eventually leave you too. Except in those cases it’s only a percentage (ideally on the smaller side!) of your total income. 


Portfolio managers in the stock market or for your 401k distribute risk by being ‘diversified.’ Most often this is a fancy way of saying: you own more than one stock, or you own stocks in companies who own lots of stocks in other companies (called Exchange Traded Funds or ETFs / Mutual Funds). 


To the stock traders and portfolio managers out there, the single riskiest thing you can do is own a single stock with all your money. It’s called “single stock risk,” and it’s risky because your money is exclusively tied up in the whims of whatever happens to that company. They eliminate this risk by simply setting up different percentages in different stocks to protect against it.


Working for someone else is the exact same thing as “single stock risk,” owning a business is the same thing as having a “diversified portfolio.” 


Therefore, calling having a job “safer” or more “secure” than owning a business is false. It’s actually riskier. People are confusing “consistency of pay” with “risk.” If business is risky, then having a job IN THE BUSINESS is even riskier, because you are ‘expendable.’ 


And by expendable, I don’t mean that negatively, it’s reality. In my business, I’d hate to lose some of my prized team members. But if the worst happened, and for some reason it meant staying in business or having to let one go, then regrettably, I’d have to let one go. 

Salaries Simply Aren’t Scalable.


It sucks, but it’s true. The average US salary in 1991 was $20,923.84. In 2019, the average US salary was $51,916.27. So over a 28 year period, salaries increased by $30,992.43, which averages to about a $1,068.70 increase per year, or a 3.4% yearly increase. 


Sounds great, right? Forward progress! 


Except, once you account for inflation, you realize that if you translate the 1991 dollars into 2019 dollars, $20,923.84 in 1991 would actually be $39,275.60 in 2019. That means, wages only actually increased by $12,640.67 over 30 years. That’s a $435.88 per year increase on average.


That pathway is hardly a pathway for ‘getting rich.’ While it’s not exactly stagnant, it’s also not exactly growing either and only marginally over inflation. In fact, inflation went up $18,351.76 in the same time period, more than the actual realized gains of wage increases.


This is why a healthy retirement plan through a 401k type plan is such a necessary part of building wealth when you’re employed, without it, you simply can’t save enough to even keep up with inflation. 


Taxes Also Don’t Favor The Employed.


The biggest tax breaks benefit businesses. An employee usually has somewhere around 14 tax write-offs they can claim, typically with the mortgage on the house and dependents (children) being the biggest breaks available. The other tax breaks are circumstantial and harder to qualify for and are highly situation dependent. 


Meanwhile, business owners have thousands of tax breaks available to them to reduce taxable income. It makes sense too: typically the business is moving money around in the economy more than an individual.


A business has to buy equipment, invest in other services like marketing, advertising, sales, employing people and a whole litany of other legitimate expenses that move money in the economy. When that money moves in the economy, the government taxes it through other means. The government always gets its cut. 


In fact, half of your income tax is paid for by your employer. 


A great accountant is a business owners best friend. For the record, I am not an accountant and this isn’t tax advice. 


Business Credit Means Business Owners Have More Leverage


Another side of the income coin, once a business is established it is a wholly separate legal entity. The best way to think of it is when a corporation or LLC is set up, it’s a whole other person that exists on paper. It has rights, it has responsibilities and it even has its own version of a Social Security Number (called an Employer Identification Number or EIN). 


This means that a business can qualify for its own lines of credit, credit cards and even qualify for loans to own property, cars, just about anything. 


While initially, the owner’s credit is usually used as a kind of guarantee, some of the best lending programs are opened up exclusively to businesses. 


In the recent COVID stimulus package, each individual person received $1,200. Business owners received this like employed people did, but also received an additional $1,000 per employee when getting an EIDL (Economic Injury and Disaster Loan) and a very generous loan for cash flow purposes that came at interest rates between 1.5% and 3.5% over 30 years. Businesses could also qualify for the PPP loan program, which had to be used exclusively for payroll to keep people employed. 


Generally speaking, you can’t be fired or laid off from your own company.


Technically, as a corporation, you can be fired from your own company if the board of directors goes in a different direction. However, as a small business you usually are the board of directors and even in those larger companies, you still own your stock. 


This falls under the category of “you’re free to do what you want.” No worries about a middle manager somewhere firing you or being crossed off the list. You build your own world for better or worse. 


Defining Stress and Anxiety in Business Ownership


This is where you have to get real with yourself. What’s stressful for you? For me, it was stressful being required to be at work at a certain time. I felt stressed to sit in traffic and feel like I had to be 30-45 minutes early and work an hour late, otherwise my position would be at risk.


Sometimes there was a company cultural standpoint behind this that actually implied a requirement to arrive early and leave late. Other times it was just me and my personal anxieties that made me feel like I had to do these things. 


For me, it’s incredibly stressful to have a great idea or a direction or vision where I see the company could grow exponentially or be more efficient by changing something, but being unable to do so at best, or stonewalled from fear of a manager looking bad at worst. 


It was stressful to have to play the office politics game. To do things simply because they’d look good or at least not make me look bad. The idea of more job interviews was stressful. 

Counter to that, for me it’s not stressful at all to deal with accounting, administration, sales, marketing, and the 17 other hats a business owner wears, because I have ownership over the decisions for better or worse. 


Ironically, in some form or fashion, you still have to deal with those things as a business owner. Instead of job interviews, you’re doing sales. Instead of office politics, you’re doing politics between business owners and relationship building. I’ll still wake up at around 5 in the morning to start my day and work long hours.


The difference is it’s “my thing” and I’m free to pursue my own directions in all those aspects. It’s not a requirement per se, but it’s still a pretty good idea to be on the ball with these things. 


If you find stress in taking ownership of these decisions and direction, then it’s probably going to be 1000x more stressful for you as a business owner. If it isn’t and you find comfort in them, then you’ll do fine as an entrepreneur.


You’ve just got to be honest with what actually stresses you out. 


You’ve got to be very comfortable with failure.


As an employee, I had a huge perfectionistic streak. Things had to be absolutely perfect before I could present them or use them or deploy the project. Whether that was a process or a product being developed or a website or a sales pitch. 


It had to be perfect because otherwise I had a genuine fear of it not being accepted, and then, logic would go, it would put my job, and my income, at risk. 


As a business owner, perfection simply doesn’t exist. Failure is expected, and it’s okay. Life and business is iterative (meaning small changes over time). A product idea doesn’t fly? That’s fine. Let’s make it better.


Sales are down? Great, how can we improve it. We learned that didn’t work, so how do we make it better?


Process isn’t connecting with people? Okay, where are they getting lost so we can adjust.


The website isn’t perfect? No problem, it’s an ever-evolving project. Make adjustments and move.


Strategy didn’t work? Great, try something else.


Success comes from taking consistent action, making adjustments and not letting the setbacks affect you. When you own the show, you’re liberated from the fear of failure that directly stems from an instinctual fear of losing your income if things don’t go well.

As the business owner, the worst thing that can happen is you don’t land the client, or the client fires you. Difference is, it’s not 100% of your income on the line. Ironically, when you’re liberated from this fear, in the end you come up with more innovative, better quality products and services.


That said, this is typically where people go “if you keep failing, you’ll go out of business.” There’s truth to that, if you never evolve and learn from the mistakes, you’re certainly destined to go out of business. Businesses who didn’t adapt to the internet and went out of business when COVID hit certainly learned that lesson the hard way.


But a big part of being a business owner is being innovative enough to be able to pivot, evolve and change dynamically enough to prevent that from happening. The idea here isn’t to fear the failure, but to be able to embrace it and grow.


Business Ownership is All About Growth.


Growth financially, yes. But growth personally is the biggest benefit. You’ve always got to be personally growing, learning, improving, evolving. There’s excitement to that. The market you operate in basically demands that you continually evolve and adapt. 


The people who can’t evolve and adapt go out of business.


The ones that are able to evolve and adapt become market leaders and reap the rewards. 


It’s as simple as that. 


Conclusion - Is Business Ownership Right For You?


In the end, business ownership is a way of life that most anyone can benefit from, but not everyone is suitable for. Everyone has the talent to do it. Knowledge isn’t a prerequisite (some of the most successful business owners aren’t the smartest). Being able to grow and embrace change is the biggest skillset you need to prosper.


  1. In the beginning, income from business will be less than as a salaried employee. Over time as your business grows and expands and you evolve, business owner income rapidly outpaces employees. 

  2. Business ownership means more responsibility. You own the show. It’s on you. If you find that empowering, then you’ll do well. If that’s stressful, probably not so much.

  3. Know what truly stresses you. For me, it’s infinitely more stressful working for someone else and operating out of a primal fear for my job than it is to spend all my time working on my business in everything from accounting to marketing. 


You’ve got to decide which one are you more comfortable with: freedom and the responsibility it comes with, mixed with some uncertainty and needing to be a bit of a jack of all trades or consistent certain pay, focus on one or two areas, and being a ‘part of’ someone else’s machine.


Whichever you’re most comfortable with, that’s where you should be. Either way works as long as you make it work for you and get the maximum enjoyment out of life. It’s too damn short otherwise.