My friend Jun Loayza pushed his girlfriend to be an entrepreneur and came up against resistance. Not everyone is cut out to go solo, nor should they. In the tight knit blogging and Brazen Careerist community, you see quite a few that have gone out on their own. The appeal is very tempting at first: work your own hours, blur work/life, be your own boss, travel the world, create a 4 hour work week, ditch the cubical, etc. However, when reality kicks in, here are a few things that don’t sound so appealing:
- Setting up corporation paperwork, filing company officers, creating shares, board of directors, registration.
- Building an accounting system to track transactions, and hiring an accounting or CPA to validate the system for tax reporting or to seek funding from venture capitalists.
- Payroll, if you plan on hiring people, doing payroll (the boss gets paid last), COBRA, unemployment insurance, benefits.
- Personal liability if you’re not incorporated, and professional liability if the company gets sued.
- Professional insurance, the company may get sued.
- Personal insurance, no more health benefits, and ouch, it’s expensive to get your own.
If you take a base salary of say $50,000, add in all the benefits assuming 30% gives you a total of $65,000. Then add in 20% overhead giving you $78,000. Unless you can make well above that amount as an independent business owner, you’ve basically bought yourself a job, with all the risk.
What do you think? Is going solo all that it’s cut out to be? In my next post, I’ll highlight some of the success factors to being an intrapreneur.
{ 2 comments… read them below or add one }
There are a lot of things involved with starting a business that people do tend to forget. Payroll, incorporation, and health insurance (if necessary) can all become a headache.
Where did you get your 30% and 20% for your numbers?
I think it's all about time-value of money. If you're working 60 hours week and making 75K, I think you'd be way better off working 20 hour weeks and making 40K.
What do you think?
- Jun
.-= Jun Loayza´s last blog ..Remember your first time? =-.
For the figurative illustration, I used soft assumptions on a typical burden rate and a relatively moderate overhead rate. In your time-value analysis, it'd be great to work part time and earn $40k. However, I think you're going for more of the "lifestyle design" approach and reducing hours in exchange for more free time. Ultimately, it depends on your life goals.
My next post will do a comparison on entrepreneurs vs. intrapreneurs.