Being your boss -vs- working for the man

LSum-Ting Wong on 27/09/2020 - 12:14

I’m seeking the esteemed knowledge of fellow ozbargainers regarding self-employment versus being an employee.

Do you work for yourself and have your own business? What risks did you have to take to get there? Has it been worth it? Or did you try it and ended up failing?

For roughly 15 years I’ve been involved in a small manufacturing business as an employee with minority ownership. It’s been a tumultuous business relationship and is soon to come to a bitter end, but it looks like I’ll come away from it with my mortgage paid off and totally debt free.

So I’m thinking of what my next step is. I’m heading into my mid 40’s and feel like time is running out for me to take the leap into being my own boss. Do I start my own business and start climbing my second mountain or do I just get another job and be an employee for the rest of my working life?

Starting my own business and leveraging my industry experience would require registering a new Pty Ltd company, borrowing $200k (secured against my house) to purchase machinery and equipment (~3k monthly repayments), leasing a small factory at ~$25k to $30k p.a., plus other overheads/COGS to be covered before turning a profit.

Pros of starting my own business:

  • implement and profit from my own ideas
  • higher earnings potential
  • enjoy deeper relationship with customers and suppliers
  • potential to grow the business
  • retire early if it all goes well
  • kids/wife could work in the business (possible con)

Cons:

  • high financial risk
  • long term commitment
  • always thinking about the business, can’t switch off
  • stress
  • will set me back 10 years if I fail

Pros of being just an employee:

  • none/little risk
  • can leave work troubles at the door
  • take holidays without worry
  • can change jobs if I get bored

Cons:

  • job insecurity / getting to the age where ageism comes into play
  • little potential to increase earnings unless I run a side hustle after hours
  • have to tow the line/perform my designated role rather than call the shots

Would very much appreciate any experience or advice that can be shared.

tl;dr is it better to be your own boss (considering the risks involved) or better to be an employee?

Education & Work

Comments

  • letslogin on 27/09/2020 - 12:26
    +5

    Seek financial advisement first (what follows is not advice, just my opinion).

    1. Start here, and inspire yourself with real stories of entrepreneurs who have all sat in your position at some stage: https://www.npr.org/podcasts/510313/how-i-built-this
    2. Paying off your house at 40yo sounds great, but may not be the best way to leverage your investment portfolio. It's an appreciating asset with an incredibly small interest amount. You could earn far more ROI by leveraging equity into higher interest-generating options (shares, IPO's, start up companies, or even …. your own business…)
    3. Running a business should be driven by a goal. Are you a lifestyle business owner? Are you a build-then-sell type business owner? Are you a political, morally or ethically motivated business owner? Why you go into business changes how you run the business.

    I run a small medical clinic. I am a physiotherapist by trade. I work in and on the business each day. I would say I am a lifestyle business owner… but one day I'll change it up I think and start something else (really fire up my entrepreneurial engine). If you plan to employ people, prepare to spend majority of your business life figuring out how to manage people, rather than the product of your business… people are tricky, but they can also be the reason you turn up to work every day with a smile on your face. I love my team (although they can be shits).

    Consider the above and when ready go forth, and conquer.

    • Sum-Ting Wong on 27/09/2020 - 13:55

      Running a business should be driven by a goal.

      Very true.

      If you plan to employ people, prepare to spend majority of your business life figuring out how to manage people

      Also true. I’ve spent 10 years managing a team of machine operators, hiring and firing and sometimes it’s like running a kindergarten dealing with all the different personalities, life dramas and conflicts.

  • MrHyde on 27/09/2020 - 12:29
    +5

    I started my own consulting business about 5 years ago and it is the best move I ever made. We are now upto 10 employees and it can get stressful at times; especially wondering where I'll get the money to pay the staff (especially this year with Covid).

    The pros have been overall less stress, more enjoyment at work, can run the business how I see fit (may not be the best way; but I sleep better at night), can take breaks and holidays whenever I want, can mostly choose my own customers.

    The cons - income varies - but still good enough that even in the bad times, I am making more than I did as an employee. However, I could probably make more as a contractor - but I'm looking at the bigger picture - the company is making quite a bit and I could maybe sell out in a few years.

    The hardest part about running your own business is the sales and marketing. If you dont have customers already lined up; spend a lot of time working out how you'll get the customers. Making the product is the easy bit.

    • [Deactivated] on 27/09/2020 - 12:38
      +2

      The hardest part about running your own business is the sales and marketing.

      He/she who runs the client networking owns the business.

      • GourmetFoodie on 27/09/2020 - 14:46

        yup. great point.
        sales and marketing is the hardest. you need a pipeline. if you don't have a pipeline you are banging up against a brick wall.

  • [Deactivated] on 27/09/2020 - 12:46

    Depends on your industry.

    You sound like you're in manufacturing. If you're a people person and you're willing to work for practically nothing for the first 2-3 years until you can secure a strong client base, you can do well.

    Worst thing I see is people demanding top dollar because of their ego and end up running the business into the ground.

    Once you have a solid workload, you start discharging work that doesn't pay well and you up your price. Then you squeeze your suppliers for that extra margin. You pretty much burn the candle at both ends to your advantage.

    Start with insufficient work and your overheads will cripple you.

  • spacebanana on 27/09/2020 - 13:02

    Maybe consider buying someone elses business? Can be a great way to get into an industry with all the assets you may need and should be creating revenue from day one.
    At the moment there are probably some good deals going on people who want to get out!

    • Sum-Ting Wong on 27/09/2020 - 13:21
      +5

      Funnily enough I had the option to buy out the existing business that I’m a minority owner of, however I decided against it as it would be just too big a financial leap. While it is very profitable, I don’t think it’s sustainable. Most of the profit comes from one large client. Too much of the machinery is old, rent and overheads are high, etc. Lacking good systems and procedures, too dependent on knowledgeable employees who could leave.

      I think it’s better to start small, grow slowly and manage the risk.

      • Kangal on 27/09/2020 - 18:21

        Look into getting a partner.
        Depending on how wise you are, and how intelligent your partner is: you can end up reducing the risk by x3 factor, and even increase your income potential. That's what I would consider for someone in your position.

        • MontyMacaw on 28/09/2020 - 10:39

          Partners help ease the risk. Better sometimes to be partners in several businesses than the owner of one.

  • mbck on 27/09/2020 - 13:12

    Do you actually have the clientele?

    If you have to start from scratch network/clientele wise, then considering it is manufacturing, be prepared to make losses for a few years.

    If you have the clientele, then are you sure they will be able to go to your side? If you can, then that will reduce your risk.

    • Sum-Ting Wong on 27/09/2020 - 13:41

      I have good relationships with many customers, however this industry can be very territorial (some customers tend to use a supplier in their area, especially if they work from home or are weekend warriors) and I would probably start up in a different area a bit further away from them where rent is lower.

      However there is strong potential to pickup new trade customers (kitchen / cabinetmaking industry) as well as DIY customers so with good marketing, SEO, and good old pounding the pavement visiting potential trade customers, I am confident I could bring in the work.

      • mbck on 27/09/2020 - 14:38

        It sounds like you have the desire. You know what needs to happen in order for you to be successful. And you have a goal in mind.

        This is probably your chance to do it. If you don't do it now, you'll be an employee for a few more years and when you do change jobs, it'll be tougher to start at that time.

        The last question is, what's the potential during this coronavirus period? Ie, Is the demand going to be affected?

        If not, then good luck, all the best!!

  • pharkurnell on 27/09/2020 - 13:24
    +1

    Lots of variables.. what state/area your in, what industry, competition - local and overseas

    Personally - Im quite happy these days to leave the worrying to someone else.

    Also holidays become a thing of the past.

    Few friends have had franchises (mowing, fencing etc) and they havent ended well at all..

  • [Deactivated] on 27/09/2020 - 13:34

    Still working for the man at the end of the day ;)

  • DrRalph on 27/09/2020 - 14:06
    +1

    "Pros of being just an employee:

    • can leave work troubles at the door"

    I wish!

  • GourmetFoodie on 27/09/2020 - 14:15
    +3

    It is f-ing hard mate. Everyone holds the dream of being their own boss. There is a reason 95% of small business fail and out of the 5% that survive, a lot of them are still only giving the owners modest returns. You have to have grit, determination like no other, incredible business acumen, be able to be a jack of all trades, and a lot of courage and emotional strength to hold it all together. Your family WILL suffer if you want to be successful. You WILL be working weekends. You WON'T get many (if any) holidays. It is no path to easy street. Only once you achieve genuine scale, can you actually afford to outsource enough so that you can focus on the actual leadership parts and less on the operational.

    All that being said, if you're in a strong financial position to take the risk and you think you can deal with the above, I'd do it. But I would definitely not secure any loans against your primary residence. You will hate yourself for doing it when the shit hits the fan…and the shit will hit the fan more than once I can guarantee you. Also I would never ever start a business again without a business partner. Big mistake to try to do it on your own. Split the risk, split the workload, have someone who will have your back. But finding the right business partner is very very hard.

  • SelfMade on 27/09/2020 - 15:10
    +2

    Being self employed is much better in my opinion based on my experience.

    However I didn't start off with the amount of risk/capital you are starting with…you have a lot more upfront risk…and I started when I was younger so less to lose.

    I started with around $5k, I could have put in substantially more however I still was employed while I started my side hustle so could build it up slowly…which now I am doing full time after a few years of grinding away with both my job and business.

    It is now earning me double what my salary did and with much more freedom as well AND with a lot more upside than a job.

    However it is very clearly not for most people, so many might have a specific skill they're good at ie. baking, but would fail miserably running a bakery as they lack the financial acumen required to run a business successfully, amongst the many skills and know how needed.

    It also nearly came crashing down (I thought) when all the restrictions started coming in due to COVID. As my business is mostly online I am still operating but still not as good as it could be…however these are really unique times and probably shouldn't be part of your assessment as it's very unlikely to happen again in our lifetimes.

    I also agree with some of the others around it being difficult to switch off and having more stress (at times).

    I look back though and feel so much more fulfilled on what I've been able to achieve compared to just having a job. I am now in control of my own future and that of my family's and can give them a life I would very unlikely have been able to if I stayed the course in a job…despite having decent upside in the job too as it was in finance.

    It also really depends on the industry, you've got to always keep an eye out on industry trends, taxi vs uber, hotel vs airbnb etc

    The other thing, with a business you can sell it at generally 2 to 3x multiple of net profit or a lot more if it's a large business…can't do that with a job. That's a big upside for me.

    Also a lot more tax benefits with business compared to being an employee, as there should be.

    One thing for me was regret, I didn't want to live with the regret of not giving it a crack when I had the chance. I am very glad I did.

    Good luck!

  • askme69 on 27/09/2020 - 15:52
    +3

    Gave up a Government for life job i had for 15 years. Cushy, no responaibility, absolute bludge and 100k per year.

    I am now a cleaner, own business and i turn down work or quote extremely high so people won't accept.

    Do it all again in a heartbeat.

    • popsiee on 27/09/2020 - 17:45

      With all due respect with the current employment market surely you could leverage to accommodate expansion .

      • askme69 on 27/09/2020 - 22:24
        +1

        I'm about work life balance. I don't need stress of employees etc. I have no overheads to speak of and i owe no money to anyone.

        I am FREE.

  • sockpuppy on 27/09/2020 - 17:26

    I run my own small business and have to say it is liberating not to be an employee. That being said my business is doing what I had been doing for 20 plus years, could start with a few good customers could grow from there.
    My only point is that you need to understand the business you are starting, its good when you say you can leverage your existing business skills, can you take a few good customers from your current business or do you have non-compete?. Really focus on what you are good at, and get help with the stuff you are not.

  • Third_Gear on 27/09/2020 - 17:38

    Business owner 10+ Years. My companies have taken me all over the world and resulted in many amazing adventures I never thought possible. Went from selling a few motorbike parts online to owning a few companies in various industries.

    I don’t think your age is an issue and if anything it gives you an edge as you are far less likely to make as many mistakes. Age and wisdom and all that.

    I say go for it - the freedom that comes with doing what you want when you want is so gratifying.

  • Candour on 28/09/2020 - 09:34

    unless you are going to be a high flyer in big business, the jobs may not be there at your age. start small and set up a trust so that you can minimise tax. get all family involved in it. a business is better than working for the man.
    ' borrowing $200k (secured against my house) to purchase machinery and equipment (~3k monthly repayments), leasing a small factory at ~$25k to $30k p.a., plus other overheads/COGS to be covered before turning a profit.'
    get a lease where you can to minimise cash flow. if you can be sure of your revenue and your income in a recession world, then go for it.
    a friend left a $200K job as a lawyer and went into practice netting $70000 a year. he said the tax benefits and the freedom from management conflicts were great. He works after 72, so that is a great advantage.

  • TheBilly on 28/09/2020 - 10:03

    You can still become very wealthy working for somebody else once you are debt free. Because one pro not considered is that $2,000-$3,000 a month you were originally putting towards a mortgage repayment, can be invested 100% for capital growth in whatever investment you are comfortable doing or understand. So you are effectively experiencing no change to your lifestyle and at the same time are potentially investing $2,000 a month.

  • MontyMacaw on 28/09/2020 - 10:36

    This is a very true of somewhat sarcastic statement: 70% of people want their own business and the other 30% want out of theirs. I’ve been on both sides many times and know many others as well. Be careful what you wish for. Starting your own business is a very labour and time intensive thing to do. It is better to buy an existing truly successful business. If you think you can make somebody else’s failed enterprise into a winner think again. The odds are always highly stacked against it. So go back and rethink what your capabilities are both physically and mentally. Then consider your personal life and how that could be affected because a personal life will be the first casualty. If all of that is ok then go for it.

  • OzHunterNSW on 28/09/2020 - 10:42
    -4

    Being your own boss… doing what? Relaxing on the beach, strolls in the park, reading the newspaper whenever you want. Putting your feet up on the coffee table any time you want?

    If you are referring to a money making venture, and if you have to ask complete strangers, then contemplating being your own boss is doomed to fail.

    Go to TAFE. Enrol in a "BUSINESS COURSE".

    There is a far lot more to "being your own boss" than you will ever comprehend.

    You either work for wages, and plot along, or take the gamble, be your own boss, and make more money, or lose everything.

  • Candour on 28/09/2020 - 11:04
    +1

    the world and the US and europe and EU and UK and Canada may be in recession till 2022. we may be badly affeted. i funded a son to 250K overseas for a mechanic's shop and it all got burned. keep your options open. economic fragility in oz is worse than the other countries I mentioned. it may be hard to get ongoing credit for the next few years from banks.

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