Last Resort Entrepreneurship

This article first attempts to de-glamorize entrepreneurship and then lays out a path for advancement, the terminus of which would be entrepreneurship. I also cover a reason side projects are necessities for top performers.

Starting a business is expensive and risky. What's little appreciated is that even successful entrepreneurs often don't make that much money. Indeed estimates entrepreneurs earn around 66k on average, while CareerExplorer gives a more pessimistic average of around 43k.

Small businesses are considered more stable and profitable than ordinary entrepreneurs. While there is large overlap, small businesses may include partnerships and even small corporations, which allow some economies of scale and risk sharing compared to a lone entrepreneur. According to Fundera, in 2018 the average small business owner made $72k per year, and over 86% of small business owners made less than $100k.

Entrepreneurship is clearly more lucrative than some jobs, but it's also clearly less lucrative than what I would call a good job. I consider IT jobs good jobs. Software engineering, digital design, product management, and professional Agile roles are some examples of the IT jobs I have in mind. I firmly believe anyone of average or better intelligence, regardless of their training, background, personality, and so on, can find a good fit in one or more of these roles.

I think business analyst would probably be the lowest paying among the good jobs I just outlined. Average base salary is about $68k in the US according to Glassdoor. This is a junior level position and within 5 years a candidate may be considered a Senior Business Analyst making an average base salary, before bonus and so on, of over $80k.

As you can see, good jobs pay as much or more than owning a small business without the headache and risk. Don't get me started on software engineering, which easily doubles the small business owner's average salary with no risk and awesome perks. Small business owner job satisfaction, despite all the perks of being your own boss, isn't any different than software engineer job satisfaction. It's also much easier to land a good job than it is to own a small business that lasts even a few years.

So getting a good job is a better investment than becoming an entrepreneur, but we all know about the limitations of a typical job and some of us have an entrepreneurial itch. Plus, there is eventually a ceiling to corporate success. So what should we do? I say the answer is side projects and intrapreneurship.

As a software engineer, side projects are not optional for top performers. They are required. Corporations are risk averse and you will not be able to play with the latest experimental technologies in most corporate environments, with some exceptions. It is relatively easier to dedicate some of your after work time and develop a side project. If it takes off into a money making product, that's awesome! It's entrepreneurship without the risk, because your main job is your main job and this is a side project not the source of your life's stability. Your skills will transfer into your corporate life and you will have a leg up on your peers because most engineers don't do this. Side projects can and should include open source work.

Intrapreneurship allows you to develop certain entrepreneurial skills with less risk. If you are able to shift a major policy at work you will also be improving your status within the organization. Just make sure to keep your intrapreneurial endeavors as a second-order interest after your main job. Social skills and networks are key to both the entrepreneur and the intrapreneur, but perhaps even more key to the intrapreneur. Don't burn bridges with your coworkers.

Now that you have skilled up and influenced up the industry you might be a Director at a major S&P 100 company. You will actually know how top businesses do things and you already have several side projects going on which could plausibly be turned into businesses. You will likely have opportunities to get secondary paid work or partner or advise other small companies. You see? If you are going to start your own business, take the plunge from the top, with network, with knowledge, because it is the only way to go higher. Not from the vantage point of someone who simply didn't want to have a boss.

You could also take a middle-road approach as a consultant. Consultants can optionally work as corp-to-corp, 1099, or otherwise technically operate as their own company. Be careful this is a financial win for you, though, it often appears like a win on the surface but net taxes, benefits, risk, growth opportunities, and so on, may pan out to be a loss. My preferred strategy at the moment is to work W2 and have real estate outside of my main job in order to get some of the tax benefits around having a business.