Evaluating the Pros and Cons of Being an Entrepreneur vs. an Employee

When deciding on your career path and whether to start your own business or work for someone else, there are many areas that may make you lean one way rather than the other. An employee is awarded a guaranteed income, which involves much less risk of earning an income when compared to an entrepreneur. On the other hand, an entrepreneur has the time, availability and opportunities that expand their income possibilities.

While there are many other advantages to starting a business – whether that be forming an LLC via a formations company or becoming a sole proprietor, financial security is dependent upon various external factors, many of which are outside the entrepreneur’s control, which means there are disadvantages as well. So let’s examine some of the pros and cons of being an entrepreneur vs. an employee.

Charismatic entrepreneur

Advantages of Entrepreneurship

Being a business owner has many advantages. Not only does it empower owners with more control over their income, it also grants them the authority to make decisions that employees are unable to.

1. Gain the Ability to Earn from Business Profits

When we make a career advancement, we expect that our income increases as well. Entrepreneurship provides the opportunity to profit directly from the success of the business. And with no limitations such as salary caps or small wage increases every one to two years, entrepreneurs have direct control over the increase of their income. And as the business expands, so does the entrepreneurs income – as it is directly from the profitability of the business.

2. Have a Flexible Work Schedule

The independence of entrepreneurship allows a business owner to create their own working schedule. Without a supervisor or manager to report to, entrepreneurs can work whenever it is convenient for them. They are not required to report to an office at a specified time, nor are they punished for arriving late or taking a day off. They are empowered to structure the business around their personal life in whatever way fits them well.

3. Have Complete Independence and Authority

Entrepreneurs have the power and authority to make every decision concerning their business. The entrepreneur becomes the employer who hires employees to work underneath them. The entrepreneur establishes protocols, processes, guidelines and regulations concerning the operation of the business.

4. Multiple Career Advancement Opportunities

Being an entrepreneur empowers people to fulfill their dreams and employ their passion in their career. Entrepreneurs have a large amount of control within the business sector of the global economy. Entrepreneurial growth depends on the choice of business and correlation with market demand for their product or service. It also offers the opportunity to develop a person’s skillset while designing their own vision.

Happy office worker

Advantages of Employment

Having stable employment offers advantages that make entrepreneurship seem super risky, which is why it then becomes intimidating. A job offers financial security by way of a steady and consistent income. It also limits the scope of an employee’s duties so that they are not forced to make the growth of the business a priority and can enjoy a normal life.

1. Enjoy a Fixed Work Schedule

One of the greatest benefits of being an employee is having an established schedule that is predictable. Because additional hours outside of the set schedule are not necessary, employees have the ability to structure the personal life around the required work hours. They don’t have to worry about doing more than their assigned tasks – unless there’s the odd overtime, but hey, you get paid extra for that.

2. Benefit from Limited Responsibilities within Your Profession

Employees are assigned a role that includes a list of tasks and responsibilities. The responsibilities are limited to those tasks and do not include any other duties unless they are delegated to them. Their growth as a professional depends on their performance concerning those particular duties.

3. Earn a Guaranteed Income

On either a weekly, biweekly or monthly schedule, employees receive a paycheck, no matter what. If an employee wants to increase the amount of their check, they can commit to working additional hours on top of their current schedule. But committing to those hours in the future is not mandatory, so employees can choose whether or not to work extra hours.

Thoughtful young entrepreneur

Disadvantages of Entrepreneurship

Being an entrepreneur is not without its drawbacks. When managing a business, the owner not only has to oversee the entire operation, but is ultimately responsible for its success – or failure. That means often working long hours – well beyond a normal or consistent schedule – in order to ensure that they are on top of every aspect of the business.

1. Risks Involved

Entrepreneurship offers no guarantees. There are looming risks involving their career, financial stability, possible failures, and even loss of investments. And, those risks can’t just be chalked up to bad planning. Sometimes there is a lack of demand for the product or service. In other cases, competition has capitalized on a sizeable amount of market share that makes it difficult to get into the market. In either case, the risks faced by business owners are plentiful and consequential.

2. Owners Experience Unstable and Unpredictable Income

As the employer, entrepreneurs are not guaranteed a paycheck. In fact, they have to pay their employees, expenses, overhead, and taxes before they can even think about paying themselves – if there is anything left over. Even more, because things don’t always go as planned, there may be time periods in which income is not being generated and the employer and maybe even some of the employees don’t get paid.

3. Long Working Hours Will Be Required

Until the business is able to operate on its own without consistent executive leadership, entrepreneurs will need to be involved in all of the intricate details of the business and responsibility for its success. This can be stressful and exhausting for a business owner, as it will require long hours, late nights, early mornings, and weekends. Depending on how well the business captures market demand, this level of commitment can stretch beyond the initial stage of development and continue during its expansion.

Employee in his cubicle

Disadvantages of Employment

While it may be easier to just work for someone else and not deal with so much responsibility, being an employee has its downsides too. Employees do not get to share in on the profits from their work. They are dependent upon their boss for employment and income. Because they are not in charge, their job could be terminated at any time – without warning. Until then, their source of income is non-existent, which means the employee’s livelihood is in the control of their boss, not themselves.

1. Lack of Job Security

When evaluating the pros and cons of being an entrepreneur vs. an employee, the lack of job security is one of the biggest disadvantages for employees. There are definitely no guarantees when working as an employee for a company, big or small. Employee’s job security is not dependent upon the success of the business, or their peers. In fact, job security is not even dependent upon their own performance. For absolutely no reason, an employee can be made redundant. Without an employment contract, employees not only lack job security, but also a guarantee of a long-lasting career within the industry.

2. Limited Scope to Develop

The scope that an employee has to explore and develop their knowledge and skills is limited in the workplace. Aside from the tasks assigned, they rarely have opportunities to learn new skills and develop additional professional skills. Even if opportunities present themselves to acquire new skills, they will most likely have a linear connection to the employee’s current position. So while they will be enhancing their skills, they will not be gaining any knowledge skills that would make them competent at performing new and unrelated tasks.

3. Limited Income

Employees are limited to their income as negotiated with their employer. Employers may offer benefits, bonuses and incremental pay raises as incentives, but employees are limited to those benefits. They lack access to additional sources of income. Increasing the income requires changing positions and working towards promotions.

All in all, weighing the pros and cons of being an entrepreneur vs. an employee can help you decide what is most important to you when choosing your path. If you prefer to have a consistent income and regular schedule while having a minimum amount of responsibility in your career, then being an employee will work best for you. But if you prefer to be in control of all aspects of the business to that you are able to make all of the decisions about procedures and processes where you work, then entrepreneurship is more ideal.

Regardless of whether you choose entrepreneurship or employment, nothing is more enjoyable than working in a field that fulfills your passions. So if you prefer to be employed but have a chance to start a business in the field you are passionate about, it may be well worth the challenges and sacrifices in order to file your company registration paperwork and pursue your dreams.