Saturday, September 30, 2006

Work For a Company? Or Work For Yourself?

Most of us at one point or another have thought about whether it is better to work for a company or to start your own business and work for yourself.

Both directions have their pros and cons, of course, and the grass always looks greener on the other side of the fence.

If you work for a company, you surrender a lot of control over your life over to other people, or to a system. If the economy is bad, or if the company is not doing well, they may decide to lay you off. If there are politics at work, and there always are, you have to fight that and if you lose they might fire you. You have to prove yourself - sometimes over and over if you have a change of bosses. There are so many factors in the workplace situation that affect you but you have no control over them.
When you are young, you seem too young for them to want to take a chance on you because, although you have energy and youth - you have no experience. But when you become older, they don't want you anymore. You are now experienced, but you don't have as much energy and youth as the younger ones.
On the other hand, the money is steady. The pay is usually pretty good. I remember a friend that I worked with at American Express. He left and went out on his own and we had a chat a couple of years later and he told me something I never forgot. He said that when you leave the corporate environment and go out on your own - it's really, really hard to replace that corporate-level income on the street. The package of salary, pension, benefits, etc. that a big company can put together is hard to match when you are self-employed. Also, there are skill standards you can educate and train yourself for, and certify and qualify yourself for to build credentials to get the position.
Someone else spends all the money and takes all the risks to set it all up. They pay millions of dollars for advertising, and marketing, and product development, and they spend years maybe, building the company up. One customer at a time, one deal at a time. They learned by trial and error and solving a million problems exactly how to build that company to what it is today. They pay all the taxes, and all the fees, and buy all the equipment. They build the building, and buy all the furniture. They make sure they have bought enough parking spaces in the parking lot. They pay for the power and lights, and heating and air conditioning. You just step into a ready-made company. Their risk is HUGE. Your risk is minimal. The worst that can happen to you is that you lose your job and then you just try and find another one. You might be up and running again in just a few weeks.

Then you have the option of working for yourself. Starting your own business. Let's take a look at that. The negatives are obvious. You pay all the costs, you assume all the risks. You have no established infrastructure, you have to buy it or build it - and it is frighteningly expensive! You pay all the taxes and fees. You might have employees and suddenly you have tremendous responsibility for them. Their lives and their families lives are in your hands - and most of the time you might feel like you don't know what you're doing. It is a daunting responsibility - if you think you can handle it easily, you might not have a firm grasp on the exact contours of the problem.
You have to find a product or service, or set of products and services that will allow you a competitive position that survives in the current and future market conditions. You have to decide whether to build that basic business premise from scratch or buy it from another company. You have to invest money over and over again when it seems like you may never get your money back. You have to have courage and faith, when it seems like nothing is going to work, and it seems hopeless - because you know that every successful business out there had a rough patch like this when they were getting started - many of them continue to have rough patches even as mature companies. Ford has been around a few years now, but they are certainly having a rough time - again. And how about those airlines? When was the last time they made a profit? How long would you continue to sink money, time, and energy into your company with no light at the end of the tunnel? How far will you take it into debt before just calling it quits? When does it no longer make sense to just keep pedaling?
When it's a mature business, everyone seems to rely upon YOU and your efforts to hold them up. To keep the whole machine running.
And when it's a startup, where do you get the money you need to start the company? Do you risk your house and borrow against that knowing that the reason banks don't loan money to start up businesses is because over 85% of them fail in the first year or two? Or do you seek out venture capitalists to help you fund it? But then they take an equity ownership position in the company and suddenly it's not your company anymore. In that case it's like you just have a job again because you have to report to them and please them. It seems more like their company now and you just work there. So what to do?
You wanted your own company because you didn't want to have a boss anymore - but when you own the company suddenly you find that you have hundreds of bosses. Thousands of bosses, because every customer is your boss, and your stockholders or investors are your bosses, and you have to answer to all of them. And what happens if your employees become unionized and use that power of collective bargaining to bankrupt you - or suck all the money out of the business that it is no longer viable or worth it to keep running? Or what if a new competitor enters the neighborhood, or the market? If you are a consulting company and you need to charge $92/hour to keep the company alive, but suddenly the Indian consulting companies enter the picture and they only charge $18/hour, what do you do? How do you compete with that? How much time, effort and money of what you have left should you spend trying?

And then there is the whole issue of lawsuits. Every major company has to deal with lawsuits. The larger ones have a permanent staff of lawyers that deal with the steady stream of lawsuits. There is no way to find this out for sure, but I would guess that probably half the lawsuits a company gets involved with have the potential of crippling the company or even causing it to go bankrupt.

I work for a small company of only about 30 people, and it's only been in business for 5 years so far, and yet pretty much every year there has been the threat of lawsuits from somebody somewhere. Suppliers sue customers, customers sue suppliers, employees sue employers, etc. Corporate lawyers are making a killing out there keeping the courts busy, or just punching each other using the bankbooks of their corporate clients.
Sometimes it is a competitor who is suing you to try to put you out of business because they cannot compete in any other more legitimate ways. Sometimes one company sues the other for what they claim to be "unfair practices" when they tried to compete over a deal. Often, it is employee-related. It might be wrongful dismissal, or sexual harrassment, or discimination accusations, or it might be another company suing you because you hired one or two of their employees away and they claim that caused them damage (we were sued for that last year and we won - but we could have easily been bankrupted.) Or one company sues another for copyright infringement, or because they say the second company stole their ideas when they hired a key staff member, or they claim another company stole their customer base when they hired their key salesrep who brought his rolodex with him - the list goes on.

There are a thousand different types of lawsuits that are constantly in rotation in the corporate world. Even for small companies. And you have to be aware of that before you step into the position of starting your own company up. There are many possible ways for lawsuits to actually shut the business down if you lose, from crippling it financially, to restricting trade in the marketplace or restricting the sales of products that you invested heavily in, or losing specific key customers for various unfair reasons, etc. But even when you win the suit you still have the ongoing legal fees for dealing with them as they come up. In this litigous society, it has become just part of the cost of doing business. But most business owners don't see it coming. They had no idea it was so pervasive, and so expensive. I dare say that if many of them knew the legal liabities involved in starting and running their own business they never would have started it up in the first place. For them, the risks, and the headaches and the stress and demands on them are just not worth it.

When you simply take a job and have a career within a large company, you don't have to worry about all that. Someone else takes all the financial and legal risks. You just show up for work, do your job, and collect your pay and live your life. Simple.

On the other hand, if you are working for someone else, unless you are a senior executive in a very large organization, you will probably never become rich - or even financially independent, because no one can afford to run a business like that. They cannot pay all the employees enough to become wealthy.
My father used to have a cabin cruiser style boat, and when I went to visit him at the marina, he took me around and showed me all the other boats and told me who owned each boat, and one thing struck me loud and clear about that. Every single boat was owned by a person that owned his own business. No one there was an employee of any company. Not one. These were not massive million-dollar yachts or anything. But they were boats from say 30 ft to 55 foot. They would have been worth from say $50,000 to perhaps $500,000 for one or two of the largest.
It seems that people who work as employees just usually don't make enough money to be able to support themselves with house, car, insurance, utilities, putting kids through college, dental bills medical bills, and all the expenses that come up, AND still be able to afford a nice boat on top of all that. There are always exceptions, of course, and people can always make sacrifices, but for the most part, chances are that the average person that owns a boat of more than 30 feet is probably a business owner. Obviously, that is where the real money is.
And along with that lifestyle goes larger houses, nice vacations once or twice a year, excellent dining, the better schools for the kids, and most importantly - financial security and financial independence. No worries for later. A comfortable life and safe, stable retirement.

So how about you? Do you like the idea of a nice safe job where the company takes care of all the costs and risks, but you have a boss? Or do you want your own business, with all the risks stresses and rewards that go along with that?

What do you think about it?


At 10/02/2006 10:27 AM, Blogger Igor said...


In this "new flat world" to work (ie to produce valuable goods and services) increasingly means to be exploited.

One should live on % (on %) on one's capital. Or, to run/join a financial service business - nice A/C office, gorgeous secretary, and all work is virtual reality business game - just press buttons on your PC...

Someone somewhere toils in a factory, on a farm, ... poor bastards, they should have chosen better... Oh, look, last month figures show increase in WIP provision - by 0.5% ! Second time this year ! They are getting lazy in Shanghai, eh? Ok, let's move the factory to Bangladesh. Where is the phone number of our management consultants ? (nice guys, ties and impeccable suits, not like those ... brrrr ... dirty workers or loony engineers .... ) Aaaaah!... I am really good, it was smart management decision, now let's just authorise order to sell short ... click-click ... it was another productive day in the office.

To be in investing business, in other words. As the world is being divided into those who toil and those who invest - choose your side wisely.

as jobs leave America's shores...



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