Does it pay to be an entrepreneur?
A quick Google search of ‘ what is the average entrepreneur salary ‘ indicates that the average “salary” of an entrepreneur varies by state and industry but nets out somewhere around $175K/year. Not too shabby but I’d say that most of us would find that a bit hard to believe.
I’m not too sure what an entrepreneur salary actually is (more on that later), but with the likes of entrepreneur superstars like Mark Zuckerberg, Evan Spiegel and Elon Musk in the headlines everyday and the absurd net worth they have accrued as a result of their entrepreneurial pursuits, it’s no wonder that people dream of one day making their millions as entrepreneurs.
But, really, how much do entrepreneurs make?
… and I’m not talking about those entrepreneurs who grace the cover of Forbes or Rolling Stone. I’m talking about the nose to the grindstone, hustling entrepreneurs who are building day in and day out. These are entrepreneurs who would balk at the idea of an “entrepreneur salary” – the money they make is hardly a salary as they have to scrap for every penny of it. But, for the sake of an apples to apples comparison between the 9 to 5 and entrepreneurship, let’s use “salary” to mean the money you make from your efforts.
The internet seems to think that being an entrepreneur is pretty grand financially. How many articles have you read about folks who quit their 9 to 5 and now make 6 figures plus as a result of their new business? My guess, is a lot. The internet loves those stories! On the other hand, how many articles have you read that chronicle someone becoming an entrepreneur only to suffer financially and ultimately realize they aren’t going to be able to cut it. Probably not a whole lot.
There is a lot of buzz around leaving your 9 to 5, living the life of your dreams and controlling your own destiny. Given that and the sense of general optimism around it’s viability, why do most people not actually make the jump?
Why do most people stay within the confines of their corporate endeavors?
It seems that people simply can’t resist the income stability that a corporate job offers. It’s why a lot of people my age (28) are currently working their way through their MBAs right now and the hopeful $200K job offers that await them. It seems they are convinced that true entrepreneurial success is only reserved for a select few – the Zucks and Musks of the world – or that the stability of a steady paycheck outweighs the huge potential success of entrepreneurship.
It seems to be that, as Forbes put it… an offer letter in hand (or a steady job) is worth two prototypes and a Google Apps slide deck in the bush.
But it’s not actually true! An entrepreneur’s salary is actually more than the average.
According to a study from the Institute for the Study of Labor, entrepreneur incomes tend to be higher than their corporate counterparts. I skipped over all the statistical measures around medians, educations, demographics, etc., but this study seems to shout in the face of those who say that a corporate 9 to 5 provides income security and comfort therein. Check out the study… it makes a lot of great points about the current state of entrepreneurial performance and success vs. that of wage employees.
Ok, so we’ve concluded that, contrary to popular belief, the average entrepreneur actually makes more than the average salaried employee in corporate America.
I started the article with the idea of simply proving this point but I think this study proves more than that and reinforces what I’ve discovered over the years. Wages and salaries mean nothing. Money is earned and given to those who have developed needed skills. It is earned by those who fill a market need and who do it better than anyone else. So, clearly, entrepreneurs are onto something.
Instead of asking yourself if an entrepreneur salary is better than a corporate one or visa versa, I think the better question is this…
What does being an entrepreneur offer you that your day job doesn’t?
Escape the market saturation of the 9 to 5 world…
The market (usually) pays you what you are worth – or at least what your worth is perceived to be. With that being said, the corporate 9 to 5 world is saturated! It is filled with workers with overlapping roles, extreme competition and arbitrary rating and rankings systems that rewards skills and performance in even more capricious ways. It’s often tough to standout and accrue what your talent should actually pay you.
What does being an entrepreneur offer you in this respect? It offers you the freedom and ability to escape market saturation and set your own standard of evaluation. More on that to follow.
Increase your skillset much FASTER…
By escaping corporate confines, you remove a perceived market cap from your net worth, but more importantly you remove the imposed ceiling that is structurally and bureaucratically imposed on your ability to improve your skillset and see it in action in market. The study I referenced above backs this thinking up by saying that traditional employees are confined by the boundaries of corporate structure and are only able to develop in areas that they are assigned and as opportunities present themselves.
Entrepreneurs, on the other hand, are able to bypass these windows of opportunity by creating their own environments to thrive within. They are able to play to their strengths that allow them to succeed as entrepreneurs. As a result, these skills increase exponentially, much faster and their market value increases along side of this growth.
Essentially, entrepreneurs are able to remove all the corporate crap that slows down personal and skill progressions.
Get income stability…
Yes, a 9 to 5 offers a steady paycheck. There is no denying that. It offers benefits, the ability to rise up through the ranks and the ability to accrue increasing networth along the way.
But, as the study points out, while it might seem that you are simply being valued based on how long you have been in the industry or operating in a certain role, what you’re actually being paid for is your skillset and the increased value that comes along with its development over the years. Why are MBA holders paid more than non-MBAers? It’s because they have fast tracked their skillset over a narrow amount of time and are then back in-market putting that improved skillset to use.
The faster you can progress your chosen skillset, the more stability you will accrue.
The fastest way to accrue stability is through the development of skills and entrepreneurship provides the fast paced, sink or swim environment in which to do it.
Do something different…
Simply put, and not to get too philosophical, but being an entrepreneur introduces change into the world. I’m not saying you can’t create massive impact in the world through a corporate endeavor, but I’m saying it’s often much slower moving and more profit-driven. Entrepreneurship is all about creating something new and introducing change as a result. Yes, it is profit-driven but dramatic change often brings about great new influences in the world. This is great for your personal self-development but also for the world at large. Just take a look at what Elon Musk is doing and tell me that entrepreneurship is not changing the world.
If entrepreneurship is not right for you, that is 100% ok. Don’t discard it’s values and turn your back on it entirely. Most fast moving and innovative companies embrace the idea of intrapreneurship because its values are the same as those of traditional entrepreneurs. They embrace what makes entrepreneurs effective – they create environments for them to excel within and focus on improving skillsets that allow them to be most effective in creating new and innovative systems in the world.