Should You Be An Entrepreneur?

Years ago, when I was taking my daily commute to work, my mind would often wander off and sometimes, I would see advertisements on my phone that look like this:

Live the life of your dreams, be an entrepreneur, be your own boss

This makes me ponder, “Should I quit my job and be an entrepreneur?” Of course, we have heard about the benefits of being an entrepreneur and working for yourselves.

Time Freedom. Being your own boss. Control your life.

All sound great but I was really concerned about the risk. As an investor, my worldview is always about “Risk vs Reward”

To keep my life as simple as it can be, I have two rules about Risk vs Reward.

1. A risk is only worth taking if the expected reward is SIGNIFICANTLY higher.
2. Never take a risk that will DESTROY me, no matter how low the probability maybe.

Rule No. 1

So in the example of entrepreneurship, what are the risks?

• Low odds of success – We have heard of successful entrepreneurs like Jeff Bezos and Mark Zuckerberg. These people made billions from their empire and many want to be like them. Successful and Free! However, do you know the odds of success for entrepreneurs? Most startup end up in tears within the first few years. Of course, you may be an upcoming “Jeff Bezos” but do you really have what it takes? Only you have the answer to that question, and for goodness, be honest about it. Just remember that all the “failed” entrepreneurs who come before you are likely very talented and hardworking individuals too. Even then, they failed. Frankly, I was scared stiff at seeing such low odds.

Behind every successful business, there is a trail of 99 failures.

Pete

• Stresses of running your own business – Most people would not have had the experience of running a business. The common mistake is under-estimating the amount of work and capital required. This can cause a high level of stress, especially if you are financially stretched. Unless you are exposed to the stresses of running a business since young, you will likely be overwhelmed and it could ruin your personal life too.
• Income Uncertainty – When running your own business, it is common for the business owner to draw very little or no salary at all, just to keep the business afloat. This could work if you are fresh from college but if you have a family or other financial commitment, this will be a serious issue.
• Bad for Family Planning – With little financial certainty, it is hard for entrepreneurs to have a proper family planning. Questions like, “Should I have a kid?”, will turn into “Can I afford a kid?”. Entrepreneurs often have to sacrifice a huge part of their family planning to ensure the success of the business.

What are the rewards?

• Flexible working hours – If you call the shots in your business, you can choose when to work and when to rest. However, take note that most entrepreneurs work much harder than employees because IT IS THEIR BUSINESS! Their livelihood depends on it.
• Riches from the business – Indeed, I have seen people selling their business for millions. However, I have also seen many entrepreneurs with nothing to show for after slogging for many years.

No doubt, having a successful business of your own is definitely attractive to the ego and potentially financially lucrative. However, it does seem to take a lot of risk before getting to the pot of gold.

So based on my Rule No. 1, I do not see the rewards of entrepreneurship as significantly higher than the risk.

Rule No. 2

What if my entrepreneurship journey fails? Will it destroy me?

In my opinion, it does sound like a risk of ruin . Entrepreneurship usually requires large amount of money capital and time capital. In investing terms, it is similar to putting all your eggs in one basket. If the basket is ironclad, it may be worth it. But in entrepreneurship, your chances of failure are so high that putting all your eggs in one basket is just not the wisest choice.

Given my current situation of having a family with kid, I truly believe the cost of failure is too high. A failed venture will destroy most of what I have built over the years.

After all, there must be a reason why there are only so few successful entrepreneurs. Frankly, I don’t like my odds. To me, investing seems like a better option while I continue to receive regular income through employment and dividends.

In reality, I am surrounded with peers which have build their fortunes through investing. I think my chances of success in investing is higher than taking a stab in entrepreneurship.

And that’s why, I did not venture into entrepreneurship after leaving my previous job, instead devoted my time to investing. To me, the risk of entrepreneurship is just too high.

Hope this is helpful to those of you who are considering to venture into entrepreneurship. Remember, the grass is always greener on the other side.

What do you think? Are you an entrepreneur? Do you agree with my assessment? Let me know what you think, I would love to hear from all angles.