If you’re facing a decision, whether to continue being an employee or starting your own new practice, that’s a tough one.
I should know.
I faced exactly that decision in late 2010, when I was laid off. But we’re jumping ahead here, so let’s start closer to the beginning…
I never planned or expected to start my own business. From childhood, it was clear I’d be a physicist. I got my MSc in theoretical high-energy physics, and then a PhD in experimental high-energy physics. Next, I did a post-doc developing particle detectors, followed by a research position in experimental cosmic-ray physics. I planned to become a tenured professor, teaching and researching how the universe works.
But life had other plans for me…
My academic career gradually veered into a dead end. I was overworked, underappreciated, underpaid, and not allowed to do the work I really wanted to do.
So, I handed in my resignation at the end of 2008, and moved to the corporate world, taking a job with a small engineering services company. Less than two years later, my employer decided they couldn’t market my skills and laid me off.
And that’s when I had to decide – do I look for a job at some other company, or start my own business? It took faith, courage, and grit, but with my wife’s support I decided to start my own consulting practice.
The first 6 months brought in a very round number of dollars – 0.
Then, I got my first gig, which petered out after a few weeks.
Then my second, which lasted 3 months.
Then a third…
By the time my first year in business was done, I’d billed over 1300 hours and brought in a lot more money than the 6-figure salary I’d lost.
The second year was even better, and since then there were a couple of leaner years (though still better than my last salary), and mostly great years.
Now, 11 years later, having opened two more successful solo businesses, I see the career setback that turned me into an “accidental entrepreneur” as the biggest opportunity I could have asked for.
Below are the 7 most attractive financial and freedom benefits I got from starting my solo businesses. But first, a few intriguing numbers about small businesses, and the smallest of those – solo businesses.
Small and Solo Businesses Are Important
According to the Small Business Administration, 99.9% of all US businesses, or 31.7 million, are small businesses! Of these, 81%, or 25.7 million, are solo businesses!
Small businesses account for 61 million employees – nearly half of all private-sector workers. And since 2000, nearly 2 in 3 new jobs were created by small businesses!
If over 30 million people felt their best path forward was to start a small business, they probably know something others haven’t thought of (or at least haven’t acted on)!
The 7 Most Attractive Benefits I Got from Starting My Own Businesses
I won’t sell you a bill of goods.
Starting my own business was scary, and as I mentioned above, the path to success wasn’t a “hockey stick,” but more of a roller coaster.
However, it brought me lots of very attractive benefits. Here are the top 7.
Benefit #1: Getting Paid for Actual Time Worked
When I worked as a university researcher, we were all expected to work long long hours, for not very much pay. My then supervisor would tell us, “Working nights and weekends is for your own benefit, so you can get your work done.” She’d add, “Weekends and holidays are for students and secretaries.”
If you’re a professional, you’re most likely what’s known as an “exempt employee.” That means you’re "exempt" from being paid for any overtime work you’re required to do. That was me back then.
Now, as a consultant, if a client wants me to work 80 hours in a week instead of 40, they’ll pay me double. That’s right. And if a client wants to pay for only 20 hours, that’s how many hours I’ll work for them.
None of that “work 90 hours and get paid for the same 40 hours” BS.
Benefit #2: Getting Compensated for (Nearly) All the Value I Create
When I worked for that engineering services company after leaving the university, I believe they billed my time at $120/hour. If I worked 1800 hours/year, that would translate to $216,000/year. My compensation including benefits was, shall we say, much lower.
The reason is obvious. If they couldn’t make a profit on my work, why should they employ me?!
Now, as a self-employed consultant, I capture nearly all of what NASA pays for my time (a small fraction goes to a prime contractor through which I subcontract).
Benefit #3: Great Tax Benefits
As an employee, even if I worked from home, bought a laptop and smartphone, drove to the office and back, etc., I couldn’t deduct any work expenses from my taxes.
Now, as the owner of my own business, I get to deduct expenses such as driving from my home office to client locations, equipment and supplies, legal and professional services, etc. Even better, since 2018 I can even deduct 20% of my qualified business income!
This means I can legally avoid paying income taxes on a big chunk of my profits.
Another related advantage is that with the higher income and the control of owning of my company, I can max out both the employee and employer side of a solo 401(k), letting me defer taxes on another large chunk of profits.
Benefit #4: Flexible Schedule
As an employee, I couldn’t simply notify my supervisor I’d be working from noon to 8 PM, or that I’d work 10 hours a day for 4 days a week and take Fridays off. My schedule was determined by “normal business hours” (except that as mentioned above, I actually had to work far more than those). This meant, e.g., that getting to my son’s high school varsity soccer games usually wasn’t possible.
When I wanted to take a vacation, I had to ask my supervisor who could approve my request or not. Or she could tell me that a week off was fine, but 3 weeks was out of the question.
Now, when I want to take time off, whether it’s a day, a week, or a month, I don’t need anyone’s approval. I just notify my client(s) that I’m taking that time off.
As a responsible and responsive contractor, I won’t do it without making sure nothing critical breaks in my absence. If needed, I’ll work longer hours before I leave so everything that’s on my plate is handled and handed off to the next person. Or I might work longer hours when I return, to catch up on whatever piled up in my absence (and did I mention yet that those longer hours will be paid in full?).
Benefit #5: Flexible Location
Before Covid, as an employee, if I wanted to work from home (or the beach) I needed my supervisor’s ok.
As a contractor, my clients can’t dictate my work location. If I choose, I can rent a beachfront villa and work from there. Of course, there are certain activities that require physical presence, but those are the exception rather than the rule.
With Covid, I’ve worked remotely for almost 20 months now, and expect to continue for at least another year. Once the pandemic is over, most employees will probably need to return to the office or possibly face significant pay cuts. I, on the other hand, will continue working remotely most of the time.
Benefit #6: Freedom to Choose Who I Work for and What I Work on
As an employee, when my supervisor wanted something done, she could simply notify me that I’m to do the work. When I worked for the engineering company, if they decided to bring in someone and insert him into the org chart above me, I had zero say in the matter (and yes, this actually happened to me). If they scored a project and needed me to do the work on it, guess what – I had to do it whether I like the work or not.
Now, if I don’t want to work for someone, I simply don’t.
If I take on a job and the client starts behaving like a jerk, I can fire him without losing my job.
If I don’t like a project, I don’t take it on.
As long as I’m good enough at what I do to have other paying work that I do want to do, my freedom in this is absolute.
Benefit #7: Freedom to Assign Work to Others
Related to the previous item, employees usually don’t get to take a part of work they’ve been assigned and get someone else to do it (if you’re a supervisor, you can and do assign work to your direct reports, but you can’t assign your own work to them, at least not if you want to stay a supervisor).
As a business owner, if I need something done and don’t want to do it myself, I can hire or contract someone else to do it for me.
I might choose to do it because I’m not expert at the task, or am not efficient at it, or simply don’t like doing it. Of course, I’m responsible to the client if the person I delegate to does a bad job. But if I choose the right person and oversee their work, I’m fine with that.
Sometimes it isn’t even client work. For example, I contracted a property management company to manage a residential property I lease out. This way, I don’t get called in the middle of the night if the renter’s toilet gets clogged, and don’t have to run to the courthouse if the rent is late.
The Bottom Line – It’s Good to Own Your Own Business, If You Have What It Takes
I never intended to start my own business, let alone 3 of them. I just wanted to do super-interesting research and teach.
But life had other ideas.
It’s been a wild 11 years (and counting). There were some downs between the ups, but overall it’s been a great journey and I’m happy as can be with how it’s turning out.
Starting my own businesses brought me multiple attractive benefits. If you’re considering doing the same, make sure you have marketable skills, enough resources to tide you over until you become profitable, and the “intestinal fortitude” to ride the roller-coaster without bailing out.
But if you have all that, it may be the best decision you’ll ever make.
This article was first published in the Baremetrics blog.
This article is intended for informational purposes only, and should not be considered financial, business, or legal advice. You should consult a relevant professional before making any major decisions.