Are you on the fence about starting your own business? Perhaps you are happy about being a salary earner.
There are pros and cons as well as risks associated with starting a business. But there are also risks associated with NOT starting a business.
It is more risky not to start your own business than to start one. Why would that be?
1. Is This A Good Investment Opportunity?
Evaluate the following investment opportunity:
The investment requires almost all your time. If all goes well, you may earn a return equal to the inflation rate, maybe 1% or 2% above inflation.
The risk you take is that you may lose that in a single day for reasons that you have no control over. In this investment, there is a cap on the upside, but the downside is unlimited.
This does not sound like a good investment deal, does it?
Well, would you be surprised to learn that millions do this every day when they go to work for someone else?
As an employee, you may lose your job and income at any moment, without warning and without being at fault. And you only receive increases equal to or just above the inflation rate, year after year.
I’m not against employment and the world needs people who prefer this type of income generation and are prepared to take this risk. The question is rather, are you happy to earn your income this way and take this risk.
Having a job may be risky.
Being a salary earner, your income is capped on the upside.
The downside for a salary earner is unlimited as they may lose their job and income at the drop of a hat.
2. Survey Results From The IRS
In an Internal Revenue Service (IRS) report of January 2015 about ‘The 400 Individual Income Tax Returns Reporting the Largest Adjusted Gross Incomes Each Year for the years 1992-2012’, the income statistics show that the income of people on the list average $335.7 million in 2012.
When analyzing the numbers, it becomes evident that in that year the income of the 400 highest earners in the United States came from the following sources:
- Salaries 7.5 %
- Interest 4.4 %
- Dividends 16.2 %
- Partnerships and corporations 13.7 %
- Capital gains 56.9 %
About 7.5% of the Top 400 earners received salaries, 4.4% received interest, 16.2% dividends, 13.7% received income from partnerships and corporations, and 56.9% through capital gains.
This breakdown shows that huge wealth does not come from employment by earning a salary, low-risk income investments such as cash and bonds receiving interest, or investments in shares on the stock exchange that pay dividends only.
Yes, there is no question you may earn a comfortable living doing this – about 30% of the top 400 income earners did. So, I’m not against that or disputing it. I did it myself for almost 40 years.
The results show that having a business, which means sharing in profits and capital gains, is where the big financial gains and wealth come from for roughly 70% of the top 400 income earners.
It is also true that wealthy people invest their profits from business ventures also in stocks and bonds and other investment vehicles to create more passive income.
To become wealthy and enjoy freedom, you have to look at more than just earning a salary.
- In the 2012 IRS report, the minority of the Top 400 Income Earners receive salaries.
- The bulk of Top 400 Income Earners have a business. These high-income earners use their income to create passive income.
3. You Become Wealthy By Using Leverage
Becoming wealthy comes from investing in your business education and in leveraging.
The dictionary tells us to leverage is using a lever to exert force on another object. Think about pole vaulting in the Olympic games. There is no fancy equipment. Just speed, a catapult, and the determination to succeed.
This is how leverage works in business and your personal life. You are using your existing resources to expand and multiply to produce new resources.
First of all, you leverage yourself and what you have in terms of knowledge, skills, money, and time to produce new resources.
Secondly, you leverage the knowledge, skills, money, and time of others by building teams, systems, and by taking calculated risks to produce even more new resources.
Perhaps you are already a professional person and would prefer to invest in your own business. Maybe you just do not want to work for a boss anymore and want to start your own business. It is also possible that you simply want to increase your wealth by playing the game more intensely by starting your own business.
Whatever your reasons may be, understand that you only become wealthy by using leverage to produce new resources.
- Leverage your knowledge, skills, money, and time fully by starting a business.
- Start to leverage the knowledge, skills, money, and time of others by building teams and systems in your own business.
4. Additional Benefits Of Being An Entrepreneur
There are more benefits to being an entrepreneur than only financial gains, provided you do it correctly. Most entrepreneurs feel wealthy not only financially but also emotionally. Often they have found their purpose and are living their dream.
I like to say they have found the secret of being a co-creator. As co-creators, they are not only creating their lives but also help others create theirs. They sparkle with excitement when they talk about what they do.
But not every entrepreneur is beaming with excitement. There is a darker side also to being an entrepreneur that many people don’t want to talk about.
It’s like people seeing a man riding a lion and thinking 'What a brave guy’. And the guy is thinking, 'How the hell did I get on this beast and how do I keep myself from getting eaten?’
Your mindset and emotional intelligence are critical for success as an entrepreneur. Just as for employees, the downside for entrepreneurs can be unlimited. You may go bankrupt if you do it wrong. But the crucial difference is that the upside for entrepreneurs can be unlimited both financially and emotionally IF you do it correctly.
Entrepreneurs doing it the right way sparkle with excitement.
The downside for entrepreneurs can be unlimited as they may go bankrupt. But the upside is unlimited both financially and emotionally.
There is no reason why the life of an entrepreneur can’t be yours. You can start your own online business. This does not need to be big. It can be your hobby that you are stepping up on but doing part-time or it can be something bigger. Just start small and grow.
Nothing is limiting you apart from you and what you believe is possible. Take a chance and back yourself. Live life on your terms and experience the feeling of true empowerment by controlling your destiny. The best way to forecast your future is by creating your future.
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