But That’s Not My Job: the Benefits of Owning Your Own Business

Dec 16, 2010

Any small business can fail.

A small business that has been in existence for more than five years has a sizable advantage over a business that you start yourself if you can afford to purchase it.

Most people can’t.

In lieu of that route there are ways to start your own business that don’t require large outlays of cash and there is (probably) considerable cash already in your budget that you could use to start your business.

It’s surprising how little money one needs to get by on, but in order to reach a blissful state like this, one must be willing to reduce waste and expense. This does not mean you must sacrifice basic pleasures to change your lifestyle to a cost-cutting one.

Here are many things you could do without — that could be put toward purchasing/building that dream you have.

I want to say something here. I’ve heard some criticism that a series like this doesn’t really belong on ERE – that it’s better suited toward job seekers.

I applaud ERE for going with my temerity on this one. My answer to that is there are many, many recruiters thinking about change. Leaving one profession for another isn’t a bad thing; it may just be what’s calling you at this time.

I received an email after the first installment of this series that asked:

I would also be interested in knowing how one is supposed to work for themselves. It just doesn’t seem practical if you need benefits and all else, if you don’t necessarily have the money to open your sports bar (etc.), if you aren’t an entrepreneur, if you’re not in the right profession.

Working for one’s self is not for everyone. However, today’s challenges are demanding it from some of us.

You may be one of these and not sure about how to take this step.

Something like a sports bar is very capital-intensive and involves licensing authorities and many other factors that complicate it and make it probably not the best choice for a novice entrepreneur.

Believe it or not, it’s very difficult to make money in the restaurant business.

If it’s your first love, I say go with it but don’t say you weren’t warned.

My advice to you about what to do is to do something that you know more than a little something about that you enjoy doing.

Do something that makes your toe tap.

It’s just like finding a job. What are you suited to do and what do you enjoy doing?

If someone is paying you to do it now, there’s a pretty good chance there’s opportunity for you to make money at it going it alone.

You just have to figure it out.

Let me address the issue of benefits. The federal mandate about health insurance still seems to be up in the air, so let me address what you can do as an individual to obtain health benefits for your family because I know that’s probably one of the main reasons you work for someone else to begin with.

You can purchase it.

The United States tax code encourages entrepreneurship. If you’re self-employed, pay for your own health insurance premiums, and not eligible to participate in a plan through your spouse’s employer, you can deduct all of your health, dental, and long-term care insurance premiums for yourself and your spouse and dependents.

Now that we have that one put to bed, what else stops you? The amount your employer contributes to your 401(k)? Set your own up. Just about the best self-employed tax deduction of all of them is a self-employed retirement plan. There are several, and they’re particularly valuable for reducing your tax bill and racking up tax-deferred retirement savings for later. In 2010, you could feasibly contribute 20% of your net self-employment income (based on a maximum net income of $245,000 in 2010) plus a $16,500 elective salary deferral to a solo 401(k) for a total maximum contribution of $49,000.

Not only that, but with your own profitable business you’re not limited (when your employer doesn’t offer any kind of retirement plan) to the only-$5,000-a-year maximum annual IRA contribution you’re allowed to make as an employee.

Hoping for a pension that will see you through your old age?

Good luck with that one. Just as it’s too early to tell what’s going to happen with the health care reform issues, it’s too early to say what proposed pension reforms will be. Let’s suffice it to say that some are in danger of collapse as a result of some playing fast and loose with other peoples’ money.

This is all the more reason not to depend on anyone but you.

Just as any small business can fail, so can any big business.

Remember this. If someone is willing to pay you a salary or a wage, you’re not only earning enough money for that someone else who pays your own way, but you’re more than likely putting money into her pocket.

So why work for another?

There are many good reasons to work for someone else.

A person may not want the hassle (or risk) of working for themselves. After all, it’s kind of nice to walk through a door and leave your troubles at work.

Or is it? Nowadays work follows many people everywhere — on their Blackberries, pagers, laptops  — and continuous connection is becoming more and more commonplace these days.

I predict a major burnout on this one.

People will sooner (or later) wake up to the fact that no longer are eight hours a day being given over in return for pay but that their entire lives are being hijacked for a paycheck.

Radical, even revolutionary I know.

That’s me.

But will there be a backlash to the problem? It depends on the continued (and gathering) power of employers.

Don’t think employers don’t understand the power they hold.

Why is it, do you think, that you’re having such a hard time finding a job?

I predict the day when companies like IBM will be able to wave a sweeping arm over their workforces and say, “Everyone without a college degree: out!

It’ll be sad indeed but that’s where we’re headed with the picky exclusiveness this recession is giving employers.

Let me ask you what your alternative is when you can’t find a job.

There was a big hint in the first article I wrote in this series. It was the fourth and fifth sentences. If you read carefully I said:

Guess what? If you’re not willing to do anything, anywhere, at whatever price, you may as well hang up your tool belt now.

Someone answered me when I asked them in an email what the alternative was when someone couldn’t find a job. He said:

Keep looking, keep trying to temp — keep trying to take new classes, and so on. I’m not saying it’s easy.

And so I pushed further. I asked:

And when the stop-gap money runs out, as it is for many, then what?

No answer.

That’s where many are today — the stop-gap has run out — and the unemployment insurance band-aid will only stay on for so long.

The wound remains exposed and bleeding.

His last words to me answering my questions were:

I’m not saying it’s easy.

And I didn’t say it would be easy either.

Very briefly, the following are a few good reasons why you might want to consider owning your own business:

  1. Interest rates are low. Take advantage of them. It’s possible to fund your startup with credit cards. Be careful though and have a good plan as to how you’re going to pay off the debt.
  2. Interest deductibility. If you fund your startup (or your business purchase) with a line of credit on your living space (you’ll be surprised what constitutes a living space) you can (still) deduct the interest. This deduction may not always be available (as it once was for credit card interest) so use it while you can.
  3. Quality of life. I haven’t seen it written about, but I suspect small business contributes to the fabric of society. At least I’d like to think it does.
  4. Paying toward ownership. You’re making an investment in your future each day you work to build your small business toward something you’ll eventually own that will have worth and value. It will eventually become one of your assets, able to be sold.
  5. Equity. Building worth over time (see number 4) means that over time your business will fund future projects. If you do things right, you’ll be able to tap into your business to finance other opportunities.
  6. Tax Advantages. Owning your own business will avail you of many tax advantages that working for another can never deliver. That last link will take you to a pretty good primer on the subject.
  7. Independence. Never again will anyone ever tell you, “Your services are no longer needed.” Not only will you learn things about others you can only imagine you’ll learn things about yourself you never dreamed possible.

I’d like to hear from all of you the reasons you choose to work for someone else and the reasons you’ve chosen (or want to choose) to work for yourself.

I know all of them are valid and good.

I’m curious.

Other articles:

But That’s Not My Job; Part II; Part III.

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