If you are highly successful in your corporate career, it does not mean you necessarily have what it takes to be self-employed. Typical examples of self-employment include freelancing or running your own business. I would like to avoid the term “entrepreneurship” because it is such an overused word.
I work as a full-time software developer at a large tech company. I am very fond of my job. For various reasons, I constantly run side hustles to complement my career.
One of my side hustles was an indie mobile game development company I co-founded with a friend. The company failed miserably and is now defunct. It is one of my favorite failures.
I am grateful for the whole learning experience. In particular, I learned that there are characteristics that are helpful both on the career path and in self-employment. Characteristics like diligence or good time management skills.
On the other hand, there are certain characteristics that are okay to have as an employee but are extremely detrimental in a self-employment situation.
The need for a stable income with a linear increments
One of the key advantages of having a 9-to-5 job is the stable income.
There are of course unexpected circumstances that can jeopardize this. For example, you could get fired or you could be forced to take a pay cut if the company is performing badly. Baring those unfortunate events, the paycheck always comes in at the end of the month.
The bad news is that with the exception of commission-based jobs, the number on that paycheck doesn’t change much from month to month. The annual pay raise is commonly linear.
The only opportunities to get extraordinary increments in your income in the corporate world are:
- performance-based bonus and stock options
- getting a promotion
- switching to a higher-paying position
The fact is, the money you get does not always reflect your effort or your contributions to the business of your employer. This is an inconvenient truth that goes rarely gets acknowledged.
If, for example, you decide to work 80-hour-weeks this month instead of your typical 40-hour-week, you will double your pay. If you produce twice as much productive code as a developer than you did last month, your pay will still stay the same.
Your manager might notice your increase in performance and will consider rewarding you with a bonus or pay raise. But there is no way in hell you will get double the pay if you double the effort you put in.
There are obvious benefits to having a stable income.
With a stable income, it is easier to plan your personal finance. If you take a loan to buy a house, you won’t have to worry every month if you will make the payment.
Another major benefit is that you will still receive the same pay when you are having a less productive phase at work. Maybe the project has hit an unexpected roadblock, maybe you are facing a bout of depression. You will still get paid the same.
The comfort of a stable income goes away if you are solely reliant on your self-employment. If you are a freelancer, you will be paid according to your billable hours. If you are selling products, your income will be dependent on your sales volume.
You will be on your toes all the time. If you stop working, you will stop getting paid.
Being self-employed, you will have more influence over how much you earn.
The main reason is that you can fully decide what you want to do and how much effort you want to put. The profit goes straight into your business. In a 9-to-5 job, the profit goes to the company, a tiny portion of it gets redistributed to you.
As you can see, there are pros and cons regarding the income if you are an employee versus working for yourself.
If you are attached to the idea of a stable income, employment is the way to go. You can, however, always start a side hustle to reap the other benefits of running your own business while enjoying the comfort of a stable income.
When running a business, you might be earning just peanuts at the beginning. There is also a real risk that your business does not make any money for long periods of time. You have to be okay with accepting this reality.
Concerning yourself with the approval of others
If you are working your way up the corporate ladder, your income will depend on the perception of other people.
During the job interview, your initial salary will be decided based on the impression you make on the interviewers. Your bonus payouts and annual raises will be determined by how your boss perceives your performance.
You are rewarded for making a good impression. Being effective at your job and doing what is best for the company does not always guarantee a good impression. At times, you still have to toot your own horn.
An employee who is adept at self-marketing and has decent hard skills can easily earn more than another employee who has excellent technical skills but is unable to communicate his contributions. I have noticed this phenomenon this on multiple occasions at work.
When I starting out as a software developer as a fresh graduate out of engineering school, I thought that all I should focus on was honing my technical skills and doing what is best for the business. I believed that I would eventually get noticed and be rewarded accordingly.
My naivety was rapidly crushed by reality. The reality that the perception of the work I do is more important for my salary than the quality of the work itself.
Undoubtedly, the perception also depends on the quality of work, provided that the management of your company is competent. Nevertheless, it is important to recognize that the quality of work is not the only deciding factor in your financial compensation.
In a corporate environment, it is relatively hard to discern the value of individual contributions of employees. This is especially true in a bigger company and for careers that are not sales related. That means it is almost impossible to proportionally distribute salary based entirely on work contributions.
Working in a corporate environment trains us subconsciously to seek the approval of others.
When you run your own business, your customers care more about your services and products more than they care about you as an individual.
When you run your own business, customers judge you based on the value you offer them. They are paying you to get something they want or to help them solve a problem they have.
Your income does not depend on the perception of a few people. Even if they do pay you handsomely in the beginning because of their positive perception of you, the house of cards will quickly crumble if you fail to deliver on value.
You might be brainwashed by your job environment to associate the approval of others to the income you earn. This could be a subconscious thought pattern.
If you want to have a chance of succeeding in running your own business, you have to move away from the approval-seeking mindset. Instead, your singular focus should be providing value to your customers.
Not taking 100% responsibility
If you are an employee, you are never 100% responsible for the business.
You can be responsible for a wide range of things, for example by:
- having a proactive approach when executing your tasks instead of being reactive to the situation or people
- taking the initiative of performing tasks that are not formally of you, if you think that it is good for the business
You should have a sense of responsibility for your own skills, career and your role in the company.
Nevertheless, there will always be factors out of your control that will affect your daily work and career.
Even if you are the CEO of the company, if you do not outright own the company, you cannot influence everything.
As an employee, it is tempting to mentally defer responsibility to other people in the company or to the “way things are”. This is a slippery slope.
An employee can get away with taking less responsibility than required of him because there are no objective metrics to measure one’s willingness to take responsibility. The bigger the company is, the easier it is to absolve responsibility to others or to circumstance.
On the other hand, when you are self-employed, it is entirely on you.
You can celebrate every win because you made it happen. Leaving the aspect of “luck” out of the equation, every single success of the company is attributed to your ideas, decisions, and actions.
This also means you are responsible for the failures. And there will be failures.
Beware that is easy to blame market conditions or the fact that the customers are not “getting it”. If you do, you will not learn anything from the failures. That itself is the biggest failure of all.
If you find yourself in such situations, it is your responsibility to pivot out into a better market position, market your product better or do something else completely. It is all in your hands.
When venturing from a 9-to-5 career into self-employment, be mindful of how you view the concept responsibility, especially if you tend to say “it’s not my fault” or “that’s just the way things work around here”.
Making the transition
Depending on your job, you will be able to reuse many of the mental frameworks you acquired in your career in your business. There are many other mental shifts needed if you want to venture into self-employment.
The best way to learn is to start. You will learn along the way.