There are advantages and disadvantages associated with pursuing a career and building a business. The key differences are discussed below, along with some important considerations relating to business.
Career Vs. Business
For some people, work can be both enjoyable and rewarding and so they may have absolutely no reason to look for anything outside of their existing roles. For others, work can be monotonous and unfulfilling. The other factor that always needs to be considered in relation to employment and business is the potential to generate sufficient income to meet your lifestyle goals.
There are aspects of my career that I find incredibly rewarding. I am a teacher and a programme leader for in the region of 300 employed learners and I know that I am making a positive impact. As a teacher, I believe that I adopt innovative approaches to teaching that help my students to learn and I nurture and encourage the best from them. I have been fortunate enough to have been observed as a grade 1 teacher on 3 separate occasions during a 4 year period as a result. In my capacity as a progamme leader and mentor I would also like to think that my students and their employers depend on me and this view is supported by the feedback and levels of satisfaction that have been expressed. This has helped to encourage significant growth in our department’s higher education provision in the 3 years that I have been operating in this role.
As I am sure you can appreciate, there are also aspects of my career that I find less rewarding. There is not really the opportunity for career progression unless I am prepared to remove myself from my teaching responsibilities. This means my income is limited for as long as I choose to be a teacher. Another source of frustration for me is that regardless of how effectively or efficiently I work, I am essentially building somebody else’s asset.
If you are dissatisfied in your work, then the question you should ask yourself is whether a different job or career would enable you to fulfill your goals. I am not suggesting you quit your job to build a business, but you are certainly not alone if you are willing to consider the alternatives.
Defining a Business
There are some key distinctions that differentiate a business from employment and self-employment. These are distinctions that so many people seem to overlook or misunderstand and with a little explanation these principles are relatively simple.
Assets and Liabilities
People often become defensive when their views on assets and liabilities are challenged. This is because most of us are brought up to believe that a house is our most valuable asset. Unfortunately, if you live in your house, or still owe money on a mortgage then it is more likely that it is your biggest liability using Robert Kiyosaki’s definition from his best-seller, ‘Rich Dad, Poor Dad’.
Robert Kiyosaki explains that an asset is anything that puts money into your pocket, whereas a liability is anything that takes money out. Therefore a house is only an asset if you own it outright and generate income from it (i.e. through letting the property). If you still pay a mortgage, or are mortgage free and only pay for the upkeep of your home, then it is actually a liability because it costs you money.
Examples of assets are rental properties, but also paper assets such as stocks and bonds. Other investments might include art or antiques, providing you know what you are looking for and their value increases with time.
Liabilities include mortgages, loans, credit cards, store cards, vehicle leases, etc. These are things that costs money each month.
Trading Time for Money
First of all, you do not own a business if you trade time for money. If you are employed then you receive a salary or an hourly wage. That is trading time for money. Even if aspects of your work are commission based, you still only earn commissions if you are putting in the time. The exception to this would be if you have devised a system to sell automatically, or if you receive repeat commissions from repeat orders. Then you would have leverage (see below) and passive, residual income.
One of the biggest misconceptions is that being self-employed is owning a business. I know because I have made this mistake! I was a self-employed personal trainer, but I thought I had a personal training business. I realised I didn’t have a business when I wanted to take a holiday and I didn’t get paid! If you are a contractor or a consultant then you are self-employed. You may get paid £500 per hour, but you are still trading time for money.
You have a business asset when you get paid whether you work or not. A business asset produces income day and night. You build the asset and it pays you. In ‘The Seven Habits of Highly Effective People’ by Stephen Covey, he uses the analogy of a goose that lays golden eggs. You look after the goose and it lays more golden eggs!
Leveraging Your Efforts
Leverage is one of the most important concepts to understand if you wish to build a business. You leverage your time by either leveraging systems or by leveraging the efforts of other people and this generates passive income for you.
If you own a business then you can leverage the efforts of other people by employing staff. Business owners employ staff with particular specialisms, or simply because they are unable to complete all of the operations for themselves! If they appoint a manager to oversee the business then they are leveraging the efforts of that manager as well as their staff, providing the collective profits generated by the staff is more that the business overheads. The business owner gets paid whether they work or not because they have created leverage for themselves.
Another example of leverage is leveraging systems, such as the internet. Some affiliate marketers (Super Affiliates) are experts at this because they know how to promote and sell other people’s products using Internet Marketing Strategies. When they generate a sale they receive a commission and the merchant fulfills the order. All they need to do is maintain their marketing campaigns and continuing generating sales for the merchant. This will generate passive income day and night, regardless of whether they are working or not.
Entrepreneurs have a different mindset to employees. Also in ‘Rich Dad, Poor Dad’, Robert Kiyosaki explains the different mentalities of the employed and self-employed, when compared to Business Owners and Investors. He refers to a ‘Cashlow Quadrant’ where mindset differs greatly on the left and right side of the quadrant.
As a very short summary, entrepreneurs understand the importance of paying themselves first, whereas employees rarely do. This is a massive generalisation as there is a whole spectrum of people and this represents the two ends of a vast continuum. My aim is not to undermine or stereotype anyone, but this over-simplification does help to highlight an important principle.
Typically, an employee acquires liabilities. They have a mortgage, a leased car, credit cards, etc. Because of this, they live pay-day to pay-day. They will get paid by their employer, pay their bills first (often generated by their liabilities) and spend whatever they need to on their necessities. Anything that is left after all of this is for luxuries. Most, if not all of the money will be gone by the following pay-day.
Entrepreneurs use their income to acquire income producing assets first. They purchase things that have the potential to generate recurring income in the future. Using the earlier example of the Affiliate Marketer, they might outsource some website promotion, or may purchase some banner advertising. They use their income to generate income by purchasing assets (or investing in existing assets) and then pay for luxuries using the income generated by those assets.
For more information on these themes, check out the relevant sections on my Personal Development page using the tab above.
I believe that I have always had entrepreneurial spirit, before I even really understood the concepts described above. I remember when I first starting working as a Personal Trainer, believing that I owned a business.
This view quickly changed when I wanted to go on a skiing holiday and I realised that I would not only need to pay for the holiday, but I would also lose a full week’s income! I realised at this point that there had to be a better way.
My first idea was to set up a Personal Trainer database. The plan was to charge a finders fee to Personal Trainers for sourcing new clients for them. I would do the client screening and charge the Personal Trainers a fee for my service. The stumbling block for me was that I had no idea about how to market a website. If I had know what I know today about Search Engine Optimisation (SEO) strategies then this business idea could have led to a very successful business.
It was also at this time in my life when I was Introduced to Usana Health Sciences, Home Business and Network Marketing. The saying goes that “when the student is ready, the teacher will appear” and that was absolutely true for me! My introduction to Usana is what started my business education, as well as fueling my passion for Personal Development.
Starting a Business
I believe that starting a successful business is about being in the right place at the right time. Being in the right place is about identifying niches and market trends and being ready to capitalise on them. The right time depends on the individual and what they have done to prepare themselves.
I do recommend educating yourself to the best of your ability in your chosen field and to look for niches and opportunities within your work. You will also benefit from reading about business because this will sharpen your attention and raise your awareness of what is possible. However, the most important thing is to work on yourself. Through Personal Development you will learn what is most important to you and what you are willing to sacrifice in order to achieve your goals.
Luck, or fortune may play some part in whether or not we are successful in business, but we have a huge amount of influence over this too. To quote Roman philosopher Seneca:
“Luck is what happens when preparation meets opportunity”
Your preparedness is ultimately up to you.
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