Updated on May 22, 2020
Starting a business changed my life for the better. But I dilly dallied for a couple years before starting Financial Samurai in 2009 because I wasn’t sure whether I’d be able to commit to a long term plan. I remember hearing that it takes 10 years to become an expert in anything, and I didn’t want to start something if I wasn’t going to follow through. When the financial crisis hit I figured it was now or never.
Now that I’m 10+ years in, there’s not a day that goes by where I’m not thankful for having this site. I understand that a lot of you will say that you don’t have a good business idea or don’t have a clue as to how to start. The reality is I had no business idea either.
But now, things are so much better than having a day job – 90% less stress and 100% more income. The key is to just launch and then figure things out as you go. You can afford to do so nowadays because the cost to launch and maintain is so cheap. Good luck trying to figure things out when you have to pay $5,000+ a month in rent to run a retail store or restaurant!
Let’s look at the top 10 benefits of owning your own business in Part I of this two part series.
The Top Reasons For Running Your Own Business
1) No Boss: The older you get, the less likely you will tolerate someone telling you what to do. By the time you’re in your 30s, you’re already a master at your job. You’ll also have a lot more money. Thus, you won’t accept instructions as easily because you don’t need the money as much.
Further, you’ll also have the requisite work experience to get another job for likely more money and more appreciation if a change of scenery seems advantageous. Even if your boss is awesome, being your own boss is 10X better.
2) Master Of Your Time: Sunday evening is always a great time because you’re reminded there’s no need to set an alarm clock. You get up when your body naturally wants you to get up. As a result, you’re happier, healthier, and way less stressed than being forced to wake up by a certain hour because you have to be on a call or in the office by a certain hour.
You can take a three hour break in the middle of the day to watch a baseball game if want. Afternoon siestas are no problem either. By the time your kids get home from school, you’re refreshed and can spend as much time with them as they’d like before they go to bed. Then you can work in the evenings if you wish.
3) Much More Efficient: I always knew that working for a large corporation wasn’t very efficient because there were too many meetings about meetings. To get something done requires so much bureaucracy. Many people I know simply spend hours surfing the web at work (thank you!) because they’ve either already finished with their work or are waiting for their managers to catch up. It’s no surprise that startups with no resources constantly innovate much quicker.
After doing some freelance work for several startups (I live in SF after all), I’ve now experienced countless examples of business development deals that have taken 3+ months to finalize, which would have only taken me one hour if I was on the other side of the table.
I’ve also done some freelance writing for some major media publications. In one article, it took my only a couple hours to write and edit. But the editor was such a knucklehead that she asked for three revisions!
Three hours of entrepreneurial time is like 12 hours of corporate day job time.
4) No Commuting: Commuting is one of the biggest wastes of time and money. Not only are you more stressed by the time you get to work, you might also get in an accident on your way there as well! Unlike those who smartly run internet businesses, not every entrepreneur gets to have no commute. But at least when you’re your own boss, you can decide guilt-free when to work from home, when to go to the office during non-rush hour traffic, and when to leave at more convenient times.
5) Expense Deductions: Although it’s nicer to have a corporate card that pays for everything, it’s still nice to have expense write-offs so you can have more freedom to spend however you wish. For example, instead of having to spend a weekend in a conference room at your company’s corporate offices where they serve you free rubber chicken sandwiches, you can write-off a semi-annual team building trip to Hawaii.
Besides expense deductions, running an online business costs a fraction of what it costs to run a bricks and mortars business, which is much more scalability. When you can start your own website for just $2.95/month and run it from anywhere in the world, nothing beats that.
6) All The Income And All The Equity: As an employee, you earn a salary, and maybe get a tiny amount of equity (the vast majority of employees get no equity). As a business owner, you not only earn what your business makes, you also hold a massive portion of the equity that can be sold for multiple times revenue, operating profits, or earnings in the future.
The only way to next level wealth is to own equity in a business. As an employee, you are making someone else rich. As an owner, you are directly making yourself rich. Operational leverage is huge with an online business. Please study this chart carefully:
7) More Correlation With Effort And Reward: Most people simply want a fair shake. But working for someone else requires playing politics. People promote and pay people they like and trust. This is why there are always questionable performers who rise to the top. The larger the corporation you work for, the more politics you must play. If you are the business owner, you don’t have to play any politics. You decide what’s best for the business. There’s nothing better than getting rewarded for hard work.
8) Potentially Lower Tax Rates: Expense deductions will lower your effective tax rate. You just don’t want to take on superfluous expenses because that would be counterproductive. There is a chance the Trump administration may lower the small business pass through tax rate to that of the corporate tax rate. In which case, small business owners may see 5% – 15% lower income taxes for the same income earned by W2 earners.
9) Higher Pre-Tax Retirement Contributions: Business owners can save up to $57,000 in their Solo 401k for 2020, provided they have an operating profit of at least ~$192,000. Business owners who elect to go the SEP-IRA route can also contribute $57,000 a year pre-tax, provided you pay yourself ~$220,000+ in income.
As an employee, you can only contribute up to $19,500 max in your 401k or $6,000 in your IRA (if your income is low enough) for 2020. Yes, the maximum contribution limits tend to go up about $500 every couple years. But the employee portion of the 401(k) contribution limit is much smaller than what the business owner can contribute.
10) Location Independence: Being able to run your business anywhere in the world is truly liberating. You can geo-arbitrage by moving to a cheaper country if you wish. If you don’t want to go that far, you can always relocate to the heartland, where housing is often one third the price of coastal city real estate. Vacations are no longer limited to just two or three weeks. There’s nothing more fun than seeing the world while making money.
BONUS! 11) Hard to shut down: As we’ve learned from fighting the coronavirus pandemic, many businesses were forced to shutdown on government orders. Millions of businesses have been devastated and are unlikely to return when the economy opens up.
If you have an online business, most of the time, no human interaction is required. All you’ve got to do is communicate over the internet with freelancers if you need help. Therefore, with an online business, you can continue to operate and pivot during a global pandemic.
If your business is more defensible, that means your business is also more valuable. If you ever go to sell your online business, you may be able to get a bigger premium. From a business buyer’s perspective, wouldn’t you be willing to pay more for a business you know that’s able to operate regardless of whether there is a natural disaster or a global pandemic? I know I would.
BONUS! 12) A career for your children. It didn’t hit me until I started watching my alma mater’s online convocation that many college graduates in 2020 are screwed because the economy is paralyzed. It makes me angry and sad that millions of college graduates, who have spent 4-5 years of their lives and lots of their parent’s money, are shut out from gainful employment due to the lockdowns.
If you own an online business, not only are you able to teach your children about marketing, PR, business development, finances, sales, supply chain management, and more while growing up, you can also hire them into your family online business when they graduate from high school or college. In other words, owning an online business is the best form of career insurance.
As a parent to two young children now, there’s nothing more in this world that I want than to raise happy kids who find purpose and meaning. If you graduate from high school or college during a recession, you might not be able to get a job or a job that you want. Not finding gainful employment can cause depression, a delay in family formation, and a whole host of other issues.
Working at a family online business might not be the ideal job for your adult child, but at least it provides the temporary ability to work until a more suitable job comes along. Career iisurance for your children is now my favorite reason for owning an online business today.
Business Ownership Provides Options
With all these great reasons, hopefully everybody will now start their own online business, even if it’s just a side hustle while you have a day job. You just never know what the future holds if you take action. Two years after starting Financial Samurai, I realized I could leave a well-paying banking job. Heck, even one site I hardly ever update is generating a passive ~$500/month for the past five years.
As a business owner, you will feel more proud of what you produce because before you, there was nothing. Every time you see your product in the store or in the news, you will beam with pride. It’s rewarding to see an FS article hit the front page of Yahoo. And it’s surreal to see hundreds of thousands search results when you type “Financial Samurai” into Google.
But the reality is that 97% of you won’t take action. This is an irrefutable truth supported by millions of data points. It’s much easier to do nothing, even if you aren’t satisfied with your lifestyle.
So for those who need extra motivation to change, stay tuned for Part II of this series. I’m confident after reading Part II, the non-action rate will decline by 1% to 96%! Just like investing in real estate and stocks, 10 years from now, you’ll be happy you started today.
Suggestions For Starting A Business
Start your own website. Every business needs their own website. Here’s a step-by-step tutorial showing you how. Not a day goes by where I’m not thankful for starting Financial Samurai in 2009. I ever would have imagined being able to engineer my layoff from a well-paying job in 2012 to just write and be absolutely free. You just never know what might happen if you try. Back when I started, I had to hire someone for $1,500 to launch FS. Now you can launch in under 30 minutes for less than $3/month with Bluehost.
Open up a business rewards credit card. If you’re going to have a business, then it’s important to have a business rewards credit card to separate all your business expenses, provide you buyer protection, and give you a healthy amount of rewards. My favorite card is the Chase Ink Business Unlimited because there’s no annual fee, you get 1.5% cash back on everything, and you get a healthy $500 for free if you spend $3,000 within the first three months of opening.