Simply because you don’t have a boss doesn’t mean that you are an entrepreneur.
Whats the difference?
Being self-employed effectively means that you are the product. You are the revenue/profit engine. Without you, there is no revenue. Some industries, at their core, are self-employment businesses including: lawyers, insurance agents, consultants, contractors, etc. Even in these industries, some become entrepreneurs (e.g. owner of a consulting firm that employs consultants and, ultimately, managers of consultants).
Entrepreneurs, on the other hand, run a business in which they are not the core factor of production. When they take two weeks off of work, revenue is still generated. Entrepreneurs run businesses that do (or at least have the potential to) not need them to survive, prosper and grow.
3 Big advantages of being an entrepreneur
1. Generating returns to capital are way better than only generating returns to labor. I will be writing a full blog post on just this topic. For better or worse, this is the primary way that people generate real wealth. Understanding how to generate, use and compound returns to capital is critical to wealth generation.
2. Value of your business if/when you eventually sell it is much greater if you are not self-employed. Would you value a business very highly that relies on an individual to generate most of the revenue and profit AND that individual is selling out? If and when you decide to ultimately leave your business, would you prefer to be well compensated for the effort you put into building it?
3. Personal flexibility is better (over time). If you have ever had the experience of going on vacation and realizing that you are not making any money and still have business-related bills (rent, telecom, etc.) to pay when you get back, then you know exactly what I am talking about.
Self-employment as a means to become an entrepreneur
One of the most common paths to becoming an entrepreneur is to start as self-employed and work toward being an entrepreneur. Lawyers hire other lawyers and, as they scale, the value of the firm begins to be worth more than the value of the individual lawyers. Consultants hire other consultants and, as the firm grows, clients are focused on hiring the firm, not the individual consultant.
But beware of the trap. Many people start out as self-employed with the vague notion that someday they may become an entrepreneur. However, comfort with what is known, fear of hiring and perceived loss of control can stop people from taking the next step.
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