Owning A Business Can Be Worse Than A Job
I have a problem with all these "Get Rich" books. They lie. They routinely say, "Working for other people is not the path to wealth" and owning your own business lets you "Do things your way"What a bunch of crap.
I've run into so many people young and old who simply say, "I want to own my own business some day". Have they really thought about this?
Have these people seen what owning a business is REALLY like? It's not for everyone. People see certain wealthy people with businesses and see their luxurious lifestyle, but they don't see what the majority of business owners live like. There are over 22,659,000 businesses out there, not all of them have founders that live like royalty.
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Some reasons why people want to run their own business:
1.) Freedom to do what you want, when you want.
2.) Loads of cash.
3.) Ability to choose which days you work.
4.) Choose who you work with.
It's time to shatter some dreams. I want to share some of the less glamorous examples of business owners I have seen:
Business 1:
Mr. X was successful in the corporate and business world. He wanted a new venture so he invested in a large franchise chain. He bought the land, made preparations and opened shop. The store was a big success, land value skyrocketed and the money was flowing in. Then he sold it because he hated it so much. He had to deal with his employees who would constantly steal, outrageously obnoxious customers, very long hours, sexual harassment cases caused by employees, and tons of paper work and a boatload of accounting. If he wasn't there, there store would probably fall apart.
Business 2:
Mr. B opened up a franchise restaurant. Money is good with the three stores he owns, but he is constantly looking for new employees, dealing with landlords, having to suffer bad months where weather effects sales, bad years where the economy is down. Mr. B has a pretty average lifestyle yet a large amount of responsibility with his three stores. He spends a lot more than 9-5 working at his stores. He could easily live the same styled life if he and his wife both worked. So instead of a regular 9-5 job, he has a 24/7 job with lots of stress and unpredictability.
Business 3:
An asian friend of mine owns with his family 2 successful gas stations. In his 20+ years of life, he has NEVER taken a single vacation with his entire family at the same time. His parents have not missed one day of attending their stores in 15 years. Enough said. He drives a pretty fancy car...and you know the only place he drives it? From home to his gas station and back.
Business 4:
On a trip to a football game in Dallas, we stayed at a medium sized hotel. The entire family worked AND lived there with no additional employees. The dad was the check-in host, the mom and daughter were the maids, the grandmother cleaned and the son did the janitorial work. We saw them all everyday for 3 days.
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So, with a business you may STILL have to:
1.) Work very long and unpredicatable hours.
2.) Accept low income at times.
3.) Skip out to attend to your business.
4.) Deal with assholes.
I ALSO happen know some people with very handsomely paying jobs. These people go to work from 9-5 and they are DONE. They save and invest wisely and are financially independent...sometimes fiscally better off than their business-owning friends.
So before you make a generic statement like "I want to own a business," think about it first. It's not for everyone.
Labels: eCommerce
posted by Neville @ 1:03 AM
29 comments
29 Comments:
It is true that simply being a business-owner is not the Gold-Paved Patch that so many people assume it to be. Creating the above-mentioned "passive income" is key ... but it is not easily done, either.
As with so many other things, in business ownership, it's good to be good, but better to be lucky.
I always seem to read different numbers too. regardless, its definitely not for everyone.
a key point I believe.. is to exactly create one where you can turn it into a franchise, or at least a small business with a set of system that's easily duplicated by anyone. create and build a business that someone would WANT to buy or invest in.
like mentioned, its so easy to say that than actually doing it.
eh. there's no easy way to wealth, whether from your own venture or a 9-5 job.
http://www.johntreed.com/Kiyosaki.html
"Passive income" is what it's all about, but that idea was around for a long time before Kowalski hyped it up. Keep in mind that passive income doesn't have to come from a direct investment in a business or real estate - you can get dividends from mutual funds or bond funds.
My "personal" sampling maybe flawed as well. Many biz fail and most biz owners fail at least once (I know I did). Running a business is not for everyone and it is not easy otherwise everyone would be doing it. I agree with the posts about passive income.
While passive income is the key, you have to be operating your business because you like/love it. Doing it just for the check just makes it another job.
BUT...it brought attention to the not-so-glam side of business which is mostly overlooked.
While I enjoyed reading Rich Dad, Poor Dad....I always took it with a grain of salt. These books teach people to go after money and not success (which in turn creates money). They make lazy people think they too have hope of sitting on a beach in Bermuda sipping a Mohito by doing nothing.
But hey...he's sold who-knows how many copies of his book, so good for him!
Cap, good article link. Those Google Guys really do their homework!
Signed,
That other college guy with a business or two. =)
Lack of security is the reason. (Also I like living by the beach.) See my friends can go ahead and buy houses to live in. They get hooked up with an ARM, and put very little money down to secure it. Payments are more than 50% to 60% of their after tax income. They have secure jobs though, so they know they can spend most of their money on a place to live.
The possibility that one month they won't get a paycheck because unexpected expenses come up doesn't exist. They have 401K plans where their employers match their contributions so they don't even have to get very good returns on their investments. Some even have defined benefit pension plans. In 5 years when that ARM adjusts for the fist time, if the payments go up...well they know that between now and then they'll have recieved once a year raises 5 times,
and still be able to make the mortgage payments.
For me though I know it's unlikely my business will be around 10 or 15 years from now, so even though I make a lot more money than most of my friends, I couldn't imagine spending 50+% of my after-tax on housing. My living expenses are a small part of what I make, because they have to be. That money has to go into savings. If at sometime my business no longer works, I better have a pile of cash on hand. Furthermore, I better be able to make enough money from investing that cash so that I can support myself. I have to save my money and live frugally so that I can BUY MY OWN SECURITY, since I don't have an employer to provide it.
A house is a savings account! The money you would be paying for it is moving from your left pocket to your right. By renting, the money moves from your pocket to your landlord's pocket - never to be seen again.
If you purchase a $200,000 house for 5% down, or $5000, then your payment at 8% per month is $1430.84 for 30 years (mortgage-calc.com). Your total payments over 30 years equal $515,102.40. You paid interest expense of $320,102 above the purchase price of the house. $889 of your $1430 payment is going to interest. Even if you take the nominal value of the house, your "savings" of $515,102 is worth $269,569 at 2% appreciation (the national average). That's a gross return of -47.6%. That's not really the rate, since it's really an annuity we're talking about, but you get the idea. The interest expense far outweighs the "savings" you're making.
It's too bad that most people see it as "Wow, I bought the house at $200,000, now it's worth $269,000, and I own it free and clear! Good thing I saved that money all these years."
Now in the renting situation, lets say you again have $1430 per month to spend on housing. Rent is $900 for an apartment, and you put the additional $530 each month into an investment which returned only 3%. If you reinvest the interest at the same rate, your savings equal $520,850 after 30 years. Quite a bit better than the $269,569 you would get out of the house, and you still had a place to live.
Please correct me if I'm wrong. I'm just an apartment tenant myself. =)
Signed,
That other college guy
Damn good point. Good job using a clear-cut example too! I've never seen buying a house as an investment unless you have the intention of renting it out.
Home equity is TECHNICALLY added to your total net worth, but I think its a bunch of crap.
On CNN's "Millionaires in the Making" these couples have maybe $20,000 in cash and stock, then $350,000 in "home equity" and they are called Millionaires in the making. Riiigggghht.
If you notice in my goals, I always state "Liquid Assets"
-Nev
P.S. Who are you?
Thanks for that analysis. That's exactly my thinking. People who call their houses "a savings account", should look at an amortization table, and see how much interest they are paying. That's what I did after my girlfriend bought a condo. I pulled up an amoratization table in excel and looked at a 30 year fixed. It looked to me like for many years most of the "savings" was actually interest payments. Now one factor left out that I'm not sure how to account for is the tax savings. Maybe that tips the balance and make it so that a house is a good way to save money. I'm not sure. Another thing I intentionally leave out is apreciation. Buying a house to live in and counting on apreciation is a suckers bet.
It seems like there are so many real estate speculators out there who are willing to rent out their property at negative cash flow in CA that they are actually subsidizing renter's living expenses. My rent is not even a third of what monthly payments would be on a similar sized condo in my neighborhood.
In the house example, you get to write off your interest of $10668 per year. After 30 years, that's $320,040. That puts our home buyer at $589,040 - higher if they had invested the savings at the same 3% rate.
Remember though, the apartment dweller was only getting a 3% return. Hopefully anyone reading this can manage a better return than that. =)
On another note, I'm all for RE investing because of the leverage you can get at relatively reasonable rates. Try getting a SBA loan or margin of 90% of your total position from any respectable lender. The one other good thing about RE is that trends are very slow - you know when appreciation is going to occur, and when the market you're in is on a decline and whether that decline is permanent. Since people are actually living in houses and they have to be built, they move much much slower than other asset classes. Both of these (leverage & slow moving, observable trends) are significant advantages in my book.
- College Guy
I do not agree with that. Robert Kiyosaki does not teach you to "Go after money" You do want to become successful and the bottom line is through his teachings are ethics morals and heart. Yes there will be some work that is with all businesses to put a little blood into the game as we say to acheive your goals and dreams It is what makes it all worthwhile besides being able to sit on a beach in Hawaii or Tahiti or Miami or the Italian Riviera sipping Mojitos and Mai tais being lazy Ahhhh! Thats my favorite pastime. Just some girl from NY living the dream in Hawaii
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