Entrepreneurship vs employment

Hi everyone,

This is the first thread I start, and I’m doing so because I am interested in your professional situation and your opinion on the subject.

Here and there I read that people are mostly saving on their salary and investing in the market, one way or another. I also read that the best investment one could make is in oneself, and I think I kind of agree.

Since a lot of people here seem to work in an IT related field (maybe it’s a bias, not sure), and since this is probably the field where starting a company is the easiest, I am wondering how many of you actually took the leap and why.
Same goes for the other way around, if you prefer being employed I would gladly read your opinion.

As an introduction, I have been working in IT for more than 13 years, and I founded two companies last year after spending time in small companies and even a startup. One of my companies is merely a vehicle to bill the services I provide, but the other one is a startup with currently no revenue but a promise of future growth – hence the investment.

Looking forward to exchanging on this topic :slight_smile:

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I personally believe that entrepreneurship is one of the best thing one can do for himself and the good of humanity in the same time - it’s the engine of civilisation and a force of personal growth. I leave however this social grace for my post-FI life as I don’t want to break my current work-life balance. I’m working at 80% and spend rest of the time with my family. I think this arrangement would be difficult while running a business, even a small one.

PS. “Entrepreneurship is a personal growth engine disguised as a business pursuit.” – James Clear

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Hi romzzz,

glad you started this topic! I took the leap mid of 2018 and created my first company. Never looking back ever since. End of last year, I created my 2nd company.

One of the big advantages of being self-employed: you are your own boss
Disadvantage: you can’t complain about having a sh*tty boss :wink:

I was a manager in my previous role (managing a team of IT professionals + working technically as well), and I knew there was a big demand in my profession (SAP). My previous company was badly managed, so I decided to give it a try. I had enough money saved to be able to survive 1-1,5 years (without getting any project).

The last two years have been amazing in terms of earning money. Still, there are also downsides:

  • you have to be able to sell yourself
  • you need to do accounting, or have someone doing it for you
  • there might be times, when business is not going well
  • negotiating prices needs a Bazar mentality
  • you’ll usually be working a lot (at least that’s the case for me - my opinion: I can have vacation when I don’t have projects)
  • might not be working too well with family and kids (work-life balance)
  • you will basically be a soldier, unless you have a product you can sell
  • in my case: I’m selling my knowledge, which means I’m the product. That’s not scalable (at least at the moment)

Upsides:

  • higher earnings
  • you can choose which projects you want to do
  • faster way to FIRE
  • learning curve in terms of business administration
  • you can use much more of your potential for your own good (vs working in a company, where you can do the best job in the world and still only get a 2% pay-rise every year)

It might sound riskier to work in a small company, but lets face it: working in a big company like UBS or Swiss Post, you also have no job security (at least in IT). I know very well what I’m talking about. I was working for one of the biggest outsourcing companies worldwide, until they made a decision to carve-out all technicians in my country. We’re talking about >1.500 people at that time.
If you are working in your own company, you at least have the option to adjust. I could offer different IT services, I could do coaching etc.

So, from my point of view: yes, there are risks, but as of today I wouldn’t want to go back to a corporate job. I’ve seen it numerous times at customers: political games, clueless management, people getting promoted just because they knew the boss. Not interested in that any more :sunglasses:

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Comparing apples and oranges… or apples and refrigerators. You can’t compare a “normal” (swiss) big company and an outsourcing company. An outsorcing company is made exactly to simplify the firing of people. Of course it’s easier to lose your job there.

Yes, it’s not a 1:1 comparison. Still: I know some people in higher management, and if they are able to cut costs, they will do. Discussions about which IT departments can be near/off-shored are always ongoing.

My point was to emphasize that your IT job in big company in Switzerland might not be as safe as you think…

Do you know if the actual hourly pay is very different in the end? You could be working 2x the hours compared to being employed. :slight_smile:

(if the goal is to maximize revenue that might be fine, if you’re happy working a lot, most companies won’t pay you overtime if you want to work 60 hours a week so that’s one way to achieve that).

I can answer in my field (IT consulting / software development), daily rates are around 1’500 so if you do work a full month (let’s say 20 days average) you get 30’000. If it is your own company, you can use that money to pay your salary (minus social/insurance expenses) and you would still be way above 20’000. You can also get part of it as dividend, and avoid said expenses and limit your taxes at the same time.
I think it’s a no brainer :slight_smile:

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Yes, in theory you could work 2x the hours. In the end, it’s always depending on the needs of the customer. If there is a critical go-live or production systems are affected, you are going work more.

As a freelancer, you usually get paid per hour.

Rates are similar in SAP area. Sometimes more, sometimes less (depending on the customer)

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It’s two different concepts:

  • Independent consultant, works for a daily rate for customers. Quite common in IT. Work alone
  • Entrepreneur, create a startup to develop a new product, software or technology. Hire employees if needed.

Independent consultant is quite good, higher salary, more flexibility, normal “hours”, hourly paid. However, only some fields hire consultants.

Entrepreneur’s success would depend on a lot of factors. At the beginning, your salary will be lower and on average, an entrepreneur will make less than a salary. Lot of hours. Lot of stress. Unknown outcomes

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True, but you can also see the independent consultant as a seed to grow an actual company that can continue providing the same services or evolve into selling products (software). Either way you can scale up and become an actual company (in the hiring people sense), with the benefit of knowledge acquired while working “alone”.
I really see the two as a whole and not as separate entities.

I would also add that while you might get a lower salary (or none) at the beginning, the upper limit is not defined, which fuels motivation.

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THIS! From my personal opinion, the indepedent consultant has a lot of advantages.

  • (hopefully) a working business model
  • good salary
  • risk is lower than for an entrepreneur, who first needs to find out if his product/service is selling

You are learning a lot of things on the fly (business administration, aquiring clients etc). Plus, with the good money, you can take some risks (e.g. hiring other people, invest some money to create a product, start a different side-business)
The tricky part is to make that leap, e.g. from working alone to create a business with employees. The transitioning is when it gets tricky, but I really look forward to explore those possibilities :cowboy_hat_face:

I still don’t get how you people start consulting. It’s not like you go out and put an ad on a board and then people appear.

You contact target clients and ask to present yourself. That’s the easy part.

if you work as a consultant in a consulting firm. When you have a good relationship with your customer, and they know that you will leave, they usually propose to hire you or they will follow you … It helps to start. :slight_smile:

Try to get out of the box thinking. I can give you some insights on how I did it

  1. You need to be decent/good in your profession. It will be much harder if you only know how to write “hello world” as a programmer.
  2. There is high demand for the job you are working in
  • In my previous role, I was also managing people. I was searching for experts for my team, and it was really hard to find someone. The company I was working for paid pretty good salaries, but the good candidates could simply choose from several offers. Btw: I didn’t expect to find a unicorn, but there were simply a lot of people who called themselves experts and didn’t have the necessary skillset.
  • It was also hard to find good external consultants. I’ve been working together with several IT consulting companies (Deloitte, Accenture, TCS, to name a few), and it’s really amazing how much they charge customers for rookie/intermediate consultants. They usually have two or three really good people, and the rest is intermediate at best.
  • I saw that it was hard to find someone good both internally as well as externally
  • Conclusion: there is high demand in this field, and there are a lot of people selling themselves quite high in terms of skillset
  1. I had a certain amount of money saved, which allowed me to test the waters. Worst case risk of my plan: go back to corporate job after 1,5years if I don’t find any project.

The rest was simple: open a business, create profiles in freelancer portals, use your contacts.
You don’t even need to have contacts if you are willing to work for lower hourly rates. I don’t say cheap, just lower rates than your competition (which are still higher than if you work as an internal employee).

Summary:

  • do a market analysis
  • know your strengths/weaknesses and your own market value
  • have a risk buffer
  • Start

This is also a valid approach. It would be “use your contacts” from my comments above

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ahah.
The only thing I have at the moment is the risk buffer.
I was a good programmer, a bit of an architect at some point, then I lost a bit of my skillset because of job necessitites. I am still strong in seeing how the projects should go and help the architects decide. I think I should define me as a Product Owner, even if not the “official” term.
I work with some “unicorn” people and I keep seeing that I am needed to steer them.

Anyway I think there isn’t a place for me as a consultant. I am neither one thing nor another.

Having worked in a consulting company helps a lot obviously, but selling oneself is also very important. In the end the only thing that really matters is the network, provided you are good at what you do.

But the consulting model is hard to scale up without losing one’s soul, as you can see with big companies. They indeed charge you a lot for young inexperienced people that are not going to deliver anything useful, and that are probably going to outsource that to their Indian counterparts. Their only metric is the money that comes in.

This vision is harsh but also the sad truth, and while I think consulting is extremely rewarding both skill and money-wise, it is not my target, just a step on the path :slight_smile:

Yes, but for some reason, companies continue to hire external/consultants. I think because of stupid accounting practices: the budget is in a project, not in payroll or to avoid showing that the number of employees increased (look bad in the ratios for the stock analysts)

For sure, specialized employees can be useful to work few days/weeks on a specific project. But most consultants stay in the company for long periods.

Although, consulting firm will always ask what are your salary expectation in the first questions, as you said they need to have the highest margin between salary and billed hours

@ma0 I think it’s a lot easier to be a technical consultant, PO or project manager positions are in most cases internal

I agree with your opinion about accounting practices: most of them are stupid. Still, you also have to see that hiring an employee fulltime is also costing money. The employer has to pay more than what you see on your gross salary statement, you might have to pay a headhunter, plus onboarding etc.

External consultants should (!) be experts in their field, they have to pay their social stuff themselves and they can be fired within a few hours. The risk for an external consultant is definitely higher.

True. They are making sure to sell a junior who gets a crappy salary as a senior consultant to customer to get more money.

Product owner = yes, project managers are also often hired externally. I’ve seen both (internal+external project managers) in different companies.

My first job in Switzerland was at a consulting company and I switched to freelancing after two years. I doubled my salary, can choose the projects myself and when I can’t find a project I get unemployment benefits that are slightly higher than my old salary at the consulting company. For me personally it’s a nobrainer but I think this job is not for everyone. I also think 1500 chf per day is realistic but the higher end. I know a lot of freelancers and 175 per hour is very good for a freelancer at a long term project (although sap seems to be a well payed skill). You can always negotiate the best rates when you know the customers yourself and don’t need a payroll company to search a project. On top of the lower rates that they use to sell you they usually charge about 20% comission. Maybe I met some of you guys at meetups without realizing it. :slight_smile:

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