How lucrative is starting your own business? The answer depends heavily on the success of that business. Some entrepreneurs earn a lot, while others earn little and either go out of business or run their company as strictly a side job and a labor of love. The United States Bureau of Labor Statistics (BLS) reported that about 9.6 million Americans are currently self-employed as an unincorporated company, while many more entrepreneurs establish incorporated business and employ workers of their own. While income for the self-employed can be unpredictable, some studies suggest that, under the right circumstances, entrepreneurs can earn considerably more than employees and even top leaders of established companies.
IMAGE SOURCE: Pixabay, public domain
Comparing Salary Potential for Business Careers and Entrepreneurs
Business and finance occupations have a reputation for high rates of pay and prestige. It’s not unusual for students who earn a graduate degree like a Master of Business Administration (MBA) from a top school to be offered jobs with salaries approaching the $200,000 a year mark, Forbes reported. How do entrepreneurs’ salaries stack up to these potentially lucrative roles?
Simply put, some do, and some don’t. However, a study by the international Institute for the Study of Labor (IZA) found that entrepreneurs with similar levels of education, similar performance on standardized tests and other factors can see significantly higher median and average incomes. In fact, the study found that the average income for entrepreneurs is nearly 50 percent more than that for those categorized as employees, according to Forbes. In fact, their average income is higher even than that of CEOs, according to the study.
Despite the rosy outlook you might glean from the results of this survey, there are no guarantees when it comes to entrepreneurship. However, one way to improve your odds of a lucrative self-employed career is to find out how much graduates of your school earn. For example, graduates with a degree in entrepreneurship from certain schools may see average starting salaries as high as $62,288. A college entrepreneurship program that has a history of producing highly successful entrepreneurs most likely has a strong curriculum and plenty of resources and support for aspiring business owners.
What does it take to be an entrepreneur? You need to conceive the idea for the business, flesh it out with a business plan, secure funding, launch the company and manage it successfully – while all an employee of an existing company must do is apply for a job.
The Highest-Paying Occupations for Entrepreneurs
Unsurprisingly, entrepreneurs in the field of business and finance are among the most successful. The BLS reports that self-employed personal financial advisors earn a median wage of $100,900 per year, more than $10,000 per year than the $90,640 overall median wage for this occupation.
Self-employed real estate appraisers and assessors earn $60,540, compared to the $54,010 median wage of all employment types. However, even among business jobs, self-employment doesn’t always equal great gains in salary. Management analysts and accountants and auditors are two of the self-employed roles with the highest incomes, but the $71,560 median wage for self-employed accountants isn’t much above the $69,350, and self-employed management analysts’ $65,090 median income is well below the entire occupation’s $82,450 median salary.
Other top-earning entrepreneurs include lawyers, dentists, chiropractors, psychologists and veterinarians, the BLS reported.
Factoring in the Pros and Cons of Entrepreneurship
As you may learn in your business studies, salary is only part of your overall compensation package. Even if your business is wildly successful and you earn far more as an entrepreneur than you would as an employee in an existing organization, self-employed workers often miss out on other benefits that businesses commonly offer their talent. For example, your peers who start out in entry-level jobs at established firms will likely receive some form of employer-sponsored retirement savings and health insurance. Often, they will start to accrue paid time off in the form of sick or vacation days. If they work overtime and are not considered exempt, they will be paid extra for their long hours. For the entrepreneur who is working tirelessly to get their new business running, there are no vacation days, no overtime pay and no employer absorbing the cost of an insurance policy.
Of course, entrepreneurship comes with benefits of its own. You can tailor your work schedule to match your preferences, though you must be available when your clients need you. As your own boss, you never have to defer to a superior, and you have the autonomy to take the business in the direction that you find most compelling or appropriate. You have the chance to define your own work environment and play to your personal and professional strengths, which can make your work feel a lot more fulfilling.
What many students who are considering an entrepreneurship degree wonder is whether this field of study is worthwhile. At the end of the day, that is a highly personal determination. You don’t need to major in entrepreneurship to become an entrepreneur, so the decision comes down to how committed you are to launching your own business, when you intend to do so and whether you think a broad or specialized education will add more value to your efforts.
To make up for the benefits you miss as a self-employed individual, you can buy your own insurance. If your business becomes large enough, your organization might ultimately bring on employees and find ways to offer these benefits to workers.