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Owning a Business versus Freelancing and Consulting


Maybe you should go for Door #2 (by which, obviously, I mean freelancing and consulting)

I have just read the most wonderful book to help you decide if you should start or buy your own business. The book is The Entrepreneur Equation: Evaluating the Realities, Risks, and Rewards of Having Your Own Business by Carol Roth (BenBella Books, 2011).

Roth helps people determine if they should go into business for themselves by offering criteria against which to compare themselves.

This book is unique because it so clearly illustrates—with real-life examples and numbers—why it is so difficult to build a profitable business. It’s a true reality check.

Roth takes on the widely-help myths of self-employment in a funny, but sobering, way. Like when she summarizes The Secret as the law of attraction but without one important component: hard work.

Or when she reminds us that in quitting a day job, we’re giving up free Starbucks coffee and access to already-paid-for office supplies . . . and that we’ll find out this is a bigger deal than we had thought.

And then there’s the chapter on managing cash flow and why this problem can sink even a business that’s flourishing. Honestly, this chapter is so scary that it’s sobering without being funny.

But Roth had me back on page 4 when she doubts Michael E. Gerber’s assumptions in his 1995 book, The E-Myth Revisited. If you’ve forgotten that book, he helps “Sarah” turn around her flawed pie bakery by developing systems to turn over more of the work to her employees and free her own time for higher-level entrepreneurial activities.

Back when I read the book I was thinking that he never asks who would buy all this pie, given that I only eat pie on Thanksgiving.

Roth asks the same question, though she addresses this issue in terms of a more profound concept: consumers improving their diets.

And then she asks other questions contrarians ask, like “What kind of a return on your investment can you get from a pie shop? Does it justify all of the risks Sarah has to take?”

Yeah, good question. Well, does it?

Roth asks questions of the reader throughout the book and by the time you finish reading it, you’ll agree with one of her most important points: “You can do anything you put your mind to, but just because you can, doesn’t mean you should.”

Where does freelancing and consulting fit in the picture? Roth classifies them as job-businesses in which you’ve created a job for yourself but you aren’t building a business with equity value that can be sold.

She says, “If you are just creating a job for yourself, you not only forgo equity value, but you now have a job that takes more time and energy and risk than any job you could otherwise get. “

OK, so freelancing and consulting don’t come out looking so good either.

But in all fairness, Roth’s one weakness is that she underestimates how hard it is to get a good job. In Roth’s world, good workers are recognized as such and are appropriately rewarded.

The people she knows who decided to stay with their jobs or close down their businesses in favor of jobs got hired in an instant and went on to numerous promotions as easy as Sarah’s pie.

Still, this is a book you’ve got to read. I’ve read many books on entrepreneurship and this one is truly different . . . and better.


Originally posted 6-19-11

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