Entrepreneurship vs. Employment — the Complete List of Pros and Cons

Daniel Doan

Published:

So you have a brand-new business idea and you’re considering venturing out on your own. Before you take the leap, it’s time to take a careful look at entrepreneurship versus employment. Then, you can decide which path works best for you.

entrepreneurship versus employment, a woman in a woodshop who has chosen entrepreneurship

This guide is designed to share the pros and cons of both lifestyles. From there, you can make the critical decision between entrepreneurship and standard employment.

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Entrepreneurship vs. Employment

Entrepreneurship: The Pros and Cons

Employment: The Pros and Cons

Entrepreneurship vs. Employment

Entrepreneurship and employment come with two very different lifestyles. Before we dive into the differences, let’s start with definitions.

  • Entrepreneurship involves establishing and running your own business or service. Your earnings will be the business’s profits.
  • Employment includes hourly-rate or salary jobs. Here you complete specific tasks and services assigned by an employer.

Entrepreneurs run their businesses and take on financial responsibilities. Meanwhile, employees work for a company and get a set pay rate.

Entrepreneurs handle expenses and business decisions, while employees focus on doing their best and helping the company succeed. Unless they work in accounting, employees rarely have to deal with any of the financial aspects of the business.

Now, let’s review the pros and cons of entrepreneurship and employment.

Entrepreneurship: The Pros and Cons

Becoming an entrepreneur has plenty of benefits that make it an appealing choice. Still, you should understand the drawbacks before taking the plunge. Review the pros and cons below to make an informed choice.

entrepreneurship vs employment. Entrepreneurship pro: managing your company profit, potential for wealth, ability to control your schedule, flexible retirement. Entrepreneurship con: initial costs, financial responsibility, additional stress, taxes, covering salaries and insurance.

Pro: Managing Your Company’s Profit

If you run a business, you’ll receive the profits first. Once you've covered all your expenses — including employee wages — you can save, invest, or reinvest the money.

As you make more money, you can reinvest funds to grow your business.Pro: The Potential for Wealth.

If your business takes off, you could start making six figures a year and take home more as you grow. Profits can increase even if you spend more money to grow your business.

For example, you can build up your cash, create a retirement account, and prepare for the future.

Pro: Controlling Your Schedule

Since you run the business, you can choose your schedule.

You can stack your hours at the start of the week and focus on relaxing during the latter half. You can take breaks to pick up kids, choose to work from home, or work late in the evening if you’re a night owl.

Few positions offer as much flexibility as running your own business.

Pro: More flexible retirement.

As an entrepreneur, you may have the potential to retire earlier than others. Depending on how much your business grows, you can invest heavily and prioritize a comfortable retirement.

You could even pass the torch to someone else, earn passive income, and sell the business once you want to retire.

Con: The Initial Costs

Starting a business requires capital. You have to find employees, pay for the supplies, and secure funding for your venture.

You can cover these upfront costs yourself if you have significant savings. Other entrepreneurs take out loans to cover startup costs or work with venture capital investors.

As an entrepreneur, you’re responsible for securing capital to get your business off the ground. Longer term, you’ll need to pay off loans and maintain your investor relationships.

Con: Potential Financial Difficulties

Starting a business comes with large financial risk. For example, if sales drop, you may have to pull from your own savings to cover the difference. If your business idea doesn’t work out, you may even face bankruptcy.

Remember, entrepreneurship doesn’t have to be your only stream of income. If you're weighing the financial sacrifices of starting a business, consider keeping your full-time role. You can always dabble in entrepreneurship on the side. If profits skyrocket, you can make your side project a full-time job.

Con: Additional Stress and Responsibilities.

At a larger company, you can reach out to accounting, legal, and human resources with any questions. As an entrepreneur, you’re responsible for it all. If you’re not compliance or payroll savvy, you’ll have to learn. You can also hire a consultant or software tools to help you navigate more complex processes.

Wearing so many hats comes with additional stress. Be sure you’re prepared for the emotional investment before you start a business.

Con: Dealing With Taxes

Taxes become more complicated when you run a business. Instead of receiving a form from your employer, you are responsible for calculating your expenses and sending them to your employees.

Taxes can become so complicated that business owners hire accountants to take care of the details.

Before you start a business, choose a solution to help you navigate taxes. That could be an accountant, a software solution, or making a CFO your first hire.

Con: Covering Salaries, Insurance, and Other Expenses

Taxes are just one of the many administrative tasks entrepreneurs face. Until you create an HR department, you’re completely in charge of people operations.

You have to pay your employees their salaries and offer insurance benefits. You’ll also have to ensure that all of your contracts abide by state and local laws. That may include hiring a consultant or keeping a lawyer on retainer.

These costs are necessary for your business if you want to attract the best talent. For many, this laundry list of tasks is intimidating.

Employment: The Pros and Cons

If you’re looking for greater stability and consistency, standard employment may check all your boxes.

However, every role has its challenges. To paint a broader picture, we’ve gathered a list of pros and cons.

entrepreneurship vs employment. Employment pro: consistent paychecks, set hours, health insurance, promotions, career development. Employment con: job loss, working under management, less control, less flexibility, corporate politics.

Pro: Consistent Paychecks

Whether you’re hourly or salaried, you get consistent paychecks as an employee. You don’t have to worry about the business’ performance, but you need to focus on your work.

You’ll always get your bi-weekly or bi-monthly check to keep up with your bills. You also know exactly when your next paycheck will be and how much money to expect.

Pro: Set Hours

Entrepreneurs often struggle with work-life balance. Long hours and late nights are common, especially when a business has just started.

If you appreciate more structure and consistency, many standard jobs will offer you set shifts. Along with consistent pay, you can have consistent hours for your work. This lets you learn your schedule, stick with it, and build your routine.

Today, many companies are also offering more flexible schedules. If you work from home, you can still run out for a quick errand. Or perhaps you can pick which days to work from home to avoid traffic.

If you’re looking for the benefits of standard employment with increased flexibility, you can narrow your job search to meet that need.

Pro: Enjoying Full-time Benefits

If you live in the U.S., health insurance can be expensive. Entrepreneurs are responsible for finding plans for their employees can themselves.

Meanwhile, those with full-time roles often get benefits from their employers. This may go beyond basic health insurance. Dental, life, and vision are often included. Many companies also offer 401K and other retirement plans.

Company size also affects your benefits. Employees at larger companies often pay less out-of-pocket for their insurance plans. Some employees at smaller companies have limited options or must find healthcare plans on their own.

Pro: The Potential for Promotions

Over time, you can seek opportunities for promotions. Promotions give you more responsibilities while allowing you to make more money. You can also try your hand at people management, running projects, or working with senior stakeholders.

You’ll need the experience to receive promotions, but that’s worth the chance to boost your income and prepare for the future.

Pro: Building Your Career

On top of promotions, many companies offer professional development opportunities. That may include upskilling courses, mentorship programs, or employee resource groups to help you meet other professionals.

Working at an established company can also give you a resume boost. Experience at an impressive company can help you secure future roles. Further, the connections can lead to job opportunities as your colleagues change roles.

Con: Potentially Losing Your Job

At large companies, hiring and layoff decisions are completely out of your hands. If the economy or your revenue changes, you risk losing your job. Whether you fail to perform or the company eliminates positions, you could find yourself without a job when you least expect it.

Changing jobs requires updating your resume and seeking new opportunities, which can be challenging.

Con: Working Under Management

Employees always have to report to someone, usually to a manager. Even if you climb the corporate ladder, you’ll need to report to senior leaders or your executive board.

Some people may dislike the ever-present authority and find it challenging to work in a structured environment. In these cases, entrepreneurship offers more flexibility.

Con: Having Less Control

Employees have little control over businesses. A company may make a decision you don’t like, which could lead to new procedures. Unfortunately, you have to follow specific ideas, techniques, and choices even if you dislike them.

While you can express frustrations and try to encourage change, you’ll need buy-in from more senior leaders to execute your ideas.

Con: Less Work Flexibility

Even as companies switch to more flexible modes of work, you’ll still need to stay true to your schedule and tackle your responsibilities.

If you’re planning a vacation, you’ll need to have your time off approved. You’ll need to take sick days if you can’t complete your work. You may even need to find someone to cover your shift.

It depends on where you work, you may also have a rigid schedule and requirements to be in person. Here, you’re responsible for clocking in and out on time.

Which Path is Right for You?

Reviewing the pros and cons of entrepreneurship and employment can help you find your ideal career path. Be sure to consider your personality, financial situation, and business savvy before making a decision.

Remember, you can switch between entrepreneurship and typical employment. You may start your career in an office and launch your business years later. Or you may work at a startup and decide a more traditional environment is a better fit.

No matter what you choose, be sure to check in with yourself and regularly review your chosen career path.

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