The upside of entrepreneurship

Continuing from last week.

In corporate, it is easy to demonstrate that income does not grow significantly year on year. In fact, the best way for an employee to earn more, is to change job. For someone who has been employed in a corporation at a salary of RO 2,000, the next salary step might be RO 2,100. The growth is minimal and it might take a year. And as time goes by, the longer an employee stays within the same company, the smaller the growth will be, until the salary will eventually plateau.

However, when an employee starts looking for new opportunities, the entry point in another company could be much higher than the current level. The same employee could join another company starting at RO 2,500, with a 25 per cent salary increment compared to a mere 5 per cent staying in the same position. My reasoning is not meant to advocate job hopping, which is indeed not a good sign on an employee’s CV.

Moreover, growth should be measured with different metrics other than salary. For example, staying in the same company for years is a great way to learn about corporate structure, internal dynamics, processes and procedures. Some researchers said that the sweet spot for balancing salary and other less tangible growth elements could be two-and-a-half years.

After that, both the chances of earning more and learning new skills, drop significantly. Two and a half years is also a good amount of time on the CV to show consistence in keeping a job. If after said period, a new opportunity arises within the same organization – such as a transfer to a new department or country – then staying within the organization could be the right move. Two consecutive terms of two and a half year, covering different roles and responsibilities, sum up to a 5 years commitment with the same organization. An excellent asset in any CV.

But let’s explore the endless upside of entrepreneurship. If we look at the statistics, the majority of entrepreneurs earn as much, or slightly more, than a normal salary in the corporate world. Also statistically, an average entrepreneur might work 25 - 50 per cent more than an employee.

So why would anyone do that? Well, here is the deal. While entrepreneurs might not earn a great salary from the get go, they are building valuable assets. Simply put, a company can be sold.

A job cannot. Let us take the example of an entrepreneur working for 5 years on a new business idea. Imagine that in the first year the company makes a loss and the entrepreneur cannot pay salary consistently. Let’s then imagine that during the years 2, 3 and 4, the business starts and continues to grow, thus making room for a salary above average.

Then year 5 comes, and the business has a major breakthrough. A huge client is won and the business generates large profits. Now the entrepreneur still receives a higher than average salary, but also receives a one-time bonus that compensates for the first full year of inconsistent salary. Then year 6 comes, and the entrepreneur sells the business for an amount of money that can buy a property in cash. Time and hard work reward entrepreneurs. [The columnist is a member of the International Press Association}.