EVERYTHING FRANCHISING

Benefits of Ownership vs. Employee

Business Ownership provides a significant number of benefits to the owner. For starters, you’re certainly the last one fired. Although it comes with a lot of responsibility, being a business owner allows you to see problems coming so you have a chance to react so you’re in a better position to be proactive rather than reactive.

Being a business owner provides three income streams:

  1. You pay yourself a salary
  2. You gain several tax savings
  3. You gain growth through equity

EVERYTHING FRANCHISING

Benefits of Ownership vs. Employee

Business Ownership provides a significant number of benefits to the owner. For starters, you’re certainly the last one fired. Although it comes with a lot of responsibility, being a business owner allows you to see problems coming so you have a chance to react so you’re in a better position to be proactive rather than reactive.

Being a business owner provides three income streams:

  1. You pay yourself a salary
  2. You gain several tax savings
  3. You gain growth through equity

As the first income stream is self-explanatory, let’s dig a little deeper into #2. Many people don’t realize the tax advantages of owning your own business. Let me illustrate this with an example.

When you pay $100 for a cell phone, you have to have earned $130 in income to pay for that (assuming an average tax bracket). But when you own a business you can deduct all or a portion of that expense to the business. So, if your business earns $130 and you deduct the $100 cell phone as a business expense, you only pay taxes on the remaining $30, around $10. That leaves you with $20 that you wouldn’t have had by being an employee with a salary. A person that was making $100,000 with a job can have the same or better lifestyle making $70,000 with a business for this reason.

With Growth equity, #3, you can sell your business for an amount multiple times your investment. i.e. if you have a business that costs $50,000 up front, but sell it in 7 years for $1.2 million, which equates to 24 times your original investment. You profit from the growth of the company you invested in and contributed to. You achieve wealth accumulation when you sell that business.

In addition, you gain equity on the property your business is on, should you own the real estate. You can sell the business and maintain property ownership that can continue to gain value over the years; thereby creating an asset that can remain in the family or be sold at a later time for additional profit.

Owning a business provides you unlimited income potential on salary and earnings, you can take an owner’s draw and pay fewer taxes. You also can be paid for passively running the business once it’s in motion.

Owning a business provides many lifestyle benefits as well:

  1. You’re free to make your own schedule
  2. You’re free to take vacations whenever you want
  3. You’ve the freedom to take care of your family’s needs as they arise
  4. You pick the location and can move it as you move
  5. You’re able to wear clothing that’s comfortable for you
  6. You have pride and passion for what you do
  7. You make the rules, there’s no boss to report to…YOU are the boss
  8. You choose the clients and co-workers you want to work with
  9. You improve the economy by creating jobs and opportunities
  10. Your sphere of influence is boosted; you can meet other business owners as a result of your mutual business ownership interests and expand your sphere

The Downside of Remaining an Employee

Here are some of the shortcomings of being an employee:

  1. You can be fired or laid off without a warning or chance to react
  2. Your contribution is rarely valued as an employee
  3. You have a single income stream; you’re paid a salary
  4. As you age you become less valuable to the company
  5. Studies show that the typical worker stops receiving raises around the age of 40. These studies also show that workers in their 40’s and 50’s earn only about 10% more than similar workers in their 30’s.
  6. Newest employees are the first to be let go
  7. Your future potential turnover will increase
    • Example: You were with your old company for 10 years and you were laid off. At the new company, where do you think you’ll be on the list when they need to do layoffs?
  8. Not only will your income actually go down; you’ll also have less job security
  9. You are usually capped on your pay
  10. You only get paid for work you have done, can never make passively earnings
  11. You always have to consider where your employer is located and if it’s a reasonable distance from your home
  12. You are essentially a subordinate
  13. You have to follow dress codes
  14. Employer’s values may not align with your personal values
    • Example: Thousands of Enron employees lost their jobs and retirement funds due to corporate malfeasance, accounting violations and unethical business practices

Business Ownership Readiness Quiz

How Strongly Do You Agree with the Following Statements?

1 = Strongly Disagree | 2 = Slightly Disagree | 3 = Undecided | 4 = Agree | 5 = Strongly Agree

IF YOU SCORE AN 88 OR HIGHER, YOU'RE AN IDEAL CANDIDATE FOR BUSINESS OWNERSHIP


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