Entrepreneurship is a manifestation of the American dream. Anyone, with the right idea and enough hard work can become successful, the saying goes. And, indeed, we constantly see images of multi-billionaires, like Mark Zuckerberg and Richard Branson, who built empires from scratch, and are taught that there's no income limit for business owners in our capitalistic system.
Accordingly, hundreds of thousands of new entrepreneurs every year write business plans and gather funds for their own chance to strike it rich and build enough wealth for a lifetime. But, is the idea of using entrepreneurship to get rich just a pipe dream? Or is it a legitimate way to build that level of wealth?
Entrepreneurship is a way to unchain yourself from the fixed salary you’ll make at a full-time job. Rather than being capped at whatever value your company determines that you offer, you’ll create your own value by owning a business with no upper limit on profitability.
Whatever money your entrepreneurial company makes beyond what it invests in itself and its operations is then yours to keep; what's more, you just might see an even bigger payday if you sell your company to a larger organization. But, as you might imagine, the path to wealth from entrepreneurship isn’t as straightforward as that picture would have you believe.
The average salary
A study by American Express OPEN found that more than half of entrepreneurs surveyed were paying themselves a full-time salary, and typically making $68,000 a year. That number rises and falls from year to year, but hovers around $70,000.
Of course, that paycheck doesn’t include any additional profits that business owners reap, or reflect what they make if and when they eventually sell the business. However, it does provide a portrait of how the “average” entrepreneur performs.
Because today's median household income in the United States is $52,000, entrepreneurs -- given that average $68,000 a year -- are earning above average.
But, remember, there are entrepreneurs who make far more and far less.
Chances for breakout success
We like to celebrate the big winners of the entrepreneurial world, because our capitalistic and materialistic society deems these people the most worthy, and the best representations of the American dream in action. However, it’s not reasonable to think you have a strong likelihood of becoming one of them -- as well as a multi-billionaire.
That's certainly possible, but only a handful of entrepreneurs -- out of those 28 million small business owners in the United States -- get there.
Chances for failure
It’s commonly reported that 90 percent of startups fail, but this number misrepresents the real statistics (and for several reasons, it doesn’t define failure or include a time frame). Even so, it is true that the majority of businesses do fail, even if they barely constitute a majority.
The good news is that after four years of operation, approximately 50 percent of businesses are still open, though that number does decline as the years go on Does that mean you have a 50 percent chance (or higher) of failing?
Not necessarily. Much depends on the nature of your business and your specific circumstances, but it does mean that entrepreneurshipis neither an easy or straightforward way to get rich.
What Entrepreneurship Does Give You
So, yes, it's uncommon for entrepreneurship to make you rich, at least in the material sense. But being an entrepreneur comes with a host of other benefits:
- Fulfillment. For many, entrepreneurship is about fulfilling an inner desire to build something, lead a team, or leave behind a legacy for one's children. Whatever the case, entrepreneurship can lead to inner fulfillment, rather than just a big paycheck.
- Freedom. As your own boss, you’ll have the freedom to create and capitalize on whatever you want. You can create the work culture you want and hire your own workers. You can take days off when you feel like it, and set your own schedule. For some, that’s far more valuable than just money.
- Experience. Even if your business fails, you’ll walk away with more experience to use in your next endeavor, whether that means starting another business from scratch or returning to the professional world.
- Contacts. You’ll also get more visibility as an entrepreneur, which can lead to stronger connections for future endeavors, whether that means finding a new full-time position, or knowing which partners to work with in creating future businesses.
Does entrepreneurship make you rich?
So . . . back to the original question. The bottom line is that entrepreneurship can make you rich, and in more ways than just materially. But it's not the only way to become wealthy, and becoming an entrepreneur is certainly no way to guarantee you'll be able to build wealth.