Becoming an Entrepreneur Might Not Be as Risky As You Thought

If you're looking for a way to justify your move into entrepreneurship, Berkeley Associate Professor Gustavo Manso's got your back.

Shutterstock

In a recent study, the specialist says there's less risk associated to starting your own business than previously thought.

Overall, Manso's findings indicated those who stayed on the entrepreneurial path throughout their lifetime earned more compared to others who avoided the road less traveled. But if it doesn't work out, he also determined people receive similar lifetime earnings if they eventually return to a salaried position.

Related: How Much Risk Should First-Time Entrepreneurs Take On?

"Would-be entrepreneurs may think they have a huge chance of failure and will be sacrificing earnings for the rest of their lives, but it's not true," Manso says in a University of California Berkeley press release. "Even if the business fails, entrepreneurs don't suffer as much since they are able to quickly transition to the salaried workforce."

Unsurprisingly, research revealed 52 percent of entrepreneurial pursuits lasted less than two years. Most of the folks who returned to traditional working environments did so after they didn't make as much when they went solo. Overall, those who stuck it out on their own made at least 10 percent more.

"The study suggests that becoming an entrepreneur is a rational decision and failing isn't as bad as one would think," Manso says. "It doesn't hurt your lifetime prospects."

For three decades, the specialist followed the careers of entrepreneurs working in a range of opportunities from startups to small businesses. Research included successful and unsuccessful endeavors, as well. Manso also used information from the National Longitudinal Survey of Youth and data from more than 12,000 men and women from ages 14 to 22.

A version of the study is included in Manso's paper, Experimentation and the Returns to Entrepreneurship.