So, you want to start a business?
Its easy to understand why. Business ownership promises professional freedom, a creative outlet, the reward of building something from scratch, and maybe even wealth.
A job + investing can also lead to wealth.
You might rightly decide that chasing a high paying career and investing that salary in the market is the best risk and lifestyle adjusted return on the investment of your time an effort. Being an employee has its benefits and owning a company has many pitfalls. Many “business owners” earn less than their employed peers, work harder, and take more risk.
Owning equity is the only path to wealth.
But the upside to employment is limited, and investing in the markets is a very slow path to wealth creation (it works best over long time horizons…like saving for retirement). By directly owning a venture (as opposed to passively investing in the equity market) you are now in control of
Business vs Self Employment
Self employment is using your skills and trading your time for payment. It looks similar to building a business entity — it has LLC filings, a business name, customers, insurance, licensing, and more — but differs in very important ways. There is nothing wrong with being self employed and many people love being their own boss. Just understand that by not using leverage you are still trading time for money 1 to 1. This limits your wealth creation potential in similar ways as employment, yet has many of the same drawbacks of business ownership. You might argue from a risk and effort adjusted return, that this is the worst of both worlds.
Building a business is different. Building a business uses leverage (capital, machines, labor, media, or technology) and systematization to create a machine that provides a product or service that customers will pay for. The entity exists separate from the owner and would continue to function (serve customers) without the direct involvement of the owner (at least for a time).
The old way
The new way
Leverage is provided by technology. The internet provides the exact customers you need access to (no niche is too small). Startup costs can be less than $100 + your time.