Entrepreneurship is a manifestation of the American dream. Anyone, with the right idea and enough hard work, can become successful. We see images of multi-billionaires like Mark Zuckerberg and Richard Branson, who built empires from scratch, and we’re taught that there’s no upper income limit for business owners in a capitalistic system.
Accordingly, hundreds of thousands of new entrepreneurs every year write business plans and gather funds for their chance to strike it rich and build enough wealth to last the rest of their lifetimes. 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 while employed in a full-time job. Rather than being capped at whatever value your company determines you to offer, you’ll create your own value by owning a business with no upper limit on profitability.
Whatever money the company makes beyond what it invests in itself is yours to keep, and you might see an even bigger payday if you sell your company to a bigger institution. 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 are paying themselves a full-time salary, and they’re making $68,000 a year. That number rises and falls from year to year, but hovers around $70,000.
Of course, that number doesn’t include any additional profits that business owners reap, or what they make if and when they eventually sell the business. However, it does provide a portrait of how the “average” entrepreneur performs on a regular basis.
The median household income in the United States is $52,000, putting entrepreneurs above average, but remember, there are entrepreneurs who make far more and far less than this.
Chances of Breakout Success
We like to celebrate the big winners of the entrepreneurial world, because our capitalistic and materialistic society deems these people to be the most merited, and the best representations of the American dream in action. However, it’s not reasonable to think that you’ll have a strong likelihood of becoming a multi-billionaire.
It’s certainly possible, but only a handful of entrepreneurs — out of the 28 million small business owners in the United States — eventually get there.
Chances of Failure
It’s commonly reported that 90 percent of startups fail, but this number is a misrepresentation of the real statistics (and for several reasons — it doesn’t define failure or a timeframe). Even so, it is true that the majority of businesses do eventually fail, even if it’s barely a majority.
After 4 years of operation, approximately 50 percent of businesses are still open, though that number does decline as the years progress. Does that mean you have a 50 percent chance (or higher) of failing? Not necessarily. Much depends on the nature of your business and specific circumstances, but it does mean that entrepreneurship isn’t an easy or straightforward way to get rich.
What Entrepreneurship Does Give You
It’s uncommon for entrepreneurship will 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, to lead a team, or to leave behind a legacy for their 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 coworkers. You can take days off when you feel like it, and set your own schedule. For some, that’s far more valuable than straight money.
· Experience. Even if your business fails, you’ll walk away with more experience, which you can 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 that you can use in future endeavors, whether that means finding a new full-time position, or knowing partners to work with in creating future businesses.
Does Entrepreneurship Make You Rich?
The bottom line is that entrepreneurship can make you rich, and in more ways than just material wealth, 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.
If you want to become an entrepreneur just because you see it as a shortcut to “get rich,” you may need to rethink your priorities. However, it does offer significant potential for those willing to work for it.
For more content like this, be sure to check out my podcast, The Entrepreneur Cast!