Entrepreneurship vs Employment

Once upon a time there lived two friends Ramesh and Mahesh. They had been friends since childhood. Now both of them have completed their studies. Ramesh aspires to be an entrepreneur one day and started working towards that, whereas Mahesh wants to join a Multinational company and earn good salary. They selected their way of life after carefully studying the advantages and disadvantages of entrepreneurship and employment. The two friends spent long hours discussing and finally parted ways in different direction with a promise that they will meet once in a year and will measure the progress they made in life.

After one year they met and narrated each others story.

Ramesh, the entrepreneur invested Rs.1,50,000 to launch the new business by taking a bank loan. Meanwhile, Mahesh, the Employee invested nothing, incurring no debt or risk. If anything, he invested was a bit of time and photocopier expense in preparing a good resume.

Over the course of the first year Mahesh had a pretty big advantage in terms of income, with a salary that clearly exceeds the Rs. 20,000 owner benefit the Ramesh takes from the business. In Year 1 there is no arguing the fact a six-figure salary, even after taxes, exceeds the Rs. 20,000 owner benefit by quite a margin. Ramesh was willing to accept this.

	Entrepreneur	Employee
Startup Investment	Rs. 1,50,000/-	Rs. 0/-
Year 1	Rs. 2,00,000/- Gross 10% Net Rs. 20,000 Owner Benefit	Rs.1,00,000/-

In second year, things improve for both. The Mahesh received a very nice raise of 5%, and now has a salary of Rs. 105,000 annually. Meanwhile, The Entrepreneur has done better in the business. His gross revenues have increased from Rs.200,000 to Rs.350,000 and his net income percentage has increased from 10% to 15%—but look at what has happened to his owner benefit. Because of the healthy boost of gross revenues and greater efficiency, owner benefit has now more than doubled from Year 1 from Rs.20,000 to Rs. 52,500. Still, The Employee has an advantage in take-home salary, but Ramesh the Entrepreneur is building a business. He has more than doubled the owner benefit and is building the foundation for future growth.

	Entrepreneur	Employee
Startup Investment	Rs. 1,50,000/-	Rs. 0/-
Year 1	Rs. 2,00,000/- Gross 10% Net Rs. 20,000 Owner Benefit	Rs. 1,00,000/-
Year 2	Rs. 3,50,000/- Gross 15% Net Rs. 52,500 Owner Benefit	Rs. 1,05,000/-

Once again in Third year, The Mahesh who is a good employee was rewarded with another salary increase. His Rs. 108,000 pre-tax gross salary exceeds the Ramesh’s owner benefit. But the gap is narrowing. In two years Ramesh has gone from Rs. 20,000 to Rs. 90,000 in Owner Benefit.

Who achieved the greater hike in earnings? Ramesh again. In terms of take-home salary, The Ramesh has at least evened the score, and possibly surpassed Mahesh .

	Entrepreneur	Employee
Startup Investment	Rs. 1,50,000/-	Rs. 0/-
Year 1	Rs. 2,00,000/- Gross 10% Net Rs. 20,000 Owner Benefit	Rs. 1,00,000/-
Year 2	Rs. 3,50,000/- Gross 15% Net Rs. 52,500 Owner Benefit	Rs. 1,05,000/-
Year 3	Rs. 4,50,000/- Gross 20% Net Rs.90,000 Owner Benefit	Rs. 1,08,000/-

Moral of the story:

After three years if we compare, the asset value

• The Employee’s job has an asset value of ZERO! Think about it.
• Does an employee own a job? No.
• Does an employee own their office or work station? Someone else owns these assets—the business owner!

• Speaking of our entrepreneur, look at what happened to the market value of the asset that was created with a Rs. 150,000 investment. Because the Entrepreneur worked hard and created a successful business, he can now sell the business if he wishes. It is now worth around Rs. 2,70,000 (rule of thumb is 3 x owner benefit).

	Entrepreneur	Employee
Startup Investment	Rs. 1,50,000/-	Rs. 0/-
Year 1	Rs. 20,000 Owner Benefit	Rs. 1,00,000/-
Year 2	Rs. 52,500 Owner Benefit	Rs. 1,05,000/-
Year 3	Rs.90,000 Owner Benefit	Rs. 1,08,000/-
Owners Business	Rs. 2,70,000/-	Rs. 0/-

• The start of the exercise, the Rs. 150,000 investment seemed like a significant setback for entrepreneur, while employee enjoyed the comfort and ease of settling into a new office to work for a steady paycheck.

• Within three years The Entrepreneur had built both cash flow and asset value that exceeded The Employee.

This is just the start of the story. …..

ET – The DNA for business excellence

This article is not about the movie ET the Extra-Terrestrial a film directed by Steven Spielberg but about Entrepreneurial Traits that is required in every person who wants to be successful in the field of business. Entrepreneurs are considered vital to the development of our economy since they create wealth and jobs. And while Technofirst through ‘I’m an Entrepreneur’ campaign are always on the lookout for ways to spark entrepreneurship in the campus, no one knows precisely what leads people to start their own business. Whether the entrepreneurs are ‘born or made’, is a question that appears to be the basic argument between nature and nurture. I strongly believe that the entrepreneurs are both born and made. Because when some people are born with natural talent and risk tolerance, entrepreneur-ship skills can be learned by everyone.

Let me share my own experience. I was born in a middle class family where both my parents were social workers. Their was no entrepreneurial culture in my family. Despite all the objections I became family first entrepreneur in 1987 after completing my college education. The year 1987 was still the licensed raj where elaborate licenses, regulations and the accompanying red tape that were required to set up and run business in India.

It's not that certain people are predestined to be entrepreneurs. In addition to in-born characteristics, there are important entrepreneurial skills that can be learned. Chief among these is the ability to see and articulate a vision, as well as to build and motivate a team. Unlike in-born characteristics, there are tools used in the application of these skills, such as opportunity identification, evaluation and communication, and consequently they can be learned from others and continually improved. We all can learn how to do it. But some personal characteristics will lead you to do better than others.

Below is an entrepreneurial assessment test, which will help you in your personal evaluation process. The traits detailed below generally identify who is and who is not cut out to be entrepreneur.

Rate each of the following 11 characteristics using the following scale.

+2	Very strong in this characteristic
+1	Possess this characteristic
0	Don’t know
-1	Have very little of this characteristic
-2	Do not possess this characteristic

Characteristics	+2	+1	0	-1	-2
1. Creative
2. Take Calculated Risk
3. Self-Confident
4. Dynamic
5. Like to Lead others
6. Market Savvy
7. Resourceful
8. Persevere/Determined
9. Optimistic
10. Knowledgeable
11. High Energy Level
Total						Grand Total =

Total your score for the eleven characteristics.

· Add the pluses and subtract the minuses.

· Your score will fall between –22 to +22.

· Below 15? Wait and try another day because if you’re between +10 and +15 you have leadership instincts that can someday put you over the top.

· A high positive score demonstrates you share many of the characteristics of successful entrepreneurs.

· Negative or low positive scores indicate you may not currently possess or rely on these characteristics.

· Low scores do not mean one will not be an entrepreneur.

For example, an individual tested or assessed has all the apparent attributes of an entrepreneur profile and then fails in their new venture they undertake, the mantel of an entrepreneur can never be worn because the word "Entrepreneur" embodies the word "Success".

So you may be wondering how you can work on being an entrepreneur. Here’s a list of a few things that have helped me in the past,

• Realize that all of us have an entrepreneurially side to us,
• If you want to start a business, make sure that you pick something your really passionate about,
• Take small steps, and accept the fact that there are going to be set backs,
• Create a plan on how you’re going to deal with set-backs as they come up,
• Fine tune your idea by bouncing it off friends and family,
• Start making a plan on how you would like your business to start, and how it will grow,
• Constantly improve your skills, never stop learning, and.
• Try to have fun…the more fun you have the better off you’re going to be!

Finally remember, anyone can start a business. The secret is picking a venture that fits your entrepreneurial personality.