Business Income or Earned Income?
There is a lot of work involved with running, and especially starting, a new business. Much of the time, you are basically working for free until you reach that break even point. That break even point can be months or years into the future. And once you finally reach the point where you can pay yourself a little cash flow, it doesn’t seem like much.
Why Not Just Work Overtime?
So, inevitably in coversations I have, I am asked why I put in all this work and grind for a measly cash flow when I can easily just work an overtime shift and make the same amount of money. Well there are many different reasons why and each of those reasons have layers.
Freedom, Autonomy, and Control
One of the main reasons I enjoy earning business income is because is empowering. When customers pay you for a service or product you create it pushes me toward my goal of freedom and autonomy. With my business, I am in control of whom I do business with and I am directly involved in the terms of how we do business. If someone gets shitty with me over the phone I can choose not do business with them. I much prefer this over being told by someone else how and with whom to do business. In my businesses, I am where the buck stops and there is nobody second guessing my decisions or telling me what to do. The satisfaction from that type of autonomy is priceless.
Time Management
Another big perk of running a business is that I am almost in complete control of how I choose to spend my time. Of course, there are always emergency situations that cause me to drop everything and go to work, but for the most part I get to choose how I spend my day. If I want to get all my work done in the morning so I can spend the afternoon relaxing, I have that choice. If I want to get up at 5 am and start emailing prospects I can do that. With a W2 job, there is a set time I need to be at work and a set time that I finish. I have no control over that or how I spend my day while I am there.
In my vending machine business, I choose what and where I buy my product, how I price those products, and when I re-stock. Good luck getting that kind of control when you are working for someone else.
Tax Advantages
Look, it’s pretty obvious that Uncle Sam wants people to build businesses and own real estate. 1% of the tax code tells us what we need to pay tax on-income. The other 99% of the tax code tells us how we can reduce our taxes. This is done by deductions, incentives, and depreciations. If I drive to my W2 job and work an overtime shift, I will pay the most in taxes that way. And to boot, the taxes are taken out before the money hits my pocket.
However, If I hop in my vehicle to go deliver a margarita machine from Life of the Party, then the mileage is tax deductible. The food I ate while I was making deliveries is tax deductible. My cell phone I used for GPS directions now becomes partially deductible. The home office that I work out of to book that job is a tax deduction.
So while each of those situations put money in my pocket, my business put the money in my pocket first and I pay the taxes on that money AFTER I take out my deductions.
Conclusion
Obviously, I am a big advocate of people starting their own businesses. However, in my previous post I dive into some of the struggles and hardship thats inevitable when starting a new business. It’s A LOT of work, but it’s so rewarding. Starting a business doesn’t mean that it needs to replace your full time income on day 1. But in order for it to ever replace your full time income, there has to be a day 1.
My advice is to jump in. Instead of procrastinating by thinking of every angle or trying to learn everything before you start, just make the first step. There will always be a reason why now isn’t the perfect time. Before you know it you’ll have gray hair and ask where the hell the time went. Just go!
