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Why Should Successful Corporate Employees Not Start a Side Business?

I just realized that everything I have been blogging about to date has been horse crap.

It is absolutely false information that has misguided so many aspiring corporate employees to start a side business.

As a result, an outraged group of “side-giggers” set my house on fire.  But then I woke up this morning and realized that it was just a bad dream.

Yeah. I made that dream up. A dream which is counterintuitive to everything I stand for and talk about on my blog.  But hang with me for a few sentences here and there might be a valuable take away for you, especially if you are in a successful corporate career.

The Value of Your Time

Should you start a side business?  That question can be partly answered if you know the value of time.  Do you know what your time is worth to you and to your employer?

Consider this example. Let’s hypothetically assume you are a consultant and make the equivalent of $60 an hour.  What do you think your employer makes for every hour you work on your client?

Your client is really your employer’s client, and because your employer has to pay you as well as for your computer, office rent, lavish lunches and dinners and much more, they likely bill your client 5 times what you make, or $300 per billable hour that you work.

From the above example, we can conclude that one hour of your time is worth $300 to your employer and $60 to you.  Do you see an opportunity here?  Are you thinking about getting on your own and providing the same consulting services to your own clients at a rate much lower than what your employer charges but much higher than the $60 you get paid?

Although you may not be able to charge the full $300 to your client if you worked for yourself, you maybe able to triple your hourly wage easily while getting more time off from work too.  The fundamental question to answer is what is your time worth to you? Is it $60? Is it $120? Or is it $180?

In other words, are you willing to simply work more hours and make the same $60 you make at work?  Or is your free time worth more than that? If so, how much?  What can you reasonably expect to command and get paid if you worked on the side for yourself?

When Should You Start a Side Business?

If you are confident that you can make a lot more working for yourself, then starting a side business as a freelance consultant or contractor might sound like a no brainer to you at this point.

However, consider that there are limited hours in a day and the things you like to do with your free time.  How do you put a price tag on hours spent with friend and family, for fun and pleasure?

While the answer varies across the board depending on personal situations and preferences, only you can answer this question for yourself.  Whatever that monetary value or worth is, be sure that you are clear on it.

Lack of clarity can cause confusion, and often leads to professionals to accept side gigs that pay less than what their spare time is worth to them.

When Should You Not Start a Side Business?

Hopefully the answer is quite obvious at this point.  You shouldn’t start a side business if the return on time invested is lower than what’s acceptable to you.  I can appreciate that there are several other factors involved as well that may contribute to you taking up a lesser paying task in your free time such as a burning passion for an activity.

For example, I am quite confident that FMF makes more per hour in the office than he does refereeing soccer games.  However, being out there on the field allows him to pursue his passion while spending time with his son.  The money is simply icing on the cake.

However, strictly speaking from a financial perspective, starting a side business makes sense if you project your business to earn you more money per work hour input compared to your career or job, therefore increasing your effective hourly wage rate.

Sure, you will still end up trading spare hours for dollars, but can you increase the dollars per hour significantly enough to compensate for lost free time?  Again, this is where the clarity of the value of your free time comes in to play.

If the answer is no, you might be better off spending your free time with family, friends and other activities that you derive pleasure from, unless of course you either desperately need the money, are bored or want to purposely indulge in activities knowing that it is a poor decision from a financial perspective.

Concluding Thoughts

Personally, it takes quite a bit for me to pursue a task that eats into my personal time.  I have done it sparingly on a selective basis, but the reason I have worked over the years to design systems and processes that work on auto pilot is so that I can increase my “personal time”.

I do realize that not everyone is in the position that I am in.  For numerous reasons, may successful working professionals start side businesses, and while I am a big advocate of doing so, many fail to calculate what their time is worth to them and therefore end up working for peanuts when compared to the alternative.

There are countless opportunities out there to make money, and some are better than others from a financial perspective.  A thorough evaluation of each opportunity is critical to ensure you are spending your time in a manner that provides the highest return on time invested.  Some factors to consider are scalability, investment capital, initial time requirement, ongoing time requirement, compliance requirements, cash out potential such as a sale, etc.

There are many blogs and websites, including mine, that constantly publish the top X business ideas, top side gigs, this, that and the other.  However, take a step back and evaluate your individual situation before diving into one.  Only you can answer what your spare time is worth to you.  Get clarity, pick wisely and don’t sell yourself short.

Just Looking Out

~ This was a guest post I had published on the Free Money Finance blog back in December.  Because this blog is relatively new, I want to ensure my readership doesn’t miss a beat

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6 Responses to “Why Should Successful Corporate Employees Not Start a Side Business?”

  1. Sunil, this may be a stupid question. How can you calculate the “potential” ROI when you start a business. I understand you are talking about taking what you do already and freelancing here as an example, but if I want to start an entirely new business. Lets say blogging, which is a hit or miss and will take quite some time to bring in any dollars. How do you figure out if it is worth it?

    I just gave myself a deadline, because this is something I like, I will do it for 1 yr. If I didn’t make any money I would still do it, but less frequently and when I get some time not do it as regularly as I do now. What would be a good approach?

    • Sunil says:


      That is an excellent question and definitely needs further discussion. The approach will vary based on the business model you pursue. For example, when freelancing, you can decide what work to take and what rate to charge, therefore your hourly wage is rather predictable. When you purchase a business, your earnings from the business (providing record keeping is accurate) is also rather predictable.

      When you start a brick/mortar business from scratch, you can project earnings based on models you form based on research (let’s say a competitor in a similar market). Blogging is similar wherein you can benchmark, although I do not recommend that angle for various reasons. Blogging is a whole different ball game in my opinion, and I am with you on your approach. You give yourself a timeline but you also monitor progress closely and tweak your goals accordingly (because when starting out one may not have a realistic understanding of what the goal/potential is).

      That said, one should start blogging out of passion / desire and genuine interest. Income. although a goal, shouldn’t be at the forefront at all times. Doing so will only increase to odds of failure.

      One other note, blogging is or can be an extremely scale-able business, which makes calculating ROI a bit tougher. Example, just a few years back my wife started a hobby website, and I helped her with the technical stuff like structure, interlinking, SEO, marketing etc. The site didn’t make money for 11+ months, but today is making a few thousand dollars on auto pilot monthly. Tons of hours were put into it during the 11+ months, however it is barely touched now.

      How does one calculate ROI on that beforehand? We frankly didn’t care to, because it was a hobby site and something we were both passionate about.

      Clear as mud I know. My apologies – I may have left you with more questions than what you started with?

  2. Sunil, you make great points about how an employee’s hourly rate differs from the hourly rate the employer collects from the client. Absolutely, that represents an opportunity for independent work. That’s a good way to look at it.

    Really, the opportunities can be there, if one is good at what he or she does, has marketable skills can network well, and can sell ideas and business to clients. It’s also a frame of mind and risk tolerance that folks need to have, as many people are conditioned to be employees. But the way you presented the billable rates figures should get people’s minds working.

    Good post, all around.

    • Sunil says:

      Totally my friend, you nailed it by mentioning the key phrase “frame of mind”. Perspectives vary, and thinking about the same thing/situation from various angles or perspectives influences that which we hold in our own minds. Social conditioning is a tough beast to get over. Lots of inertia against us. But that is why the rewards are tremendous for those that dare to dream.

      Changing one’s financial situation is not difficult at all, but for those that “know” how to. The “know-how” can be acquired through knowledge/education. But for those that do not think from that angle, changing their financial situation seems impossible to them, often leading to the “blame game” or the “fate game”.

      It’s like traveling. For those who travel and have seen the world, the world is simply not enough, in fact it is too small. But for those that have not left their city, state and even country, the world is tooo big. No wonder folks are wanting to go to Mars these days.

  3. Great post! Hope FMF doesn’t mind that you republished it b/c although you wrote it, it may mess with Google’s search.

    I wrote a post on called “If Was A Start Up Company” which addresses this issue in a different way. Essentially, we’d be loss making by $20,000+/month 🙂

    Best, Sam

    • Sunil says:

      I hear ya on search rankings Sam. FMF thankfully allows guest posters to post the content on their blog, but only after it is posted with FMF first.

      Google will ignore the post on my blog from an SEO perspective and credit FMF for the original content. I am not so much concerned about it, rather want to ensure my readers get a dose of the post as well.

      Are you saying that you would be running a $20,000 loss per month because of salary related opportunity cost? I can believe that. Now if only you could write that off as a charitable deduction on your 1040 🙂

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