Hello small World!

Owning a small business has been compared, pejoratively, to buying a job. In ten percent unemployment America it doesn’t sound so bad anymore. Once upon a time people invested in their own businesses because they felt that they could make more working for themselves than working for someone else. Today many start or purchase businesses because they feel more secure being responsible for their own earnings.

Working for yourself as opposed to working for someone else can be compared to minority verses majority stockholder interests. Investors are willing to pay a premium (often a huge one) to gain controlling interest in a firm. They reason (not necessarily correctly) that the firm will be better managed under their guidance and (correctly) that their own agendas will be actively pursued with less interference.

Employees (government regulation and labor law not withstanding) retain employment at the whim of the firm’s owners. Their tenure is seldom under their own control. In many states employment can be terminated summarily without cause. Owners of small businesses enjoy indemnity from summary termination. They can be fired, but they’ll have to serve as both the executioner and the condemned.

Of course there is no guarantee that any business will survive. Firms often go under in spite of the best efforts of their owners. Here things get a little muddy. Distinguishing voluntary closure (sale of the firm, retirement, walking away to pursue other interests, etc.) from non-viability is far from easy and may be impossible. Even casual research will yield a wide range of conflicting results concerning business survival rates but it’s generally accepted that about half of new businesses survive four years (averaged for all industries).

According to the Bureau of Labor Statistics the average tenure of employees in the US in 2008 was 4.1 years. In light of current economic conditions it would be reasonable to guess that this number might be somewhat lower today. Just like the business owners discussed above, some of these employees will have left of the own volition and the employment of others will have been terminated involuntarily.

So there you have it. The likelihood that you will still have your job after four years is about equal no matter whether you work for yourself or for someone else. Real job security in the sense of continued employment is the same. However, for many, there must be some sense of security conferred by being the boss, otherwise investors wouldn’t consistently pay more for majority interests. Either way, on average, you’re gone in four years. You might as well be the boss.

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