Salary earners and Business owners

A fundamental difference between a salary earner and a business owner is the guarantee on wage.

  • Salary earner: Characterised by a minimum wage set by Government and maximum wage set by Employer.
  • Business owner: No minimum wage, No maximum wage. Sometimes, No wage.
  • Salary earner: Wage is unidirectional – upwards.
  • Business owner: Wage is multidirectional – it depends.
  • Salary earner: Wage payment is protected by law.
  • Business owner: No protection.
  • Salary earner: Entitled.
  • Business owner: Grateful.

One of the difficulties in migrating from being a salary earner to being a business owner is loss aversion.

  • Salary earners will rather gain, than not lose. They hedge their bets on possibilities.
  • Business owners will rather not lose, than gain. They hedge their bets on probabilities.

This is because the salary earner has known more peaks than valleys, but the business owner has known more valleys than peaks.

The best examples on why high risk does not equal high reward, are found when a salary earner starts a business.

If you are a salary earner wanting to own a business, try starting with the stock market. It is a great school on risk, probabilities, reward and uncertainty. Buy into a business and study it like an owner. It helps. It will build your temperament and understanding on what you can control (risk) and what you cannot control (return).

– Osasu Oviawe