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The promise of entrepreneurship is that it can bring fame, fortune and freedom. A blank canvas where you can choose goals, create something that’s truly yours and receive extraordinary recognition.
That promise usually crashes against reality in a hurry.
Entrepreneurs pick ambitious goals and make all sorts of commitments with employees, clients and investors. Optimism is a great thing but it has side effects. One of them is the feeling of being trapped in a job that often feels impossible.
The freedom spectrum
The degree of freedom that entrepreneurs experience is linked to the promises and commitments they make to others. For instance:
Sole proprietors of profitable businesses with few employees have tremendous freedom, especially if they don’t have any debt. They answer primarily to themselves and can make decisions swiftly and think long term.
CEOs of large public companies with demanding stakeholders -investors, board members, employees- are bound by numerous obligations and expectations. Their decisions are often subject to scrutiny and debate. Their mistakes are painfully public.
These scenarios are not inherently good or bad. The ideal level of freedom is a personal choice and it's wise to consider your preferences as an entrepreneur.
Financial strength
One universal truth applies to entrepreneurs at any scale: financial health is freedom. A profitable business with minimal debt gives you options and flexibility. It allows you to weather storms, invest in growth and make choices based on what's best for the business.
Take Berkshire Hathaway for example. It is a massive public company with extraordinary financial strength and a very simple corporate structure with less than 30 people in it. This allows Warren Buffett, its legendary CEO, a remarkable degree of autonomy.
At the other end of the spectrum consider the example of a small consulting practice with $5 million in annual revenues, less than 10 employees and a single owner. This founder enjoys meaningful financial success and the freedom to shape the company's future.
The cost of raising capital
Raising capital can be a powerful tool for accelerating growth, but it comes at a cost – a significant reduction in your freedom. Investors have expectations and you'll be accountable to them. Before pursuing this path, carefully evaluate whether the potential benefits outweigh the loss of control.
Doing it because everyone does it is not good logic. You might be different.
What’s the alternative?
There's a compelling alternative: bootstrapping. Countless startups have reached significant scale without external funding. This path demands discipline and smart financial management, but it can lead to phenomenal success and freedom.
If you crave a life where you’re the master of your destiny, building a profitable, self-sustaining business is a viable option. It requires a relentless focus on financial performance. But it can be done.
Choose your path
Ultimately the freedom you experience as an entrepreneur is your choice. Both the investor-funded and the bootstrapped models work well and can lead to the autonomy that you’re looking for. Both paths will demand that you take control of your company’s finances, that’s not optional.
Building something that aligns with your vision of a fulfilling life is possible. By understanding the tradeoffs, setting your intentions and making smart financial choices you give yourself a chance to make it happen.