Are Entrepreneurs Rich? A Realistic Perspective
Entrepreneurship is the posterchild of the concept of “living the good life”. We are constantly taught that if you believe in yourself and work hard enough, you will become rich. This saying is almost always accompanied by images of multi-billionaires who built their wealth from scratch. We are also taught that being salaried cannot make you rich, only entrepreneurship can. If you look at the top-ten names on Forbes List of Billionaires, few of them have inherited wealth and absolutely none is a salaried person. Almost everyone who features on the world’s rich list is an entrepreneur.
So, it would appear that everyone rich is an entrepreneur. But are all entrepreneurs rich? Is it a valid idea that being an entrepreneur equates to being rich?
Before we delve into the fundamentals of these questions, let’s first do some housekeeping with the definitions. What is entrepreneurship? And what is being rich?
An Entrepreneur
entrepreneur noun
en·tre·pre·neur | ˌän-trə-p(r)ə-ˈnər
Someone who organizes, manages and undertakes the risks of an enterprise or business
The Merriam-Webster dictionary defines an entrepreneur as one who organizes, manages and undertakes the risks of an enterprise or a business. From the outset, we can see that there are “risks” involved. More on that later.
From this definition, you might genuinely ask yourself whether an entrepreneur simply means someone who “starts their own business to make money” or there is an additional implication of this person being innovative and having the capacity to see unusual trends. The short answer is that it could be either of the two or both. Usually, entrepreneurs start their own business to make money, are willing to take risks, and have a far-sighted nature.
With this definition in mind, there are two schools of thought about the origin of entrepreneurs:
- i) Entrepreneurs are born: this argument states that entrepreneurs are simply people who are born with a particular set of skills that make them successful in what they do.
- ii) Entrepreneurs are made: this argument states that entrepreneurs can be “nurtured”; that the particular set of skills that entrepreneurs have, can be taught and learnt by anyone.
In a short while, you will see how these two schools of thought come in when trying to answer the question of whether entrepreneurs are rich.
What is being Rich?
Being rich, without going into dictionary definitions, is simply having a lot of money. Making money is a huge part of the economic and social system we live in. Money is a measure and a means to many things, so having a lot of it is important. For you to be rich, it means you have accumulated enough money to buy comforts and luxuries that the average person in society cannot afford.
However, there is a small but significant distinction between being rich and being wealthy: Being rich does not mean being wealthy. And this little distinction will ultimately answer our question of whether entrepreneurs are rich.
Most Rich People Are Entrepreneurs, Not All Entrepreneurs Are Rich
Having made these two key definitions, do entrepreneurs have the characteristic of being rich?
If we take a quick look at the well-known global entrepreneurs, we can quickly establish that they are rich. They have a lot of money. We can also deduce that they are wealthy. This means they have a lot of wealth, which comes from fixed assets, stocks, passive income streams, and alternative income streams. They could afford not to work, if they so wished, but would still maintain the same standard of living.
Some entrepreneurs are not wealthy. They simply have a lot of money and cash flow. They can afford the latest designer brand and travel to the most exotic places. Because of their entrepreneurship journey, they are rich.
On the other hand, there is the notion of “poor entrepreneurs.” Some people work hard, take risks, and tick all the boxes of being entrepreneurs. But they do not make much money and so are not rich. We can see that there are levels to being an entrepreneur: You could be rich, you could have wealth and you could be a poor entrepreneur.
Rich Entrepreneur, Poor Entrepreneur
“Rich Dad, Poor Dad”, the world-renown book by Robert Kiyosaki, dedicates its pages to teaching the difference between a rich mindset and a poor mindset. From the book, you can learn that there are people who work hard, some of them entrepreneurs, but they simply do not make enough money to be rich.
Delving further into this idea, we can take a glance at less developed parts of the world where people work just as hard as other parts of the world. One could argue that at times they work even harder, but this labor does not translate to riches. Sometimes, the system or the environment has barriers that they cannot overcome. In any event, such people are still entrepreneurs. They possess the qualities and traits of entrepreneurs, but they are not rich.
(Source: IZA World of Labor – Entrepreneurship for the poor in developing countries cc License)
According to the IZA World of Labor, many workers in developing countries are engaged in entrepreneurship. Evidently, not all entrepreneurs are rich.
Entrepreneurs do not Have the Luxury of Living Paycheck to Paycheck
We mentioned earlier that entrepreneurs take risks. One of these risks is, they do not have the luxury of living paycheck to paycheck. Unlike employed people, entrepreneurs do not have a constant salary. Elon Musk once said entrepreneurship is like “chewing glass while staring into the Abyss.” Simply put, entrepreneurs have to survive. An entrepreneur always has to worry about fixed costs like salaries, office space leases, transport that just gobble up money. There are many other constant worries like whether the business will take off.
“Running a Start-Up is Like Chewing Glass While Staring into the Abyss.” – Elon Musk
Many entrepreneurs start on the journey but quit along the way because there is no comfort of a regular income – or in fact, no income at all. The outlier trait of entrepreneurs is that they can face this risk and withstand it. It is also known that most entrepreneurs are on a fixed salary. Many entrepreneurs forego earning a salary until the business takes off.
In contrast, in a study called Does Entrepreneurship Really Pay by the Berkeley-Haas Faculty, it was established that entrepreneurs earn more than salaried people. But the study goes on to demonstrate that the entrepreneurs are more aggressive, have risk-taking traits and are resilient. Again, this is the main trait of entrepreneurs that make them end up rich.
All successful entrepreneurs know that it is a journey
There is no better example for this than the story of Steve Job’s journey found in the book Steve Jobs: The Journey Is the Reward. This book speaks of the Apple founder’s long entrepreneurship journey, providing an insight into his early life and how he built an empire of immense fortunes. Jobs was selling computers from his parents’ house in Crist Drive, in Lost Altos, California. In 1976 the first Apple computer was sold , by 1978 Jobs was worth over US$ 1 million at the young age of 23. This was way before Apple became the billion-dollar venture that we know today.
Looking at this astronomical success, it is easy to ignore those first two years of Jobs’ entrepreneurship journey. At this time, he started his company, he was taking risks but he was not rich. Legend has it that he had to sell his Volkswagen to afford to build the first batch of calculators for the first Apple computer.
Fulfilment
At the beginning of this article, we mentioned that being rich is not being wealthy. Perhaps that should be your focus in your entrepreneurship journey. Building wealth can be much more fulfilling and significant than accumulating riches. Wealth comes in many ways and is not only monetary.
We also established that entrepreneurs could either be born or made. Whichever the case, the prevailing trait in entrepreneurs is that they are resilient. During the early years of a startup business, most entrepreneurs are not rich. However, they withstand this storm and take their journey towards riches gracefully.
On the other hand, it is easy to look at the big names of the entrepreneurial world because the economy and society we live in make it seem like these are the worthiest. But we should also be realistic that not every entrepreneur will have the opportunity to be a breakout success and join the big leagues.
As an entrepreneur, you will always face the risk of not being rich, at least in the initial stages of your journey. There is also the risk that your business will fail. Statistically, 90% of startups do not succeed.
Most times, realistically speaking, being an entrepreneur is not all about being rich, it is about having fulfilment, freedom, experience, networks and connections. It is about finding fulfilment in building something that will change society. Being rich is just a byproduct of entrepreneurship.
