Read: If You're Thinking of Becoming An Entrepreneur
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The idea of running a business and “being your own boss” will appeal to most people. Owning a business gives you control over your income but also presents some risks. Now, risk is something most people understand and are fine with, especially if it is within their risk threshold.
What a lot of people don’t sign up for is the day-to-day hurdles involved in running a business. Not many people are cut out for this side of entrepreneurship, therefore, it makes sense if some people prefer not to be directly involved.
For this group of people, entrepreneurship may not be their forte, at least not in the traditional sense of it. So, before jumping on the entrepreneurship bandwagon, let’s help you decide which one you are, a Passive or an Active entrepreneur.
Passive Entrepreneurs
You might have heard people talk about earning “passive income.” This is common nowadays as more people look for ways to boost their lifestyle by earning additional income.
Passive income is, therefore, income that is not the primary income and that is earned from activities that aren’t the primary source of livelihood of the individual in question.
So if you have a strong career going on for you but still need to bump up your income, then becoming a passive entrepreneur is the best route for you. It is also a safer route if you are not sure entrepreneurship is for you but are willing to test the waters.
Common businesses suitable for passive entrepreneurs are real estate rentals, affiliate marketing, blogging, investing in stocks, bonds, or a startup, and earning royalties from intellectual properties.
Passive entrepreneurs are not directly involved in the day-to-day activities of running the business or are involved in businesses that do not require so much investment in time and effort.
Active Entrepreneurs
These groups of entrepreneurs are actively involved in the day-to-day management of every detail of the business. Becoming an active entrepreneur could mean putting your career aside and treating your business as your sole source of income.
Becoming an active entrepreneur is rigorous and would demand a huge chunk of your time, money, and effort, especially at the initial stage. Here are some statistics on self employment.
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45% of working Americans currently have a side hustle.
30% of those with a side hustle said they need the extra money to cover basic costs.
19.1% of side hustlers report that they make more than $1,000 a month.
Most side hustlers spend 5-10 hours per week on their business.
An average side hustle brings in $688 a month, but 45.6% of people report that they earn less than $250 a month from their side hustle.
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Deciding what’s best for you
Here are other points that will help you choose between passive and active entrepreneurship.
- You need a little extra income on the side but are not willing to forfeit your job or career.
- You are just starting a business and are not sure what to do
- You don’t have so much time to run a business since you’re already juggling so much
- You are short on capital and need to work to keep your business running until it becomes profitable
- You want to limit the risk associated with running a business by not putting all your eggs in one basket
- You feel you are not ready to manage a business or are simply not cut out to be an entrepreneur. So you prefer not to get involved in the daily decision-making but rather sit on the sidelines and let your money work for you.
If you agree with most or all of the points above, then you should consider passive entrepreneurship. For most people, switching from passive to active entrepreneurship is a matter of income. Most passive entrepreneurs will give up their jobs or careers once they begin earning consistent income from the business. But before you do that, here are some tips to guide you.
- Test your idea
- Network and connect with others in your chosen industry
- Put your finances in order
- Be resourceful and emotionally prepared
FAQs: Read: If You're Thinking of Becoming An Entrepreneur
Passive entrepreneurship involves earning income with minimal day-to-day involvement in business operations. Examples include real estate rentals, affiliate marketing, or investing in stocks. Active entrepreneurship, on the other hand, requires an active role in daily management and decision-making, often making it the entrepreneur's primary source of income and focus.
Passive entrepreneurship allows you to maintain a steady job or career while earning additional income. It minimizes risks, requires less time commitment, and offers a safer way to test entrepreneurial ventures without diving fully into the demands of active business management.
Active entrepreneurship demands significant time, capital, and effort. Entrepreneurs often face financial risks, potential income instability, long working hours, and the pressure of managing every aspect of the business. This can sometimes impact work-life balance.
Evaluate your risk tolerance, time availability, financial situation, and willingness to manage business operations. For those unwilling to fully commit to running a business, passive entrepreneurship might be a better fit. Ultimately, understanding your goals and circumstances is crucial in deciding which entrepreneurial path to pursue.
Suitable businesses for passive entrepreneurs include real estate rentals, affiliate marketing, blogging, investing in stocks or startups, and earning royalties from intellectual properties like books or patents. These ventures typically require less hands-on management.
- Test your business idea on a small scale. - Network to gain insights from others in your industry. - Organize your finances to ensure stability during the transition. - Mentally and emotionally prepare for the workload and risks involved. Many passive entrepreneurs fully transition once their venture generates consistent and sustainable income.
Entrepreneurship involves the risk of financial loss and income uncertainty, especially during the initial stages. Active entrepreneurs often invest significant capital and time before the business becomes profitable. Passive entrepreneurs face lower financial risks since they are less involved in operations.
Yes, starting a business while maintaining a full-time job is common for passive entrepreneurs. This approach provides financial stability while testing entrepreneurial ventures with less risk. Many side hustles, such as freelancing or investing, fit this model well.
Research shows that most side hustlers spend 5-10 hours per week on their businesses. However, the time commitment can vary based on the venture's complexity and the entrepreneur's involvement.
Entrepreneurship offers personal growth, creative satisfaction, independence, and the ability to solve problems that matter to you. It can also positively impact society and provide a sense of fulfillment by making a difference through your work.
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