What Being an Entrepreneur Means: A Sober Assessment

Is it worth being an entrepreneur?

There are two narratives about being an entrepreneur. One is about freedom, success, and one's own work. The other is about sixty-hour weeks, sleepless nights before payroll, and vacations in which the phone rings. Both are true, and both are incomplete. Whoever is considering founding a business, whoever has run one for years, or whoever is thinking about selling deserves a more sober picture.

This essay therefore pursues one question: What does being an entrepreneur mean when income, satisfaction, security, and health are weighed against each other, and why do so many choose it nevertheless?

To answer it, I first clarify what is meant by entrepreneur and introduce a model that explains the satisfaction of the self-employed. Then I go through the individual items of the balance sheet, weigh two readings, and end with a personal balance sheet that anyone can draw up for themselves.

What is meant by entrepreneur

Entrepreneur here means people who run their own business and bear the economic risk, from solo self-employed people to owners of a business with a few dozen employees. Most studies speak of the self-employed and compare them with paid employees, that is, people in employment. This distinction is rough. A master craftsman with twelve employees and a translator who works alone have very different daily lives. Where it matters, I say so.

The article from founder to business owner also distinguishes two ways of working: the founder produces results through their own doing, while the entrepreneur produces results through others. The burden changes with the role.

The thinking model: procedural utility according to Benz and Frey

In 2008 the economists Matthias Benz and Bruno S. Frey explained an observation that had long puzzled many economists. If the self-employed do not earn more on average and work longer hours, why do they stay self-employed? Their answer is procedural utility. It means that people value not only outcomes such as income and leisure, but also the conditions and procedures under which these arise. Not only the what counts, but also the how.

For work, Benz and Frey distinguish two fundamental ways of deciding: the market, on which people decide independently, and the hierarchy, in which decisions are made by superiors. The self-employed stand on the side of the market. They are not subject to instructions, only to the conditions of their customers. According to their model, this self-determination has a value of its own that appears on no payslip.

An everyday analogy: two people eat the same dish. One cooked it themselves, the other was served it. The outcome is the same, the experience is not. Whoever cooked also enjoys the cooking, even if it took longer.

Item 1: income and security

The item least openly talked about is income. Hamilton (2000) examined for the United States what the self-employed earn compared with what they could have expected in employment. Most entrepreneurs entered and stayed even though they had lower starting incomes and lower income growth. After ten years, the median difference was around 35 percent. It could not be explained by less able employees moving into self-employment. Hamilton concludes that the non-monetary benefit of self-employment must be considerable.

The median matters here. It describes the typical case, not the average, which is pulled upward by a few very successful entrepreneurs. For Germany, Hopp and Martin (2017) show with data from the German Socio-Economic Panel from 1984 to 2012 that the income effect of self-employment varies greatly between groups: women achieved lower income effects than men, immigrants considerably higher ones than people without a migration background.

Security comes on top. The self-employed bear fluctuations themselves, receive no continued pay in the first days of illness, and provide for their own retirement. The article why young companies fail also shows that strongly fluctuating monthly revenue is a warning sign of exit for young businesses. So in the typical case entrepreneurs do not earn more, and what they earn is less secure.

Item 2: satisfaction and self-determination

On the other side stands satisfaction. Benz and Frey (2008) analyzed panel data from Germany, Great Britain, and Switzerland. In all three countries, the self-employed were considerably more satisfied with their work than employees. The difference persisted when income and working hours were taken into account, and it could not be explained by personality traits. The authors also considered it unlikely, based on their calculations, that simply more satisfied people become self-employed.

The difference was explained above all by two features of the work: more autonomy and more rewarding content. Workload and job security, by contrast, did not explain it. A side finding is noteworthy for owners: employees, too, were more satisfied the smaller the business they worked in, and this also was linked to autonomy and content. This fits Deci and Ryan's self-determination theory, according to which autonomy and competence are among the basic psychological needs.

More recent data confirm the picture. Padilla-Angulo, Lucia-Casademunt, and Gómez-Baya (2024) analyzed a representative European sample of 7,878 entrepreneurs. The fulfillment of the needs for autonomy and competence was associated with job satisfaction and psychological well-being, and both in turn with better health. Those who founded because of a recognized opportunity, rather than out of necessity, were more satisfied.

In the typical case, entrepreneurs are not paid with their income but with their freedom. Whoever does not use the freedom has made a bad trade.

Item 3: recovery, health, and loneliness

The third item is the burden. The article the owner's workload describes a study of French small business owners who recovered less than employees in all four areas of recovery, detachment, relaxation, mastery, and control (Le Moal, Thurik, Torrès, and Soenen 2026). According to a large study for Germany, the self-employed are also absent from work considerably less often, and only a small part of that is due to better health (Lechmann and Schnabel 2014).

Then there is the loneliness of the role. The article owner health presents a Hungarian study in which the feeling of being alone in the leadership role was most strongly associated with lower perceived business success. Whoever becomes an entrepreneur loses the boss, but also the colleague on the same level.

Notably, the French study also shows a strength: relaxation and the feeling of controlling one's own time were most strongly associated with well-being. The self-determination that underpins satisfaction thus also protects against exhaustion, if it is actually lived in daily life. An owner who is formally independent but has every hour dictated by customers and emergencies loses precisely the item that balances the sheet.

Two readings: vocation or bad trade?

The first reading sees being an entrepreneur as a vocation. Whoever decides for themselves, shapes things, and stands up for their own work gains something that cannot be expressed in money. Higher satisfaction despite lower income is the evidence for this. According to this reading, the self-employed are not bad calculators but people who calculate differently.

The second reading sees a bad trade that many simply do not notice. Less money, less security, less recovery, and a self-image that barely allows doubt about one's own decision. Added to this is a bias in the data: whoever was dissatisfied with self-employment has often already given it up and no longer appears in surveys of the self-employed. The essay why role models can mislead describes this survivorship bias in detail.

I consider both readings correct, and the condition that separates them is the same: lived self-determination. The findings of Benz and Frey show that the satisfaction of the self-employed comes above all from autonomy and rewarding content. Where both are missing, because the business dominates the owner instead of the other way round, only the cost side of the balance sheet remains. The lesson is not that one should not found a business, but that an owner should take their self-determination as seriously as their liquidity. How the owner's role changes with growth is described in the article the owner's role in a growing business.

The personal entrepreneur's balance sheet

From the findings, a simple balance sheet can be derived that I call the personal entrepreneur's balance sheet. It is suitable for founders before the decision, for owners once a year, and for anyone thinking about selling or withdrawing. Five items are rated on a scale from one to five, each compared with a realistic alternative, such as employment in the same industry.

1. Income

   How high are your withdrawals after tax compared with what you would earn in employment? Include your own retirement provision.

2. Security

   How many months of fixed costs does the reserve cover, and how strongly does income fluctuate?

3. Self-determination

   How much of your week do you decide yourself, and how much is dictated by customers, emergencies, and gaps in the team?

4. Recovery

   How often do you switch off, and when did you last have a week without the business?

5. Creative scope

   How much of your time goes into work you find rewarding, and how much into tasks you only do because no one else is there?

More important than the total is the pattern. If self-determination and creative scope are high, the balance sheet can carry lower income and less security, as research describes. If precisely these two items fall, for instance because the business has grown and the owner only fills gaps, that is a signal. Then more work does not help; different responsibilities, deputies, and decisions about which tasks remain with the owner do.

What carries over and what does not

For public debate, the findings suggest that being an entrepreneur should be neither glorified nor pitied. It is a trade with clear items, and many enter into it deliberately. For owners, a personal conclusion follows: one's own self-determination is not a by-product but a core item that must be maintained.

The limits belong here as well. Hamilton's study comes from the United States and from another time. The satisfaction data are surveys, and the dissatisfied who gave up are missing. The group of the self-employed is very diverse, from the solo self-employed to the owner of a medium-sized business, and averages say little about the individual case. Whether someone is suited to being an entrepreneur is covered in the article is there an entrepreneurial personality? with the finding that personality explains tendencies, not destinies.

Conclusion: what does it mean to be an entrepreneur?

The opening question was
it means to be an entrepreneur when income, satisfaction, security, and health are weighed against each other, and why so many choose it nevertheless. The balance is sober. In the typical case, entrepreneurs earn less than they could expect in employment, bear more uncertainty, and recover worse. Nevertheless, they are more satisfied with their work, above all because of autonomy and rewarding content. Benz and Frey call this procedural utility.

One condition follows: the calculation works out as long as self-determination is lived. For this week, it is enough to fill out the personal entrepreneur's balance sheet honestly once and pay attention to the two items that tip the balance.

Being an entrepreneur means trading security for self-determination. The trade is good as long as one does not give the self-determination away again along the way.