Making Money Online Versus Being an Entrepreneur

Back in February at Affiliate Summit West Jason Calacanis made some comments during his keynote that I’ve been thinking about lately. He seemed to think that people were wasting their time earning $100,000 a month in affiliate earnings and they should go out to create companies that they could sell for tens of millions of dollars.

I think Jason’s comments were probably more to get a reaction then a well thought out statement. I think there are some real differences between a “make money online” home based business and being a entrepreneur and doing a “real” start-up.

I think I have a pretty good perspective on this, I have co-founded a software product company, worked at several small companies, and am doing the whole home based “make money online” thing as well.

Here are several reasons why people might want to do one of these over the other.

  1. Different Skill Sets. Building websites, doing SEO and running PPC campaigns takes a very different skill set than trying to organize a company, manage employees and raise funding. Presenting a PowerPoint slide to a VC is not the same as using keyword tools to come up with those winning long tail terms. Although being a “people person” can help with a home based business it is possible to get into it and make money without ever talking to a real person, but you can’t be a hermit and have employees and raise money from investors.
  2. Different Lifestyle Choices. Running a startup usually means long hours, being responsible for other co-founders and employees and worrying about meeting revenue targets for investors. Running a start-up involves a lot of moving parts, and if you are the CEO, you need to make sure each one of those parts is functioning. (For example Jason Calacanis was fixing the air-conditioning at Mahalo today.) Although a start-up can have a relaxed atmosphere with no dress-code and free soda, it doesn’t compare with shuffling to your home office in the morning in your bathrobe and slippers to check the latest stats on you site, and than deciding to go skiing that day. I’m not saying the home business route is easy, but it is a lot more flexible then a lot of other choices.
  3. Life Goals. To some people sitting around at home in their pajamas making a lot of money would not be very satisfying. There are those who would like to build something of substance that they could be proud of. If you start a company that you can sell for tens of millions of dollars you have something you can point to in your life and say “I did that.”
  4. If I believed in things like personality types I would say that running a start-up is for type-As while working at home is for Type-Bs.

  5. Different Risk Levels. When you start a home based business you can start expecting to get some money rolling in within a few months. When you found a start-up, you know it could be a long time before you can attract enough investment money to give yourself a salary. If you don’t have a good bank-roll, you could go hungry a few months into your start-up. If it flops you have nothing to show for it and you have to start from scratch. When you start a home based internet business you can have some reasonable expectation to make some money with enough hard work. And even if it doesn’t really take off you will have a small cash-flow going.

That being said I think there are some similarities between starting up a company and starting a home based business.

  1. Need for IndependenceMost of the people who start home business or start-up companies aren’t satisfied working for someone else. They have their own ideas and want to see if they can make it on their own.
  2. Self Discipline This is the flip-side of the last point. Now that you are out on your own and don’t have anyone telling you what to do, you need to get yourself to do things. If you’re not self-disciplined enough to put in enough work, no business that you start will succeed.

Of course, I think this is a bit of an artificial distinction between home-based businesses and “real” start ups. I look at people like Jeremy Schoemaker and Darren Rowse, who seem to be straddling the line between these two worlds.

1 Comment

  1. online business Said,

    April 29, 2008 @ 12:58 am

    After all the legal aspects of starting a business by doing work online, has been taken care of, it is necessary to find ways to draw customers to your business. Many people who work online, might feel the only place to market their business, is online.

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