Should You Start a Company or Stay an Employee

What you're really deciding

Most people asking whether they should start a company are really asking something else. Am I unhappy where I am? Am I wasting my potential?

Those are fair questions. But founding is a bad escape hatch. If the job is the problem, fix the job or change it.

What founders need

• Tolerance for uncertainty. Years without a clear answer, a steady paycheck or a boss to ask.
• A specific pull. One problem you can't stop thinking about, not just a wish to be your own boss.
• Ownership of everything. Hiring, firing, cash, customers, and the mistakes nobody else will catch.
• A support system. A partner and family who understand what the next few years will cost.

What great early employees have

Early employees are often the reason a company works. They bring skill, speed and ownership of their area without carrying the full weight of the company.

If you love building but not fundraising, payroll and being the last line of defense, being employee number one at the right company can be the better seat.

Five honest signs

1. You've already started something on the side and can't put it down.
2. You'd rather be wrong on your own call than right on someone else's.
3. You can go a year without income, or close to it.
4. You've found a problem real people will pay to solve.
5. The thought of a stable job feels heavier than the thought of failing.

If you nodded at four or five, you're probably founder-shaped. If you're not sure the problem is real, start with Is my startup idea any good?

Common mistakes

• Quitting before testing the idea with real customers.
• Underestimating how long the money needs to last.
• Treating employment as failure.
• Going it alone when a co-founder would cover the gaps.

When the answer changes

Life stage matters. The right answer at 25 with no dependants is different from 40 with a family. What's right for you can change, and that's fine. Leadership & Legacy is where I write about what the job costs and what it's for.

What the numbers say about new businesses

The U.S. Bureau of Labor Statistics tracks how long new businesses survive in its Business Employment Dynamics data. Year after year, about one in five new businesses closes within its first year. Roughly half are gone within five years.

That isn't a reason not to start. It's a reason to start with your eyes open, with enough savings, a tested idea and people around you who know what you're taking on.

Founders don't need to be right about everything

Paul Graham wrote that the best startup ideas are things the founders want, can build, and that few others realize are worth doing.

Notice what's missing from that list. It doesn't say you need to be fearless, or a born leader, or great at fundraising. It says you need to be close to a problem and able to do something about it.

A lot of strong founders spent years as employees first. That's where they learned the industry, found the problem and met the people who became their first customers and hires.

Try it before you jump

You don't have to quit to find out. Some ways to test yourself first:

1. Build something on the side. Nights and weekends show you how much you care when nobody is paying you.
2. Sell to one customer. A single paying customer teaches you more than a year of planning.
3. Join an early-stage company. You'll see what founders deal with every day, with less of the risk.
4. Save a runway. Know how many months you can go without a salary before you leave.

If you do decide to start, the next question is how to fund it. Should you raise money or bootstrap? walks through that choice.

Talk to your family first

Starting a company affects everyone close to you. The hours, the money and the stress don't stay at the office.

Before you decide, sit down with your partner or family and talk through the hard parts. How long can we go without your salary? What happens if it doesn't work? What will we protect no matter what, like time together or a savings floor?

Founders who have this conversation early tend to handle the hard years better, because the people at home know what's coming and agreed to it.

Being an employee is not settling

There's a myth that founders are the only ambitious people in a company. It isn't true.

Great companies are built by great teams. The first engineer, the first salesperson and the operator who keeps everything running often shape a company as much as the founder does.

Many of them go on to start companies later, with more experience, more savings and a better network. Some stay and become the executives who take the company to the next stage. Both are good outcomes.

If you're happiest building inside a team, that's a strength. The skill that matters most is knowing which seat fits you right now. I've written more about the people who build companies in is every hire a builder or a grower.

Try it before you jump

You don't have to quit to find out. Build something small on nights and weekends. Sell it to a few people. See how you feel when it's slow, when it's stressful and when someone pays you. That tells you more than any quiz. I wrote about what to expect early on in how to tell if your idea is any good.

Find your answer

The Founder or Employee test takes about two minutes and places you in one of five types, from 'founder-shaped' to 'happier employed', with what that means for your next move. No signup.