In the past, the conventional wisdom about self-employment went like this: If you left the traditional workforce to work for yourself, you were unlikely to go back. On average, you would also earn less than you would in a corporate career, and face the uncertainties of being out on your own. In short, "Previous research suggests that you have to be crazy to become self-employed because of the negative consequences on earnings and the substantially higher risk," says Gustavo Manso, an associate professor of finance at the University of California at Berkeley’s Haas School of Business.
But that mind-set may need a rethink. In a new study, Manso tracked people’s earnings over time. He found that those who tried self-employment for a while and then re-entered the traditional workforce were not penalized financially. People who’d been self-employed for two years or more and re-entered the traditional workforce actually earned 10% to 20% more than their peers.
In other words, trying self-employment may be a reasonable way to boost your income over time. "The labor market seems to value self-employment experience," says Manso. The skills developed during self-employment make people attractive job candidates, and also help people perform well in salaried jobs.
Stefanie O’Connell, author of The Broke and Beautiful Life, has seen this in her career. She graduated from college with a theater degree in 2008, and soon became a young, unemployed actress in the middle of the financial crisis. So she worked odd jobs to support herself, and started a blog about dealing with her finances. That turned into a speaking and consulting business that, in part, helps organizations reach millennial audiences with financial content.
Within a few years, she found herself getting job offers for market research and content management positions, often at six figures plus benefits — a big step up from the babysitting and waiting tables she had been doing. She ultimately decided to continue to build her own company, but the lesson was clear: "When you start your own business, you have results you can point to. That’s more powerful than theory," she says.
Kristen Domingue spent several years running her brand consultancy before taking a job at Worth FM (a financial management firm) and then at its sister company, DailyWorth. She found that her experience running a company was helpful through the whole process—"Not just landing in [the job], but performing in it," she says. "Doing what had to be done to keep the doors of the business open allowed me to take even greater personal responsibility and accountability in my role as an employee."
That said, using self-employment as a career-boosting strategy carries more risks than staying put. It’s not for everyone, though there are things you can do to make it less risky. O’Connell notes, "I don’t think people have to go all in for this strategy to work for them." You can build a business as a side hustle, working a few hours a day and on weekends while keeping your main job. If you might otherwise spend that time going to school, starting a business instead might be a reasonable alternative for investing in your professional future.
You also have to consider how you tell the story. Sometimes people downplay their self-employment experience, but you can play it up too, by calling yourself a "founder" on your resume and listing results.
But if you do, then "you have a way to showcase the value of your skill set in the real world," says O’Connell, and "you can always leverage that."