In my recent Money story on entrepreneurship, I wrote:

…perhaps you’ve wondered, “Wouldn’t I be better off working for myself?”

Tough question. Certainly if you look at your neighbors with real wealth, you’ll see a lot of entrepreneurs: Half the families with a self-employed breadwinner claim a net worth greater than $336,000, and folks who make it big push the average for such families to more than $1 million. Then again, you could meet more than a few business owners in the waiting room at bankruptcy court. In between are lots of people hustling for every buck. Unless you get past that stage, you’ll likely make less than you do now, says William Gartner, who teaches entrepreneurship at Clemson University.

Quitting your job and going it alone is one of the biggest–and riskiest–decisions you’ll ever make. So I think it would be worthwhile to unpack some of the statistics on entrepreneurs.

–Entrepreneurs are richer than the average Joe, but…
The average Joe probably can’t be a successful entrepreneur. Whether you look at people who own businesses or people who work for themselves–not always the same thing–you’ll find that they have higher incomes and higher net-worths than the rest of us. But be careful what conclusions you draw from this. There’s a lot of “survivor bias” in these stats. They tell you a lot about the winners and the people still in the game. But they don’t tell you anything about the outcomes for people who started a business that has already flopped. Those folks just get lumped in with other non-owners and wage earners… or the unemployed.

–Many entrepreneurs would have been better off–financially, at least–sticking to a salary job.
Remember, when you are deciding whether to give up a job to start a new venture, you aren’t giving up the average guy’s salary. You are giving up your salary. And as Clemson’s Gartner observed, there’s evidence that this may be a poor trade-off. This 2000 working paper for the National Bureau of Economic Research shows that low-income people move up the economic ladder if they can survive as entrepreneurs. But those starting with high incomes did less well than they might have had they stayed on the job.

Another 2000 study (not online) by Washington University economist Barton Hamilton asks: “Does Entrepreneurship Pay?” Hamilton’s answer, in a nutshell, is “usually not.” He writes: “After 10 years in business, median entrepreneurial earnings are 35 percent less than the alternative wage on a paid job of the same duration…”

–It’s not about the Benjamins.
In the face of daunting odds, people still start businesses. Is that because they have more of a taste for risk taking than the rest of us? Probably not. A fascinating paper (also not online) by Hongwei Xu and Martin Ruef, “The Myth of the Risk-Tolerant Entrepreneur,” suggests that people who enter start-ups are both more conservative and more pessimistic than the rest of us.

Imagine you have a choice to invest in three businesses. One could earn $5 million but has only a 20% chance of success. Another offers a $2 million profit and a 50% chance of success. The third has an 80% chance of working, but would only yield $1.25 million. People trying to start a business are more likely than others to prefer the safer, lower-return bets.

But maybe in real life entrepreneurs start risky businesses because they don’t see the dangers others do. Xu and Ruef dismiss this, too. They found that only 30% of start-up entrepreneurs think that a typical start-up will eventually be worth more than $1 million, vs. 50% of those in the general population.

If starting a business is financially risk, and entrepreneurs don’t like financial risk, why do they do it? The best explanation is that people start businesses mostly because they want to be their own boss. And if that’s your goal, say Xu and Ruef, it makes sense that you’ll be conservative. You’d rather earn less money and ensure that your venture survives than reach for a big payout only to end up once again punching a clock for someone else.

Cool blog alert: If you are interested in entrepreneurship issues, check out Jeff Cornwall’s The Entrepreneurial Mind. It’s loaded with interesting info and links. I certainly found the blog–and Cornwall himself–very helpful as I was getting my feet wet in the world of entrepreneurs.