Starting a small business is no small feat. You must be resilient and dedicated if you want to build a business that makes a profit and stands the test of time. According to the Bureau of Labor Statistics, roughly 20 percent of new businesses don’t make it past the first year. What’s more, opening a small business during a major economic crisis (e.g., the COVID-19 pandemic) can make your chances for survival even slimmer.
Although entrepreneurship can be a challenge, it’s not all doom and gloom: There are more than 33 million small businesses in the U.S., which accounts for 99.9 percent of all businesses nationwide. Small businesses are the cornerstone of the American economy, and for good reason. If you have a great business idea and want to try your hand at entrepreneurship, weigh the pros and cons first.
Benefits of owning a small business
Being a small business owner may be one of the toughest jobs, but it’s also one of the most rewarding. There are many benefits of small business ownership, and they often far outweigh the negatives.
Independence
When you own the business, you are the boss. You do not have to rely on others or discuss decisions with them. The independence that comes with entrepreneurship is great for those who like to work autonomously.
Flexibility
Entrepreneurship gives you the flexibility to decide your own hours. It may seem like you are working all the time while you are first building your business; eventually, though, you will be able to decide when and where to work — no more 9 to 5. This flexibility is ideal for anyone who operates more efficiently outside of regular office hours.
Power and control
Another benefit that many entrepreneurs enjoy is having power and control. As the head of the organization, you make the rules. You get to establish your company culture and determine what is and isn’t acceptable in the workplace. When you hire employees, they will all ultimately report up to you. This control is ideal for people who don’t like working under authority or reporting back to a boss.
Passion and creativity
Another important benefit of owning a business is the satisfaction of knowing you are the creator of whatever product you put out. You are the vision behind it, and you put it in motion. You get to do what you love in a field you enjoy. You no longer have to drag yourself to a job you hate every morning. Many business owners also love that they can build their business on their beliefs and values.
Financial gains
Although owning a business comes with financial risks, you also reap the financial rewards. If you do not have a business partner or employees, you don’t have to worry about paying them. If you have only a few employees, that means fewer people take a cut of your earnings.
FYI
Once you start making money, you can start paying yourself a salary. However, experts advise paying yourself a modest salary or taking periodic owner's draws to meet your expenses.
Challenges of owning a small business
Entrepreneurs face many challenges on a daily basis. By understanding what common challenges you may face, you can prepare yourself to overcome them.
Diversifying customer bases
Of course, if you are selling a product or service, someone must purchase it from you for you to make money. You should make your customer base as diverse as possible to balance your revenue.
Managing cash flow
Managing cash flow is another large challenge for small business owners. Of course, you need money to make money. You typically need a way to make capital and to access cash reserves quickly. Small businesses don’t typically have this, so entrepreneurs typically have many sources of income. This way, when one source of income slows down, there is still money coming in.
Maintaining legal compliance
You’ll have to jump through many legal hoops when starting a business. Federal, state and local government regulations are constantly changing, which can make it difficult to maintain compliance. For example, understanding your small business tax obligations is a common compliance challenge. You’ll also need to comply with a litany of HR rules and regulations once you hire your first employees.
Sustaining quality while scaling
You may get to a point where your business expands suddenly — intentionally or not. Demand for your product or service may explode; if you aren’t properly prepared, you may experience a decrease in the quality of what you’re offering. This is never a good thing.
It can be a challenge to always think one step ahead when you are focused on day-to-day operations. However, as a business owner, you should keep this potential challenge in mind as much as possible. Plan ahead to strategically scale your business as soon as demand for your products or services increases.
Avoiding burnout
Entrepreneurs work long hours and get little rest. In many cases, until you begin to make money, you will have to do all the work yourself. There is a large potential for fatigue, which can lead to poor decisions and the desire to give up. A healthy work-life balance, even for early stage entrepreneurs, can give you the motivation to build your business for the long haul.
Tip
If you are struggling with workplace burnout, check out our article on how to combat burnout.
Weighing the pros and cons of entrepreneurship
Although starting a business requires great sacrifice, it can also come with great rewards. Evaluate these pros and cons to assess whether entrepreneurship is the right path for you. How much weight each of these benefits and limitations carry will be unique to you. For example, one person might place high importance on independence and flexibility, whereas another might not want to give up the stability of working for someone else.
Another factor to consider is whether your business idea is financially feasible. Some business types have hefty startup costs. In this case, you can either consider a low-cost business idea or explore alternative financing options. You should also test your business idea before fully launching to ensure its viability.
Comments