For over three years before starting my business, I went through the gamut of emotions, from being excited about the idea to being terrified at the prospect of failure.
I postponed my entrepreneurial journey, researching and brainstorming various ideas. Taking the leap into entrepreneurship required examining my strengths and matching them with customer needs.
However, the real push came from analyzing the advantages and disadvantages of owning my own business. Here are what I discovered.
If you are also wondering whether to buy small businesses or build your own, which one is better for you, I wrote a whole article that I encourage you to read.
Advantages of Owning Your Business
The 2021 SBA statistics show that the US has 32.5 million small businesses and continues to grow. What is the traction drawing many into entrepreneurship?
Let’s explore some advantages of owning your business.
1- Independent Control
The idea of being my boss was a powerful motivator to start my business. Working as an employee, the dread of getting fired was real. I needed a company that would pay the bills without the monster of a termination letter weighing over my head.
Furthermore, running my own business meant making my own decisions. I can take advantage of opportunities that will grow my venture without consulting anyone.
2- Financial Rewards
Running a business means I get all the financial rewards from my hard work. Unlike employment, where my pay is only part of my effort, I will pocket all the profits from my investment in the business.
For instance, a salesperson can sell a company’s product and make huge profits. However, they are only paid a commission, a fraction of the profits.
You can make money with your own business.
3- Flexible Lifestyle
Monday blues, endless meetings about targets, and the office dress code seemed off for me. I wanted the freedom to create my own work schedule and focus on deliverables.
Owning your own business offers you the liberty of a flexible lifestyle. You can take your kids to school, head to the gym before work, and take vacations without authorization.
You choose where and when to work so long as you accomplish the necessary tasks and satisfy your clients. Owning a business can help you have a successful career and raise a family without neglect.
Running your business also means no time wasted commuting to work.
4- Creative Freedom And Growth
Employment may mean working on your assignment whether you enjoy it or not. Your manager may also ignore your creative idea to help the team perform better, resulting in stifled growth.
Many people o jobs they don’t enjoy. They look forward to the end month for the reward and nothing more.
On the other hand, owning your business allows you to do what you enjoy. Your business is probably based on your skills, passion, and interest. This makes it easier to grow and gain personal satisfaction.
Money becomes the result of your passion, not something you chase after. You can implement your ideas, know your customers intimately, and watch your business soar.
Owning a business is prestigious. Your company offers you the right of ownership, meaning potential clients will likely listen to you.
When your business accomplishes great things in the industry, you attract more attention as the boss.
6- Tax benefits
Business owners also enjoy tax benefits in most countries. They are given tax breaks, allowing them to claim certain expenses such as travel costs, utilities, and office equipment costs.
I encourage you to consult accountants to help determine which expenses you can claim to reduce your tax obligations.
7- Building Equity
Owning equity is another reason to be self-employed. Owning your business allows you to build something you can pass on to the next generation.
Since a business is an asset, you can sell it or invite investors to invest money. You can then use the funds to create a new company or expand your operations.
Owning equity in your company can also help you retire early, allowing the board to run the organization.
8- Improve Your Knowledge
As a business owner, you handle many challenges and grow your expertise in your niche in a way you wouldn’t otherwise. You are constantly exposed to situations that push you to learn more about the industry.
Enhanced knowledge means you are a valuable asset to other upcoming entrepreneurs. Additionally, knowledge helps you grow your business and profits faster.
Now, this does not mean that owning your business has no challenges. This leads us to…
Disadvantages of Owning a Small Business
If I have convinced you in the first section of this article, you may wonder why we should work for someone else. Before you are overexcited, here is a reality check: running your business has its shortcomings, and here they are.
9- Financial Risk
Entrepreneurs are indeed risk-takers; however, the risk levels differ from one individual to the other. A business can go scarily wrong, and you may lose all your investments.
If you invest your life savings or go into debt for your seed capital, you could lose all of it from bad business decisions.
And the statistics don’t help either. A report by Fundera shows that 50% of startups in the US will fail after five years. Five years of hard work, hope, and money goes up in smoke five times out of ten.
The risk of failing is equal to the chances of success, so there is no guarantee your will venture will pick.
10- Stress And Health Issues
I will be honest with you. With so many decisions on your shoulder, owning a business can be stressful. You are the face of the company and have to handle many concerns such as competition, customer problems, expenses, employees, sourcing suppliers, late deliveries, and equipment breakdown.
Dealing with these challenges can impact your health, especially for new entrepreneurs.
As a business owner, you are responsible for unpleasant responsibilities like interviewing, hiring, and firing employees. Things can get more stressful during a recession when the economy is slow.
11- Time and Commitment
In theory, people become entrepreneurs to spend more time with their families. However, in reality, you may have little free time for entrepreneurship.
In fact, you may have less free time than in your 9-5 job, especially in the initial stages. Small business owners are passionate about their startups, prompting them to work long hours.
One report by Gallup shows that 57% of business owners work six or more days, averaging 55 hours a week.
Most small business owners work at night, on the weekends, or even during holidays. And with the internet and mobile devices, day offs may be unrealistic for entrepreneurs, at least at the outset.
An important email from a prospective client pops up. What choice do you have? You respond because you need them to jumpstart your business.
12- Unknown Variables
Opening a business involves superior planning, but multiple unknown factors can throw your company off course. For instance, unexpected political chaos can sink the economy into recession, causing customers to reduce spending.
An unexpectedly strong competitor may enter the market space and snatch major clients from you. Or a key business partner may pull out of a deal or fall sick, leaving you with additional responsibilities. These unknown variables can give you sleepless nights.
13- Unstable Income
In the initial stage of your startup, you may operate your business at a breakeven or loss before you can realize profits. This means you may need another source of income to cater to your bills.
These hard development times can discourage you. And if you didn’t get your finances in order before quitting your job for an entrepreneurial life, you may find it tough to survive.
With a family to feed and no emergency fund to fall back on, owning a business is a tough road.
What to read next:
- How to Become a Creative Entrepreneur? (Here’s how!)
- 10 Best Ways to Avoid Burnout in Your Small Business.
- How To Start a Business While Still Employed?
How to Increase Your Chances of Success as a Business Owner?
Based on the data quoted in this article, almost half the businesses fail before the fifth year. How can you increase your odds of success?
Every entrepreneur faces the pros and cons of owning a business. However, the difference between successful and unsuccessful ones comes down to researching and planning your course before launching the venture.
How solid and thoughtful is your business plan? A business plan should show the following:
- Your products and services
- Demand levels
- Competitors and their strengths and weaknesses
- Startup costs
- Sources of funds
- Potential challenges you will meet and how to overcome them
- A clear growth road map
While things may not unfold as planned, having a plan increases your chances of success. What are some challenges and benefits you have experienced as an entrepreneur?