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Are you excited by the prospect of being your own boss and doing things your way? Are you also apprehensive of all the responsibilities and risks that come with running a business? You’re not alone.
Many future entrepreneurs like you find themselves torn between the pros and cons of starting a company. While the advantages of a business are compelling, the possible disadvantages can very well pop the excitement bubble.
We’ve created this helpful guide on the advantages and disadvantages of running your own business to help you line up your thoughts. As experts in the small business arena, we know how to start a business and what it’s really like to run one. Keep reading to learn from our experience.
Pros & Cons of Running a Business – Overview
You might have plenty of reasons to start a business. When you want to do something, every reason looks as strong as the next. But it’s only wise to also look at the downsides.
If you’re looking at both the advantages and disadvantages of running a business, this tells a lot about how open-minded you are. You should feel good about your willingness to look both ways and make a better decision for yourself.
Before we move on, let’s acknowledge that identifying the disadvantages of a business is not a means of discouraging potential entrepreneurs. The bigger purpose is to help them identify loopholes in their business plan and start off with realistic expectations.
Advantages of a Business
There’s no other joy in the world like the joy of starting a business and experiencing its growth. But apart from the thrills and the joys of the entrepreneurial journey, there are several other advantages to running a business. Let’s take a look at them below.
Motivation Is No Longer an Issue – Be Your Own Boss
When you work for someone else, it might be difficult to find the desire to accomplish your best work. No matter how hard you work, the company’s owners will reap the final benefits.
You’ll find inspiration at work every day when you’re your own boss. Following your aspirations is thrilling, and you have complete control over your own achievements. Because the day-to-day viability of your company is dependent on you, you’ll be motivated to make each day as productive as possible.
You’ll know that your own hard work and determination will help you enjoy the benefits, and this will add fuel to your business goals, propelling you to make sure that every single day accounts for something productive!
Freedom to Pursue Your Interests
Many entrepreneurs launch their own enterprises to pursue their aspirations and passions. Following your dreams will provide you fulfillment in ways that working for someone else may not.
You are in charge of building your firm from the ground up, so you can mold it into something you are proud of and potentially create something to pass down to your next of kin as a legacy.
However, don’t forget a lot of businesses fail within five years, mostly because they don’t meet the market demands. Make sure pursuing your passion isn’t the only thing fueling your small business idea. It should also be something that promises to do well in the market.
Creative freedom is one of the most valuable advantages of a business if you opt to start one. From coming up with a business name to developing your brand identity, you have the luxury of using your creativity and problem-solving skills to determine what path your enterprise will take. If you’ve worked a 9-to-5 job, you must’ve experienced moments where you wanted to do something a certain way, but the ‘powers that be’ didn’t agree with it.
Running your own business, you call the shots and you get to choose how to solve problems. Being able to use your knowledge and skills to take your company forward can be a huge boost to your personal satisfaction and self-esteem.
Many people commit to beginning a business to make more money. While it’s true that getting your business off the ground can be difficult and result in some tough times, the ultimate aim of being your own boss is financial independence.
There’s no limit to how profitable your own business may be with perseverance and hard work. There’s no reason why you can’t accumulate a lot of wealth through your profitable business idea.
Starting your own business has various financial advantages over working for someone else. For starters, you’re establishing a business with the potential for expansion, and your pocketbook will expand in tandem with your business.
Second, your company is a great asset in and of itself. Your company’s value increases as it grows. You can choose to sell it or keep it and pass it down to your heirs. It’s valuable in either case. Thirdly, there are various tax benefits that come with small businesses and you can avail of them if they apply in your country or state.
Apart from an opportunity to earn more and gain financial independence, you can also be sure no one can fire you from your own company. This applies as long as your business venture doesn’t go down entirely.
Great Learning Experience
Nothing teaches you how to run a business better than actually running one. As they say, experience is king, and this couldn’t be truer when it comes to entrepreneurship.
As a small business owner, you’re involved in all departments of your business. Right up from the start, when you register your business to building your marketing strategy, every step will give you tons of valuable knowledge and experience.
Greater Control of Your Life
As an employee, you spend almost 30% of your entire time at work. Perhaps you’ve been in the corporate sector for a long time and are ready to start a new chapter in your life after years of reporting to a superior.
Starting your own business might provide you with a more flexible lifestyle and schedule, allowing you to avoid feeling trapped on the corporate hamster wheel. When you’re the boss, you may organize meetings around your family’s schedule or work from home – the sky’s the limit.
Don’t make the mistake of assuming that you no longer have to work. In fact, if we’re to go off of history, the work you’ll be required to do will be far more than anything you’re experienced in your day job. However, unlike before, no one is watching over your shoulder to make sure you do it correctly and on time. Sounds scary, doesn’t it?
Starting a business is difficult, and a flexible schedule may not be possible straight away. Even if you work long hours, you know you’re doing it for yourself and your family rather than a faraway employer or shareholder.
Opportunity to Act Upon Social Injustice
Setting up your company for social advantage is one of the most rewarding aspects of becoming an entrepreneur. You can choose to donate your profits to non-profits, charities, or community projects. Alternatively, you can start a business to tackle a problem in your neighborhood or the world at large – whatever your passion is.
Disadvantages of a Business
Not everything is sunshine and rainbows when you run a business. While the advantages of a business are very tempting, you must also be aware of the disadvantages before you make the big move.
Risk-taking is the second name for entrepreneurship. When you start a business, you’re investing your time and funds into an endeavor you believe in, but one can never be 100% sure about what the future holds. There’s always a possibility of losing your money.
Taking risks is an essential part of running a business and is also the cost of building a successful company. This is simply because nothing great comes without a risk.
When you start a company, you might have to invest extensively, initially depending on the type of business you’re starting. This might result in you investing all your savings or taking a loan, which puts you and your assets at risk. Not to mention that an enterprise takes its time to get into running and start generating income. This means you’ll face income instability if you’ve left your day job and this will continue until your business gets established.
Small business owners tend to experience more stress than regular workers. A Gallup survey also found that female business owners tend to be more stressed than their male counterparts.
The uncertainty associated with being an entrepreneur definitely takes its toll on your nerves. The extra work hours and countless administrative tasks and things to worry about, along with income instability and financial risk, can take your peace away.
The stress and health issues that you can face as a business owner are one of the biggest disadvantages of running a business. However, you can play it the smart way and beat these issues with a simple self-care routine.
As a business owner, you are the business. You need to be there for your business to run smoothly. Entrepreneurs have to wear many hats and have to invest much more time than regular employees. You might find yourself working 10 or even 12-hour workdays because you simply have a lot to do and no one else can do it for you.
You might also have to say goodbye to your weekends and leisure time to make sure your business’ growth doesn’t stall, especially in the initial stages. Things might get easier as you hire employees but expect an 80 or even 90-hour work week when you start.
Numerous Admin Tasks
You start a business thinking you’re finally able to follow your passion and earn a living from it. What you don’t expect is spending more than half your time running errands and completing administrative tasks for your business.
You’ll find yourself doing everything from handling business registration paperwork and doing taxes to running payroll for your employees. These are not the most enjoyable duties, but you have to do them anyway to run your business.
Is Starting a Business Worth It? – Advantages of a Business
Although there are cons, the advantages of a business almost always take the win. The amazing feeling of seeing your business grow into an established enterprise that can earn a living for you is indescribable. You can only experience it if you take the entrepreneurial road.
The fulfillment and sense of achievement you feel running a successful business makes it worth it. However, you also need to be aware of the disadvantages and what you’re up against. Being able to see both the pros and cons will help you avoid unrealistic expectations.
That said, there are plenty of unique market niches that the internet has opened for businesspeople to launch small firms, and there are innumerable online resources for help. Additionally, business owners may now connect with other entrepreneurs, learn from their experiences, and use other people’s successful and productive judgments as a model for their own decisions.
If a nine-to-five job where you spend quite a decent amount of your waking hours at work does not appeal to you, it could be time to establish your own path, move at your own rate, and make a difference in the world. It makes sense to desire to direct your own behavior. Entrepreneurship accomplishes just that: it allows you total freedom to do any action you have ever desired.
Don’t be scared to perform grunt labor since, as an owner, you will have various roles and duties in your company, especially in the beginning. You will frequently be in positions such as manager, marketer, counselor, or receptionist. While starting a company is risky, keep your motivation in mind when times are tough.
How to Find Motivation to Start Your Business
Starting a business of your own takes more than just an idea. So many factors contribute to whether your business model will be a success. We understand that for many, even the thought of starting your business can seem like the most daunting procedure. However, if you let the psychological aspect stop you from taking charge, then the steps ahead will pose an even more significant challenge to your new endeavors.
Fix Your Mindset
The first thing you need to do before even getting into the process of planning to start your business is to focus on positive energy. Many times, we hear news of the overnight success of many business owners, but nobody talks about the hardship that they had to overcome in the process.
Do not let these success stories deter you from achieving success, even if it is at a slower pace than you wanted it to be. Also, know that you are not alone when it comes to having these doubts since as many as 54% of small business owners still feel that the pandemic is deteriorating the impact their business has or could have.
You’ll be motivated when you first start your business, but that motivation will soon start to wane, leaving you feeling uninspired, confused, and dissatisfied. During this time, you would feel the need to find, once again, reasons to start a business. A whopping 55% of people around the world have begun their businesses solely motivated by the fact that they would get to be their own boss.
However, you need to step back and focus on consistency and rely on your very first motivator. It would fare well for you to know that the failure rate for new businesses has dropped by 30% since the 1970s, which means the likelihood of your start-up failing is lower than it would have been 50 years ago. Moreover, only 20% of businesses fail within the first year of their launch.
Working Towards Starting Your Business
When you think of the advantages of a business and running one, you need to think about what you are going to incentivize. Often, you will hear people advising you to come up with a business idea that monetizes what you love to do.
This often does not translate well since a failed business model, in this case, would also make you hate the thing you once loved. People do not know that as many as 70% of small company owners work 40 to 49 hours each week. So what should be the motivator, if not passion, for pursuing one’s dreams?
1. Define Your Business Concept
Besides having a strong motivation to start a business, you need to consider whether your business model is profitable and whether it is something you are good at, even if you have not received a formal education in it. Did you know, as many as 42% of the business end up in failure because there was no market need for them? This is why passion alone cannot fuel a business.
2. Look up the Competition and Market
As mentioned previously, the number one reason why businesses fail is due to the lack of a market for that particular product. If there is no need for the product, then who is going to purchase it? When you get to the funding phase, trying to get people to invest in your business, you will need to pitch your business concept to them.
If a business model is bound to fail, then you can forget to receive any investment, and this is the second most common reason why businesses do not make it. Almost 29% of companies go under because of a lack of funding.
To understand the market demands, you can conduct a survey to see whether your business model is something people would be interested in or not. Relying on previous data as a sole source is unreliable, as past trends do not always apply to newer generations.
3. Analyzing Your Finances
Starting a business takes money, and there is no question that a small amount and inadequate planning can be the ultimate demise of your business before it takes off. You must carefully consider how much it will cost to run your company and how you can turn a profit without overcharging for your goods.
The most popular method used today to fund a business is business owners using their own cash, this account for 39% of all new businesses. On the other hand, as many as 20% use their 401k retirement plan as their main source of funding, and 24% rely on friends and family.
Many businesses fail since they are unable to raise further funds before making a profit. A small business owner typically needs $10,000 in launch financing. It is never a bad idea to anticipate your beginning costs because it may take time before the company starts generating stable income.
4. Finalize Your Business Structure
This is the technical part of setting up your business. Here is where you are done placing the building blocks, which will determine how much taxes you owe if your personal assets are a liability, and how the daily operations within your organization will work.
Before choosing a business structure, discuss your situation with a small business accountant and maybe a lawyer, because each business form has unique tax concerns that could have an impact on you.
Here are some of the most commonly used business structures.
- LLP – Limited Liability Partnership
- LLC – Limited Liability Company
- Sole Proprietorship
Disadvantages and Advantages of a Business – Bottom Line
If you’re an aspiring future business owner, it was wise of you to read about both the advantages and disadvantages of running a business. It says a lot about how well-equipped you are for success.
It’s very easy to get consumed by how great your idea is, making it hard for you to see the potential downsides. Looking at both the pros and cons gives you a reality check and an opportunity to fail-proof your business plans.
No matter how good your idea is, there is always a time when you’re tested in one way or another. It could come in the shape of financial hardship, a legal hindrance, strong competition, or low market demand. The secret to succeeding is to stay consistent, persevere, and improvise.