The benefits of being a small business owner include the financial and emotional rewards of a successful business.
The downside is that you take on personal risk and liability when owning a business.
Business owners must always be aware of the business situation and be willing to work for the company's success.
Small business ownership can be extremely rewarding if your business idea is successful. You can see that your customers are enjoying your product or service and that their needs are being met. You can also see financial rewards from selling products and services. However, being a small business owner means taking risks that your business may not be successful.
If you have investors, they usually expect your business to make a profit because they receive a portion of the profits in exchange for their funding. If you take out a business loan, you may be signing a personal guarantee. This gives lenders the right to take your personal assets if your business goes bankrupt.
You assume the risk and personal responsibility of owning your own business. Whether that risk and chance of success is worth it to you is up to you.
Advantages of becoming a small business owner
Small business owners can control the operations of their business and the products and services they offer. Some of the benefits of owning a business include:
chance of success
You can create a business from ideation to profitability, and the chances of success are greater in a free market economy. According to the US Chamber of Commerce, 50% of small businesses go bankrupt within their first five years. Although this number seems high, it also means that 50% of businesses are successful.
If you start your own business, you can create any number of products and services that will help your business succeed. And success depends on your efforts to market to the right customers and spread the word about your company. When you succeed, you get a sense of accomplishment from a job well done.
capital in business
As a business owner, you get a stake in your business, and the amount of stock determines the amount you get paid through dividends and bonuses. If you have a successful year in business, you can reap financial rewards from that success. In the future, you may be able to use the stock as an asset to obtain equity financing.
flexible work schedule
Owners can set their own schedule. In some cases, your schedule may be dictated by clients or meetings. However, if your child has a school event coming up, you can take time to attend with other parents. If you are not feeling well, you can take the time off you need to recover.
Control what you work on
When you work 9 to 5 for someone else, you have to perform the job you were hired to do. But as a small business owner, if you come up with a new idea, you have the freedom to work on it and potentially bring new products and services to market.
And while you have procedures and policies to follow as an employee, you can also be creative in solving business problems.
Disadvantages for small business owners
Despite the potential for business success, you will need to work harder and take on more personal risks as a small business owner. The disadvantages of owning a small business are:
Possibility of long working hours
Many small business owners work long hours to ensure their ideas come to fruition, a phenomenon known as sweat equity. According to the New York Enterprise Report cited by SCORE, 33 percent of small business owners work more than 50 hours a week. And 25% in a week he works more than 60 hours.
stress due to responsibility
Long working hours and decision-making can be taxing for business owners. If you have employees, your business needs to be successful in order to continue paying them and providing benefits. You also need to proactively address issues you face in your business to avoid impacting your employees and daily life.
According to the American Institute of Stress, 83 percent of workers suffer from work-related stress, and one million Americans miss work due to stress every day. More than 50% of workers are not engaged in work due to stress. So while your stress is amplified as a business owner, work-related stress can transfer to your employees, further impacting your business.
Due to the seasonality of business, you may see fluctuations in the amount you are able to pay yourself. If you're just starting your business, determining your salary can be difficult, and you'll want to create a budget to ensure you can meet your personal and business needs and obligations.
Dealing with legal and business regulations
As a business owner, you must comply with the laws and regulations surrounding your industry. These regulations only increase if you hire employees or open a brick-and-mortar store. Find out the legal requirements for starting a business in your chosen field.
You can also work with an accountant to ensure that your business is compliant with the taxes it pays. Your accountant can advise you on the best entity for your business and can also help you find deductions your business is eligible for.
Assume personal risk to the business
As a business owner, you have ultimate decision-making authority (unless you sell your shares in the business to another owner). This means that people personally expect you to keep your promises.
If you need funds and are taking out a business loan, many financial institutions will also require you to sign a personal guarantee. This guarantee means that the lender can hold you personally responsible for repaying the loan. This warranty is generally void even if legally separated by forming an LLC or corporation.
Characteristics of successful managers
Most business owners start with a great idea, but successful owners know how to take an idea to market. The characteristics of successful business owners are:
Self starter. Successful business owners are in control of their schedules and know exactly what to do. They don't need others to tell them what to do on a daily basis and can perform important tasks with little oversight.
Take calculated risks. Successful business owners understand the risks they are taking. They may conduct research to better understand their audience and the market they serve.
I am mentored by other successful business owners. While business owners don't need someone to watch over them every day, it can be helpful to get advice from an experienced business owner. You can find a mentor through SCORE or your local Small Business Development Center.
Concerns about budget and revenue projections. Successful business owners stay on top of their business's financial situation and make accurate and realistic projections. Based on these forecasts, you can set achievable revenue goals. Having accurate revenue projections and goals allows owners to make informed decisions.
Stay up to date with business developments. Business owners need to know what's going on in their business, the market, and the economy. You may want to rapidly implement new technology or respond to market changes in real time.
Being a small business owner means seeing your ideas come to fruition and your customers happy using your products and services. However, we also assume the risk that the business may fail. Many business owners avoid this risk by working hard, working long hours, and setting realistic goals in order to succeed.
Is it difficult to become a small business owner?
Being a small business owner can be difficult because you have to make many decisions and are responsible for the success of your company. However, some small business owners prefer the freedom, flexibility, and creativity that comes with being a small business owner.
What are some of the reasons business owners start a business?
A business owner may start a business because they have a business idea and notice a gap in the market. You may also want to start your own business because you have expertise in a particular field. Other business owners simply want to own a business because they want the flexibility of work and the ability to be their own boss.
Is running a small business risky?
Running a small business is risky, as half of all small businesses go bankrupt within five years. Many business owners believe that achieving a goal, such as a certain level of income or the ability to work for themselves, is worth the risk.