Starting a small business is not easy. If you want to build a business that is profitable and will stand the test of time, you must be resilient and dedicated. According to the Bureau of Labor Statistics, about 20% of new businesses don't make it past the first year. Additionally, opening a small business during a major economic crisis (such as the COVID-19 pandemic) may further reduce the chances of survival.
Entrepreneurship can be difficult, but it's not all doom and gloom. Currently, there are 31.7 million small businesses in the United States, which accounts for 99.9% of all businesses nationwide. Small businesses are the foundation of the American economy, and for good reason. If you have a great business idea and want to try your hand at entrepreneurship, first weigh the pros and cons.
Advantages of running 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 to owning a small business, and the benefits often far outweigh the drawbacks.
When you own a business, you're the boss. There is no need to rely on others or discuss decisions. The independence that comes with entrepreneurship is great for people who like to work autonomously.
Entrepreneurship gives you the flexibility to set your own hours. While you're first building your business, it may seem like you're always working, but eventually you'll be able to decide when and where you work, and from 9 to 5 There will be no need to work. This flexibility is ideal for those who work more efficiently outdoors. Normal office hours.
power and control
Another advantage that many entrepreneurs enjoy is that they have power and control. As the head of your organization, you decide the rules. You can establish your company culture and determine what is and isn't acceptable in your workplace. When you hire employees, they all eventually report to you. This control is perfect for people who hate working under authority or reporting to a superior.
passion and creativity
Another important benefit of owning a business is the satisfaction of knowing that you are the creator of the product you put out into the world. You are the vision behind it and drive it. You can do what you like in your favorite field. No more dragging yourself to a job you hate every morning. Many business owners love being able to build their business around their beliefs and values.
Owning a business comes with financial risks, but it also offers financial rewards. If you don't have business partners or employees, you don't have to worry about paying them. If you only have a few employees, that means fewer people will receive a share of your profits.
Once you start earning money, you can start paying yourself a salary. However, experts advise paying a modest salary or taking regular owner draws to cover expenses.
Challenges when running a small business
Entrepreneurs face many challenges every day. By understanding the common challenges you may face, you can prepare to overcome them.
Diversifying customer base
Of course, if you sell products or services, someone has to buy them from you in order to make money. To balance your revenue, you need to make your customer base as diverse as possible.
Cash flow management
Managing cash flow is also a big challenge for small business owners. Of course, you need money to make money. Typically, you need a way to raise funds and access cash reserves quickly. Entrepreneurs usually have many sources of income, as small businesses usually do not have this. This way, even if one source of income slows down, the money will continue to come in.
Maintaining legal compliance
When starting a business, you have to overcome many legal hurdles. Federal, state, and local government regulations are constantly changing, which can make it difficult to maintain compliance. For example, understanding small businesses' tax obligations is a common compliance challenge. Additionally, once you hire your first employee, you'll need to follow numerous HR rules and regulations.
Maintain quality while scaling
Whether intentionally or not, you may reach a point where your business suddenly expands. The demand for your products and services may skyrocket, and if you are not properly prepared, the quality of the service you provide may suffer, which is never a good thing.
It can be difficult to always think one step ahead when you're focused on day-to-day tasks. However, as a business owner, you should keep this potential challenge in mind as much as possible. Plan ahead so you can strategically expand your business as soon as demand for your products or services increases.
Entrepreneurs work long hours and rarely take breaks. You often have to do all the work yourself until you start making money. Fatigue is likely to occur, leading to poor decisions and the desire to give up. Even for an early-stage entrepreneur, a healthy work-life balance can motivate him to build a business over the long term.
If you are suffering from workplace burnout, check out our article on how to combat burnout.
Compare and consider the advantages and disadvantages of starting a business
Starting a business requires great sacrifices, but 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 weigh depends on you. For example, one person may value independence and flexibility, while another may not want to give up the stability of working for someone else.
Another factor to consider is whether the business idea is economically viable. Depending on the type of business, there are significant start-up costs. In this case, you can consider another business idea with lower start-up costs or explore creative ways to obtain funding. You should also test your business idea to ensure its feasibility before fully launching it.
Chad Brooks contributed to the writing and research of this article.