If you’re thinking about starting your own business, you will want to know about all the advantages and disadvantages – both the risks and rewards – to decide if entrepreneurship is right for you at this time.
As a serial entrepreneur myself and a small business consultant, I have experienced both the pros and cons of launching new companies want to inform you, so you know what to expect when you start your business.
Come along for a healthy dose of entrepreneur reality that all aspiring business owners should know.
PROS OF STARTING A BUSINESS
Captain of Your Destiny
Launching your own business and becoming a successful business owner is exhilarating. Plus, it gives you the ultimate freedom over your lifestyle choices, schedule, and financial situation.
I have always thought – somewhat differently from many people – that owning a business was far better (and more secure) than having a corporate job.
This is because I could make my own choices and decisions to affect my financial future instead of depending upon a company or boss. If a recession was coming, I could cut expenses, expand into new markets and weather the marketplace storm. As opposed to being a corporate employee with a looming recession was coming, where I had no control over layoffs or salary reductions imposed by my boss.
Freedom to Make Your Choices
As an entrepreneur and business owner, you have the ultimate authority to make decisions about hours, schedule, location, interior design, menu, product selection, and customers.
I love the control to decide if I wanted to sell or a particular person or not, to order from one supplier or another as I saw fit. To me, this is fulfilling and makes entrepreneurship a lot like a business game.
You can start a business just like your employer. Here is how.
Maximum Flexibility
The top reason most people want to start their own business is the freedom and flexibility entrepreneurship offers them, according to recent surveys. Perks include schedule flexibility to work around kid’s schedules, university classes, or personal preferences.
Time is only one of the flexibilities that you have as an entrepreneur. You dictate your best working environment, location, and whether you prefer to work outdoors, indoors, at night, in the morning, on a computer, or with wood. It is all up to you
Build Real Wealth
Entrepreneurship is the only way to build real wealth for a lifetime. The majority of the world’s top billionaires are all self-made entrepreneurs, according to CNBC. Even the best corporate jobs have a limit on your annual income, salary, and bonuses. Owning your own business removes your salary cap.
Plus, many small businesses become valuable assets themselves that can be sold as investments. My family’s financial security is almost entirely based on the businesses that I started, built, and sold.
Leave a Family Legacy
Your children will not be able to inherit your corporate job – no matter how prestigious. But, you can leave them a thriving business concern if you start your business. Owning a family business will enable you to offer jobs to other family members, build your community economy, support your church and favorite charities.
Even if your children or other family members are not interested in running your business after your passing, they can sell it to partners or hire a manager and reap the financial benefits of your hard work.
Find Personal Fulfillment
Many people launch companies to enjoy their interests as a moneymaking activity. Instead of spending their days selling widgets in which they have no interest, they go forth and launch companies using their creative passions; to create handmade jewelry, bake delicious creations or build striking homes.
Your work becomes more fulfilling, and your life more enjoyable and interesting.
Have Some Fun
For us, entrepreneurial types business is fun! We enjoy researching our business ideas, planning our marketing strategies, and securing funding. I love spending my days building my businesses. If you do not enjoy working in your business, please reconsider your entrepreneurial venture.
Help The World
Do you have an invention or product that would help people solve their problems? Take your passion and talents and help the world by starting a company to distribute your problem-solving products, services, and information.
Many social entrepreneurs started their successful companies with a world-saving mission in mind, such as these top 50 do-good business owners. While a businesses’ main purpose is to make money and stay in business to build our nation’s economy and create jobs, a higher goal could be to help the world solve serious problems and meet as yet unmet needs.
CONS OF STARTING A BUSINESS
Work Longer Hours
Please don’t start your own business if you want to work less and have a shorter work week because it won’t happen. SBA surveys report that that the average entrepreneur works over 60 hours a week – 50% more than the standard 40-hour workweek. Also, know that as an entrepreneur, you will not only be working during business hours, there will be plenty of nights and weekends when you’ll be working while your friends and families are relaxing.
Missing Guidance Expert
If you work in a company, your boss usually has more expertise and is on hand to guide you with knowledge and decisions. However, when you are the boss, there is no one to turn to for advice, expertise, skills, or feedback.
You are figuring it out yourself, and that can result in making serious mistakes along the way. I recommend that all entrepreneurs create their own informal advisory group comprised of respected colleagues, industry professionals, mentors to get help and support.
Lack of Steady Paychecks
Most entrepreneurs are often the last people to get paid in a growing company. I know, my employees got paid every week but not me. Many business owner’s salaries are invested back into their business to pay for materials, advertising, and overhead during the early startup early stages.
Entrepreneurs will paychecks, so you want to be certain to have other financial resources to pay for your living expenses. Give serious consideration to how this will affect your family’s financial picture and your marriage. You will want to be sure that family members are prepared for the challenging yet exciting and often financially rewarding journey of entrepreneurship.
Deficiency of Business Experience
Running a successful business often requires specialized skills and business experience that you may not possess. If this is the case, I recommend that you begin by working as an employee in a similar type of business that you plan on launching. This is an excellent way to learn what you earn.
Select a firm that operates outside of your intended market area. This way, if you do decide to launch a new firm, it will not be in competition with the company you worked at previously.
Many an entrepreneur has benefitted from this type of apprenticeship and ended up becoming a partner in the business or buying the business from the current owner.
Struggle For Business Financing
It is challenging to get funding for new business ventures. Many business loans, including government-backed SBA loans, have stringent requirements such as good credit scores, collateral assets, and strong financial projections.
Recent surveys of aspiring entrepreneurs show a lack of funding as their greatest obstacle to launch. If that is the case with you, then be sure to check out my list of 17 proven startup funding sources here.
Family & Relationship Stress
Starting a business is a stressful, yet fulfilling endeavor. It can put a strain on the best marriages and happiest families. To increase your chances of business success and happy home life, I recommend that all family members are in agreement with your decision to launch a business.
Another way to lessen entrepreneur relationship stress is to start a business together as a couple – something you can both get excited about and work on together. Check out my list of the best couple business ideas here.
Insecurity and Self-Doubt
Because you are starting a new venture, everything is up for scrutiny, including your decisions, your abilities, and your wisdom on a daily basis. Entrepreneurs need to have a strong, secure sense of themselves, their mission, and their business strategies to stay on course and not self-sabotage to the detriment of the company.
Insecurity will lessen as you have more experience as a business owner, but in the beginning, it can be paralyzing. When I started my first business, I kept these negative self-doubting voices quiet with support from family members, reading success stories, and daily prayer.
Lose Money
While the likelihood that your business will succeed is far greater than past reports of scary statistics such as 80% of new businesses fail in the first five years, which is false. The SBA reports that approximately 50% of all companies survive the first five years.
The companies that survived were the ones that are well-planned, tested, and funded. Learn the best (low-cost & free) ways to test your business idea in my article here.
Failure Sucks
If your business venture fails, it can be a devastating blow to your ego, financial condition, and personal confidence. But know that, lots of entrepreneurs (me included) credit the failure of their first businesses as the fuel that fed their ultimate success, such as Steve Jobs from Apple and Henry Ford.
I often laugh at how grandly I failed in many of my early business launches. These hard-won lessons taught me fortitude, proper planning, and market research techniques that ultimately led me to start a business that I sold $1 million.
Starting a new business is hard but could it be worth it for you? Check out my article about the hardest parts of launching and how to make it a bit easier and more successful for your new venture.
Pros and Cons of Starting a Business VS Buying an Existing Business
PRO: Cheaper To Start a New Business
In most cases, you will be able to start a new business for less than buying an existing business. However, that doesn’t mean that it is necessarily the right choice for you.
Existing businesses have valuable assets such as brand awareness, loyal repeat customers, proven product lines, and verifiable financial records.
These resources will allow you to generate profits quickly, get approved for business loans, and more easily expand into new markets and product categories, which compensate for the significant cost difference between starting your own business and purchasing an existing business.
CON: Higher Risk to Start from Scratch
One major disadvantage of starting your company vs. buying an existing business is that your concept is unproven and thus is a riskier undertaking. In contrast, an existing business has a proven and verifiable performance record in the marketplace, making it a safer bet.
CON: Difficult To Get Startup Financing
Traditional business loans are often unavailable for startup companies. But banks and other business financing sources will usually approve business loans for existing concerns. That’s because going business concerns have verifiable financial reports and collateral assets to meet loan requirements.
Pros and Cons of Starting a Business VS Buying a Franchise
PRO: Cheaper and Faster to Start
The primary advantage of starting our own business versus purchasing a franchise is that it will be much cheaper and quicker to get started on our own than buying into an established franchise system. There is not lengthy training process nor multi-thousand dollar down payment before you can open shop.
CON: No Supplier Contacts or Proven Systems
A significant disadvantage of not buying a franchise is that you don’t have vetted supplier contacts with pre-negotiated prices that franchise systems offer.
Additionally, you do not have verifiable financial performance reports from other franchisees to confirm the validity of the business idea and make realistic sales and expense projections.
The essential advantage to buying a franchise is that you have a proven system to make money.
However, with that system comes a high purchase price and often a lack of flexibility. Most franchises require you to follow their exact procedure and to purchase supplies from their vendors only. They maintain that this is the only way that you can replicate the success of franchisees.
Pros and Cons of Starting a Business VS Taking Over a Family Business
PROS: Don’t Inherit Family Issues
When inheriting a family business, the risks are that you also inherit its troubles, whether it be with other family members, disagreements of heirs, lousy company reputation, deficient performance and negative cash flow.
CON: Startup are More Challenging
Are you considering starting your own business or running a family business?
If so, you should know that starting your own business will be more stressful, more challenging, and will take longer to make money and could ultimately fail.
The benefits of taking over the family business are an ongoing cash flow, a list of existing customers, and est: product or service line and most likely trained employees and a current occasion.
Pros and Cons of Starting a Business VS Having a Career Job
PRO: Great for Self Starters
Now let’s compare starting your business to having a job and working for someone else as a career.
When you own the company, you are both the boss and the employee – which can be both the best or worst of times. It is a plus if you are self-disciplined, a good planner, and a prudent decision-maker.
CON: Bad for Inexperienced
Being a business owner is a negative for someone who is not a self-starter, does not like to learn new skills, or take time to research to make wise decisions.
If this sounds like you, I highly recommend that you get an industry job in the type of firm you are considering launching.
Here you can earn money (remember to put some away for your startup capital), learn the market, develop your business skills, expand your experience, and hone your management temperament.
Pros and Cons of Starting a Business VS Being a Self-employed Freelancer
The difference between starting a business and being self-employed is that companies have employees, physical locations, and product line collections. Whereas the self-employed create their own “jobs” by selling their time and talent as services such as consultants or graphic artists. link
PRO: Low Risk and Low Startup Costs
A big pro is that it’s relatively inexpensive to get started and less risky than many other more cash-intensive new business ventures. Check out my lists of low startup cost business ideas here. Link
I often recommend that aspiring entrepreneurs begin their startup careers as self-employed, perhaps as consultants. This is an excellent way to earn money while learning about your business, industry trade, and yourself as an executive.
CON: High Competition and Need to Sell
Unsteady income is the main disadvantage of becoming a freelancer or self-employed.
Additionally, there is plenty of competition in profitable niches so you will need to learn how to sell services – and collect payments promptly.
I also found that client management of their expectations, requests, and directions has proven challenging at times. You will need to learn how to negotiate prices, job specifications and sometimes deal with angry clients.
Now that you have learned all the pros and cons of starting a business from scratch, are you ready to become an entrepreneur?
Sure there are plenty of disadvantages, but I still believe that the rewards outweigh the risk if you get educated (my blog’s mission), test your business ideas, and learn the right way to start a business in my guide.
Good luck to you, my entrepreneurial friend.
Thinking about going into business with your friend? Read my list of pros and cons of starting a business with friends here
Read my newest guide on how to start a construction business here
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