Disadvantages of Having Your Own Business
With the U.S. Small Business Administration reporting 30.2 million small businesses operating as of 2015, you're in good company if you're exploring the possibility of being your own boss and benefiting from the freedom, personal satisfaction and financial rewards that business ownership can provide.
However, you'll need to be willing to handle many roles and take full responsibility for what happens with your business, both good and bad. Before you take the step to get started making your business plan, it's good to know the disadvantages of business ownership to make sure it fits your lifestyle and financial situation.
The stress that comes with having full responsibility for everything related to your business is one of the disadvantages of business ownership. From initial business planning to day-to-day operations, your full commitment is required to keep things going.
This often means much longer work hours than when you were an employee and the need to forego time off and vacations, at least until you have the resources to hire staff to cover for you. When something goes wrong, whether you made a bad marketing decision or experience an emergency, you also have full financial and personal responsibility in handling it.
Especially when you're just starting your business and might not yet have any staff, you'll find that you have to wear many hats. This means your duties can include handling all the marketing, accounting, distribution, customer service, project management and supply management all on your own.
For example, if you're the only person running a local shop, you'd have to order your supplies, stock the shelves, operate the cash register, maintain the business's books and advertise yourself to the community.
Not only do these time-consuming tasks mean longer work hours and more stress for you, but you also might not feel comfortable in all areas of business or dislike certain duties. You might be an expert at marketing and customer service, but if you lack financial management and accounting skills, you could end up having money trouble. You'll likely find that you'll eventually have to hire staff and pay their wages to operate efficiently.
One of the biggest disadvantages of business ownership is the risk of failure. The U.S. Small Business Administration reports that the number of small businesses lasting one year is around 80 percent, but this falls to around 50 percent by the five-year mark. Reasons your business might fail can range from lack of market need or capital to poor pricing strategies and heavy competition.
To increase your chances of success, you'll need to know your market well, have a solid business plan, obtain sufficient funding and stay flexible so you can adjust your business strategies to outsmart your competitors and offer what customers really want.
When you start your business, your capital might come from bank loans, your own bank account or even friends and family. Depending on the type of business you start, it can be easy to go into debt and empty your savings due to startup costs.
While startup costs may be minimal for an internet-only business offering marketing services, opening a physical store comes with significant costs for obtaining a building, purchasing inventory and equipment and obtaining any licenses and permits necessary.
The first few years of your business might not bring in as much revenue as you'd like, as you have to get your business known to customers and establish a reputation. Any profit you do make may go toward paying other costs, and a steady paycheck is likely not in the picture. This makes it important to avoid taking on too much debt while still having enough resources to operate and cover your expenses for these initial years.
While business ownership has its risks, there are also several strengths of owning a business. Having full responsibility means you're the boss. You have freedom in how you run the business and the ability to choose the hours that work for you.
If you do things well, you can also reap all the financial benefits from your business since there's no limit to how much you can expand and how much you can profit. As you get more established, gain steady customers and hire help, you'll likely be less stressed and get to enjoy the major benefits of business ownership.