The advantages and disadvantages of running your own business often come down to different sides of the same coin. On the one hand, you have the autonomy to run your company just as you like. On the other hand, you're responsible for critical decisions with far-reaching consequences that can hurt you badly financially if you make the wrong calls. Running your own business isn't for everyone, but if it's right for you, it can be personally and financially transformative.
Major Benefits of Business Ownership
- Being your own boss. When you run your own company, you can create a schedule and work environment that's right for you. This often involves choosing a business model that makes sense for your skills and personality. If you're a gregarious night owl, it makes sense to open a bar and if you love to travel and shop, you can start an importing company.
- Creative expression. Your business reflects who you are and what you care about. If you care about fashion and reducing your carbon footprint, you can open a second-hand boutique and if you're handy and like to help people, you can start a business doing home repairs. In the end, you're limited only by your imagination and, of course, your ability to actually earn a living doing what you love.
- Earning potential. When you work for someone else, your income is limited to what your employer is willing and able to pay. When you own your own business, you have the potential for virtually unlimited earnings if you have a good idea and excellent business sense. Of course, most small business owners don't strike it rich, but the chances of unbridled success are greater in a venture where you're first in line to reap the rewards.
- Job security. You can never be laid off from your own company. As an entrepreneur, you can change your business model if you're doing something that doesn't work or if market conditions shift. You may incur debt in the process, but you're personally responsible for charting a path and taking measures to preserve your livelihood if you have the conviction that it will ultimately succeed.
Major Disadvantages of Business Ownership
- Risk. Owning a business almost always requires you to take personal financial risks. You will most likely finance your venture at least in part using your own resources, even if this is just a matter of pledging collateral for a bank loan.
- Long hours. As a business owner, you are ultimately responsible for everything from fulfilling customer orders to writing payroll checks. Even if you are fortunate enough to be able to delegate many of these duties to your staff, you must still make sure that everything happens as it should and you may end up doing much of the work yourself. Be prepared to put in a more grueling schedule than you would if you worked a conventional job.
- Startup struggles. Few businesses make enough to support their founders right off the bat. It is far more likely that there will be a period when you will work without making any money even if you do everything right. If you have some savings you may be well positioned to ride out this startup period but if you have a family to feed and no safety net, business ownership may not be right for you.
Increasing Your Odds of Success
The differences between the advantages and disadvantages of starting a business from scratch often come down to how well you research and plan before starting your venture. Invest the time and energy in creating a thoughtful and thorough business plan. This process will force you to think through everything from what you will make, to how you will market it, to how you will pay for your business launch.
It's quite likely that almost nothing that happens in your business will unfold quite the way you lay it out in your business plan. However, the process of compiling this information and thinking through different scenarios will greatly enhance your odds of success.