Becoming a small business owner can be rewarding and challenging at the same time.
If you’re prepared to take the plunge into business ownership in 2021, you’ll want to know what you’re getting into.
We’ll explore in detail the pros and cons of owning a small business. You’ll learn what to expect from business ownership so you can position yourself to succeed better in your next entrepreneurial steps to financial freedom.
Why Own a Small Business?
Whether you’re a fresh entrepreneur about to start your first business from scratch or you’re an acquisition entrepreneur looking to acquire an existing business, what you’re doing can have a significant impact on your financial life.
You can create something you’re proud of that ends up being your legacy. You can break into a new market with an innovative idea that improves lives. In your community, your business can create jobs and bring purpose and meaning to your life, as well as others.
But it isn’t always a rosy journey. Even though the significance this path can have on your life is positive, some things can flip it on its back. Hence, the advantages and disadvantages of business ownership.
Pros of Owning a Small Business
Besides being one of the fastest ways to earn above a 6-figure income, owning a business has many advantages. It is a rewarding venture that often leads to:
1. Freedom and Flexibility
55% of people who were interviewed about their motivation for starting and owning a business said it’s because they want to be their own boss. The freedom and flexibility of controlling your own destiny is a top reason many people take up business ownership.
You get to set your own hours. You can take a leave anytime and for however long you want. You can also work from anywhere you want depending on the nature of your business. The options are yours.
As opposed to being one part of an organization with not much influence on its direction, business ownership allows you to literally be the captain of the ship.
You get to steer the business in any direction you please. Your control extends throughout the system from conceptualization of ideas to making sales.
You can build your brand, mission, and vision according to what you believe. It’s why some people refer to their businesses as their “baby” — the business becomes a reflection of you and all that you love and care for.
3. Financial Rewards
In a regular job, there’s usually a cap on your salary. Except if you’re being paid overtime, there’s a limit on how much you can earn regardless of the effort you put into your work.
With a business you own, that’s not the case. There is usually a more direct relationship between the amount of work you do and the amount you earn. There is no boss to limit the amount of money you make.
The amount of revenue you pull is under your control. The more you sell, the more you earn. The higher the rates of your services or prices of your products, the more money you can make. It’s entirely up to you.No wonder, a survey by Best Wallet Hacks shows that since 1989, the top 10% of U.S. income earners gain half of their wealth from businesses they own.
4. Personal Satisfaction
It’s not a big surprise that research revealed entrepreneurs are happier than most people. When you’re working for someone else, you don’t always dictate what you want to work on.
You do the job assigned to you, and as long as it’s paying your bills, you keep on doing it even if you don’t like it. This is part of the reason most people dread Mondays.
But it is different with a business. Since it’s your choice to do what you want, you’ll most likely choose to do what you love. And get paid for doing it.
Cons of Owning a Small Business
Being called the “CEO” of a company has its appeal. But if you’re acquiring a company to grow it or building from scratch, there’s a lot of work involved in enjoying that appeal.
Here are some disadvantages of owning a business:
1. Greater responsibilities
Business ownership isn’t a small burden to bear. Especially in the early stages of the business when it’s still getting on its feet with few employees and while not making a profit.
The pressure on your mind to keep the business afloat, file taxes, pay salaries, provide great products/services, and still grow the business can be heavy to bear. And you may have to juggle various skills and work long hours.
2. Financial risks
It is risky to own a business. A lot could go wrong. So if you’ve sunk your savings into starting the business, according to statistics on Investopedia, it has a 50% chance of failing by its fifth year.
Even with rock-solid insurance, it is not possible to 100% eliminate the risk of doing business.
There are conditions beyond your control that can directly affect your business. For instance, a pandemic, natural disaster, employee disagreements, unfavorable economic policies, and regulatory requirements.
If the business fails as a result of one of these, it can set you back financially in a devastating manner.
The risks listed above are just a few of the things that’ll be on the mind of a business owner. The burden to keep things going despite all the factors working against the success of your business can take a toll on your mind and body. This has been a major concern for small business owners. Shouldering several responsibilities, working longer hours, and bearing most of the concern for the business’s survival can often lead to burnout.
Owning a business can give you
- More freedom and flexibility with your time and activities
- Greater control over the direction of your career
- The ability to earn more money without limits, and
- Personal satisfaction and happiness
At the same time, you’ll have to battle some challenges such as
- Shouldering more responsibilities
- Exposing your financial life to greater risks, and
- Being stressed out by the burdens of owning a business
Regardless of the worrying disadvantages of business ownership, people still find it a viable option for growing wealth. And when they go for it, they’re happy about it.
According to a Guidant Financial survey in 2020, 76% of business owners have no regrets about owning a small business.
However, before deciding to start or acquire a business, it’s best to assess yourself and your finances to ensure you have the entrepreneurial drive to see it through.
There’s a lot of behind-the-scenes work that needs to be done to make a business successful.
There’s the hard work, dedication, and perseverance to go through the climbing stages of a business before it can become the success you want.
There is no overnight success, just several years of work that finally comes to light.
In the end, we find that the pros of owning a business far outweigh the cons if you’re prepared to take the leap.
If you want to take the first step towards business ownership by acquiring an existing business, try signing up for our Acceleration Gauntlet. We’ll teach you to acquire, systematize, and grow a successful business that allows you to build wealth and freedom.
If you’ve already acquired an existing company, let’s hear about your business owner journey in the comments below!