Identifying The Pros & Cons Of Owning A Small Business
Assuming that you've determined that you do have what it takes to own a small business
, allow us to help take the next step and dive in. You can find as many compelling reasons why you should not own a business as you can find reasons why you should. In the following section, we present many of these reasons.These two lists incidentally, are in no particular order. Everyone is different. The reasons Bill Gates may have decided to start Microsoft may be vastly different from the reasons John Dough decided to buy his own pizza business. You won't find right or wrong reasons to start or buy a business: you'll only find right or wrong criteria that go into forming those reasons.
The reasons to own
We can think of many reasons to give your boss the heave-ho. In this article, though, we stick with the best reasons why people choose to own a business:
The satisfaction of creation: Have you ever experienced the pride of building a chair, preparing a gourmet meal, or repairing a vacuum cleaner? Or how about providing a needed counselling service that helps people solve their vexing financial problems? The small-business owner is treated to the thrill of creation on a daily basis, not to mention the satisfaction of solving a customer's problem.
Establishment of their own culture: No more standing around the water cooler complaining about "the way things are around here." After you've started your own business, the way things are around here is a direct function of the way you intend them to be.
Financial upside: Consider Charles Schwab, Oprah Winfrey, and Steve Jobs. It's no surprise that these one-time small-business owners are among the nation's wealthiest individuals. (A recent SBA study concluded definitively that although small-business ownership is risky, small-business owners had a significantly higher probability of being classified as high income and high wealth.)
Self sufficiency: For many people, working for someone else has proven to be a less-than-gratifying experience. As a result of such unfulfilled experience, some people have discovered that if they want to provide for themselves and their families, they'd better create the opportunity themselves. It's either that or be willing to occasionally spend a long wait in the unemployment time.
Flexibility: Perhaps you prefer to work in the evenings because that's when your spouse works or you want to spend more time with the kids during the day. Or you may prefer taking frequent 3-day-weekend jaunts rather than a few full-week vacations every year. As a small-business owner, despite the long hours you work, you should have more control over keeping a schedule that works best for you. After all, you're the boss, and you can usually tailor your schedule to meet your personal needs, as well as those of your customers.
Special perks: Small-business owners have several advantages over many employees. For example, small-business owners can sock away more than $45,000 per year free of federal & state income taxes into their retirement accounts. And yes, similar to those corporate execs who wine and dine their clients and then write off the expenses, small-business owners also have the option of writing off such costs as long as they adhere to IRS rules.
The reasons not to own
In light of the corresponding potential benefits, why would any reasonable soul elect to continue receiving a paycheck? Why wouldn't everyone want to own a business? Let us count the nays:
Responsibility: As a small-business owner, not only does your family depend on your business success, so do your partners, your employees and their families, your customers, and sometimes your vendors. As much as we love our small businesses, every now and then even the most enthusiastic of us wax nostalgic for the good old days when we would punch our time card and leisurely walk out the door - really, truly, done for the day. If you're the type of person who sometimes takes on more responsibility than you can handle and works too many hours, beware than another drawback of running your own business is that you may be prone to becoming a workaholic.
Competition: Although some people thrive on competition, that same competition comes back to haunt you by threatening your security. You soon find out that a host of hungry competitors is pursuing your customers and threatening your livelihood, whether by cutting prices or offering a more complete package of unique services. Sure, competition is what makes capitalism go 'round, but you should remember that in order to have a competition, someone's going to win and someone's going to lose.
Change: Products and services come, and products and services go. Nothing is sacred in the business of doing business, and the pace of change today is significantly faster than it was a generation ago - and it shows no signs of slowing down. If you don't enjoy change and the commotion it causes, then perhaps the stability that a larger, more bureaucratic organization provides is best for you.
Chance: Interest rates, the economy, theft, fire, natural disasters, sickness, pestilence - the list goes on. Any of these random events can send your business reeling.
Red tape: Taxes, health-care reform, bureaucracy, tariffs, duties, treaties, OSHA, FDA, NAFTA, glurg, glurg, glurg.
Business failure: And finally, as if this list of a small-business's enemies isn't long enough, the owner faces the specter of the ultimate downside: business failure in the form of bankruptcy. This is the stage where the owner stands back and watches the creditors swoop in like vultures to devour his remaining business assets.
Now contrast the small-business owner's failure to the Fortune 500 employee who fails, collecting a tidy severance check as he packs up his calculator and waves good-bye on his way to register for unemployment compensation. No life's savings lost for this person, no second mortgages hanging over his or her home, no asterisks on the credit report. In our opinion, no other failure in the business world is as painful as that facing the small-business owner. More than any other reason, this extreme cost of failure is the primary reason that owning a small business isn't for everyone.
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