Even if you passed the test in the preceding section with flying colors and you think you qualify as a prospective small-business owner, the decision you’re about to make isn’t a simple, clear-cut one. After all, most of you can probably find as many compelling reasons why you shouldn’t own a business as you can find reasons why you should. In the following sections, we present many of these reasons.
The reasons we present here aren’t in any particular order. Everyone is different. The reasons why Bill Gates 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.
Pros of Being A Small Business Owner
We can think of many reasons to give your boss the heave-ho. In this section, 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 counseling service that helps people solve their vexing financial problems? The small-business owner gets to experience the thrill of creation daily, 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 start your own business, the way things are around here is a direct function of the way you intend them to be.
Consider Charles Schwab and Oprah Winfrey. It’s no surprise that these one-time small-business owners are among the nation’s wealthiest individuals. (A recent Small Business Administration 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 than their employed counterparts.)
For many people, working for someone else has proven to be a less-than-gratifying experience. As a result of such unfulfilling experiences, 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 line.
Flexible working hours
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 three-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 your schedule.
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.
Small-business owners have several advantages over typical employee. For example, small-business owners can sock away tens of thousands of dollars into their retirement accounts per year free of federal and state income taxes. And yes, similar to those corporate execs who enjoy various other tax deductions, small-business owners also have the option of writing off such costs as long as they adhere to IRS rules.
Cons of Being a Small Business Owner
Considering the resounding 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:
It is a big responsibility to take on
When you’re a small business owner, not only does your family depend on your business success, but 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 small-business owners wax nostalgic for the good old days when they would punch their 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 that another drawback of running your own business is that you may be prone to becoming a workaholic.
You have to deal with market 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 need to remember that to have a competition, someone’s going to win and someone’s going to lose. That someone can be you.
You need to adapt quickly to changing market conditions
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, the more bureaucratic organization provides is best for you.
Businesses face a great deal of risk
Interest rates, the economy, theft, fire, natural disasters, sickness, pestilence — the list goes on. Any of these random events can send your business reeling.
You have to deal with red tape
Taxes, health-care reform, bureaucracy, tariffs, duties, treaties, OSHA, FDA, NAFTA, glurg, glurg, glurg.
Business failure is possible
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 remain- ing business — and sometimes personal — 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 goodbye 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 the one 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.