Many employees have dreams of starting their own business and becoming their own boss. While doing so certainly can carry a wealth of benefits, it’s not free of challenges and downfalls. If you’re considering opening a business, it’s important to understand the pros and cons as they relate not only to business in general, but to your industry as well.
Doing so can help you decide how to move forward with your business and maximize the chance of success.
The Pros of Starting Your Own Business
Independence: Listening to a boss and confining to the rules and requirements of a business or corporation can be frustrating. Starting your own business often results in a new sentence of independence, placing you in the driver’s seat. You can make your own decisions, set your own hours, institute your own policies and procedures, and choose who you work with and how much you pay them. In essence, you can control your own destiny.
Build Equity: When businesses are successful, they build equity, or the total value of your business after you’ve subtracted outstanding debts, like real estate loans or equipment financing debts. Over time, your investment will grow and you can use the equity to finance other things, be they business related, like a second location, or personal, like your child’s education or your retirement fund.
Following Your Passion: Dreams are, in large part, built on passions, and opening your own business often means capitalizing on the things that drive you. Foodies may start restaurants, environmentalists may start green-focused companies, and writers may begin their own content firms.
Running your own business can make the work days (and years) much more enjoyable, particularly if you’re punching the clock working for a company or in an industry you aren’t fond of. Additionally, as you work towards making your passions and dreams a reality, you can also gain a sense of accomplishment and professional and personal growth.
Control Over the Company: If you’ve ever sat back and said “I can do this better” then this may ring true for you. As the business owner, you typically have the final say on how you run your business, within the confines of the law, of course.
That often means implementing processes and procedures that you feel are the most efficient or yield the best final product. It also means you get to build your brand and live out your mission to the best of your ability, free from the restrictions of an employer. The end product is within your control, and the ways, means, and employees you work with can help you shape your vision.
The Cons of Starting Your Own Company
Dedication to the Company: Making your own schedule and vacationing when you want sounds great. Perhaps you’re hoping to have more time with friends and family or spend a little extra time on a side hobby – something that your current job is infringing upon.
However, in order to achieve success, most business owners must become infinitely dedicated to their business and thus work long hours. While your employees may have a few days off or take a vacation, it may not always be as easy for you to do the same, particularly in the early stages.
This can ultimately take a toll on family and friends, particularly if you see them less or are consistently more stressed.
Financial Risk: Starting a business requires money, and while some entrepreneurs may be able to finance their dreams without putting their personal finances in jeopardy, many others will need to find the money through personal savings, retirement funds, or small business loans. Each of these come with their own risk, particularly if you need to use your home, car, or other assets as collateral.
Further, business is seldom ideal, and it’s likely you’ll run into situations that require you to free up or secure funds. For example, slow seasons may make cash flow hard to come across or necessary equipment may need to be replaced or repaired. Still, sadly, some businesses simply don’t last.
All of these circumstances can put you at risk of financial loss, and in some cases, that risk can dramatically affect your personal life.
Dealing with any and all tasks: When you work for a company, you usually have a narrow focus or set of responsibilities. If you are a member of the accounting department, you’re in charge of finances. Human resources? Employee concerns like benefits. However, as a business owner, you will be responsible for managing each and every aspect.
Over time, as your business grows, you’ll likely be able to take a step back, but in the beginning, you’ll need to keep a close eye on everything to ensure it’s done in a way that builds your business and carries out your mission.
Hard decisions will be made: Will you hire friends and family members? Or, more importantly, will you be able to fire them should they not be the best candidate for the job? What about when you need financing? Will you be able to use your home as collateral knowing it can impact your family?
Opening a business is risky, but not just financially. As the business owner, you’ll often need to make decisions that will impact your business, your employees, and your friends and family. If you’re considering opening your own business, it’s important to ask these questions early on.
Tough to find Funding: Locating the funding you need isn’t always easy. As a business owner, you’ll often be limited to financing, particularly access to it. Fortunately, there are a wealth of options, including small business loans, grants, and investors. However, keep in mind that securing them often means having a good credit score, a solid business plan, and a history of fiscal responsibility.
Those are the pros and cons of starting your own business. Also see 10 Easy ways to know the right time to go full-time with your side business.
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About the writer
Andy Kearns is a Content Analyst for LendEDU and works to produce personal finance content to help educate consumers across the globe.
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