Updated: Aug 31, 2020
Planning, opening, and managing a business is very exciting and offers various opportunities. However, entrepreneurship does not end there. There won't always be a green pasture along the road and entrepreneurs need to have full acceptance of it.
Doing so will help you develop realistic views of what entrepreneurship really is, including the benefits and possible drawbacks of owning your own business. You must not forget to incorporate these risks or challenges into your business plan to cultivate preparedness.
Here are the common drawbacks of owning a business:
1. Unguaranteed profit at the end of the day, week, month or year. Although one's overall quality of life does not fully depend on his/her accumulated wealth, money is definitely needed for survival. We spend money on food, water, clothes, insurance, house, car, and even oxygen when our lungs and/or heart's functions fail to support our need for it.
In business, you cannot guarantee a salary or profit at the end of the day, week, month or year. This is particularly true during the start-up phase of a business when you are still in the process of winning loyal customers, managing a trial and error on which specific products or services do customers have affinity with, paying business loans, and others. Remember that your profit only comes after you have paid all the operating costs--the money you spend in running and managing the business.
Having a spouse or partner who still works as an employee could surely help you get by during this tough period. If possible, you may opt to look for a part-time job or stay in your current full-time job until your business consistently produces profit. Cut off unnecessary expenses to have extra money when needed.
In addition, a common knowledge and general rule is that you should have at least 6 months of savings that could cover your life expenses before running your start-up business.
2. Business failure which could result to a total loss of your investment. Becoming self-employed always entails risk; and the worst thing that could happen is you'd lose all your money and other investments. Small businesses provide jobs for many people and thus help the society. Unfortunately, failure is also inevitable. As cited in an article the following is the failure rate for small businesses:
1st year- 20% of small businesses fail
2nd year- 30% of small businesses fail
5th year- 50% of small businesses fail
10th year- 70% of small businesses fail
I do hope you won't get to that point. Nonetheless, you must be psychologically prepared to handle such big challenge. You must also have a contingency plan for working around a failure. A constantly reviewed contingency plan will help you respond to and recover from great business challenges.
Risk management is also an important concept to always consider. As an entrepreneur, you must make it a habit to identify and analyze factors which could expose you to risks, and then take steps to reduce or eliminate these.
Nobody in the business world is exempted from risks. Some are predictable and manageable, but others are unpredictable and uncontrollable. If losses occur as a result of fire, flood, disability or injury , and legal liability your business could totally be destroyed within just a few minutes. Use of insurance to protect years of hard work in building your business is a wise and practical idea. You must have a clear view of what and how much you're personally and professionally risking and how you can handle and minimize such risks.
3. It demands long hours of work, patience, and hard work. More often than not, being your own boss means longer hours of work and tons of patience and hard work. You get to do more tasks because, overall, you're in charged with the operational and management sides of the business. You'd probably have to wake up and start working earlier, then finish and come home later as compared to when you're still an employee.
Looking into the brighter side, you may not even feel you're working as you run your business especially if it's your passion.
4. Life-work imbalance. Running a business has numerous demands of time, energy, and focus. You are the primary decision maker and most probably, also the producer of the goods/ services. It's through your efforts that the established goals and objectives will be achieved. You are the chief driver of your future.
Business owners are faced with the daunting task of maintaining a reasonable balance between life and work. Oftentimes, those owning a small business are at risk for unintentionally neglecting their life partners and/or children's needs-- physically, emotionally, and socially.
It is important to consider your priorities and if possible learn how to delegate tasks. Remember that although running a profitable business can bring you wealth, high stature and recognition, it could be superficial and meaningless if this results to irreparable damage in your relationship with a spouse/ partner and children.
5. High stress level. Diving into the world of probabilities and risks, owning a business is a highly stressful pursuit. The moment you decide to let go of your full time job, which gives you a sure paycheck after 2 weeks or at the end of the month, you must fully embrace the nature of entrepreneurship. You will have to deal with triumphs and failures at one point or another.
Especially true during the start-up phase, it might be difficult to delegate tasks when you have concerns about the abilities of your staff to carry out tasks. This could leave you burdened and exhausted.
Successful businesses thrive on effective delegation-- a core concept in management. You must be able to hire the right person with whom you can get things done. Although it might be difficult at first, your staff should eventually learn how to do things according to your standards.
Don't be tempted to think that it'll be faster and more efficient if you'd do it yourself. Delegating the right tasks to the right person will save you more time in the future and could even allow you to focus on strategies on how to expand your business.
6. Complete accountability. Being your own boss means you are generally responsible for the entire management process of your business. The process includes planning, directing, organizing, controlling, and staffing.
Your tasks include, but do not limit to, setting your business goals and objectives; finding resources; researching opportunities; identifying and managing risks; hiring, training, and managing your staff; marketing; and managing the finances.
You might also be compelled to make decisions about things you're not fully knowledgeable. Talking to a business consultant for things you lack adeptness can make things easier for you. Joining business-related professional organizations and committing to continuous personal and professional development can empower you as an entrepreneur.
7. Disappointments along the way. As an entrepreneur, you should not expect smooth sailing all the time. Even if your start-up business does very well in the first few months, there will always be challenges and frustrations along the way.
By being optimistic and resilient, you are paving your way to greater success in life.
Related Post: 10 Common Traits of Successful Entrepreneurs.
Managing a successful business is amazing. However, its accomplishment isn't an overnight thing. Moreover, business isn't for everyone. Give due diligence in planning and managing your business and may the best of luck be with you!
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