Pros and Cons of Business Ownership
Owning and operating a business can be lucrative, but it's not for everyone. The numbers of businesses that go under each year attests to this fact. Yet sometimes, everything works together to cause a specific product or service, offered at the right time, in the right place, and in the right manner, to capture public attention and meet public need. This is not accidental, however; it takes a lot of work. Know the risks and benefits before you begin.
While many businesses are formed each year, unfortunately, many have short shelf lives. The Small Business Administration (SBA) reports that 50 percent of all small businesses fail within five years of opening their doors.
SMALL BUSINESS OPENINGS AND CLOSINGS — 2002–2006
U.S. Dept. of Commerce, Bureau of the Census; Administrative Office of the U.S. Courts; U.S. Dept. of Labor, Employment and Training Administration (2005).
The myriad reasons businesses fail include poor financial management, lack of experience, poor location, intense competition, personal use of business funds, poor inventory management, unexpected growth, and low sales. The owner is responsible for making sure the business doesn't succumb to these pressures. How can you protect your business from these inadequacies and mistakes? First, assess your business. Is the problem lack of experience? Study your craft and work with seasoned investigators. Worried about location? If you are opening in a public location, study area demographics and check with your chamber of commerce.
The point is that the owner has more responsibility for success or failure than is usually admitted. Certainly she can't control whether the competition possesses more operating capital, but she can control whether she scopes out the other guys before deciding to compete against them. She can also look for ways to perform better and advertise this improvement to the public.
Get the idea? When you start a business, it's what you make it. Accept this, and do all you can with the areas that are under your control, so that areas not under your control — a natural disaster or economic slowdown — are less likely to wipe you out. Is starting a business risky? Yes, but it has numerous rewards.
Positive Aspects of Business Ownership
Looking at statistics with a “glass is half full” attitude, realize that although half of small businesses fail within five years, half of them succeed. Some advantages of owning a small business include:
Flexibility of schedule — though you may work more hours, you decide when
Freedom to choose jobs you want and refuse ones you don't want
Freedom to perform your work your way
Freedom to outsource the boring stuff and concentrate on creative business building
Opportunity to better meet specialty client needs and requests
Opportunity for increased earning capacity and decreased tax liability
Opportunity, using the Internet, to look and perform big without big business costs
Opportunity to love what you do and do what you love
Remember that ending up with a successful business entity will depend on how much preparation you're willing to expend at the beginning.
Is smaller better than bigger? Perhaps — at least in some ways. Small firms contribute much to the economy and are responsible for employing a huge portion of American workers. According to the U.S. Department of Commerce, Bureau of the Census, small firms have the following characteristics:
Represent 99.7 percent of all employer firms
Employ about half of all private sector employees
Pay more than 45 percent of total U.S. private payroll
Generated 60–80 percent of net new jobs annually over the last decade
Created more than half of nonfarm private gross domestic product (GDP)
Hired 40 percent of high tech workers (scientists, engineers, computer workers)
Made up 97 percent of identified exporters in FY 2004
Produced 28.6 percent of known export value in FY 2004
Supplied 22.8 percent of the total value of federal prime contracts in FY 2006
According to these statistics, the American economy is dependent upon small business, yet there is no denying that owning one is risky, at least for the first five years and quite possibly after. However, this section will outline means of reducing the risk and optimizing possible gains. If you want to start your own business, the first step is to create a business plan.
Small business is the backbone of the U.S. economy. According to the U.S. Department of Commerce, U.S. Bureau of the Census, half of all American workers are employed by small businesses. It also reports that, over the past ten years, small businesses created 60–70 percent of all new jobs. For more information, see