FINANCIAL – Even though the business may be successful at the start, external factors such as downturns in the economy, new competitors entering the marketplace, or shifts in consumer demand may stall the businesses growth. Even entrepreneurs who go through a comprehensive planning process will never be able to anticipate all of the potential changes in the business environment. That's why it's critical to write a thorough, clear business plan and make sure you have a reasonable chance at success.
PERSONAL LIABILITY – Beyond merely losing the money you put into the business, you could put more of your personal assets at risk—from your car to your house—if you don't structure your business to protect them. Even the smallest of business ventures requires a certain amount of capital to start. For many people starting small businesses, their initial source of funding is personal savings, investments, or retirement funds. Committing these types of funds to a business venture makes them unavailable for personal or family needs. In most cases where a small business receives start-up funding through a loan, the entrepreneur must secure the loan by pledging personal assets, such as a home. Risking the equity in one’s home is a financial commitment not all entrepreneurs are willing to make.
TIME COMMITMENT – When someone opens a small business, it’s likely, at least in the beginning, that they will have few employees. This leaves all of the duties and responsibilities to the owner. Small-business owners report working more than eighty hours a week handling everything from purchasing to banking to advertising. This time commitment can place a strain on family and friends and add to the stress of launching a new business venture.
It all starts with a good idea Terrence.
John recommends the following next steps:
John Frick already gave you some excellent advice. Since I started and owned a 1-person business that eventually grew into a 50-person, multimillion dollar business, I will identify some of the leading pros and cons to business ownership from my perspective:
1. Being your own boss: That means a lot to people who are independent, confident and can effectively lead people (if they have a staff). It also means you have the ultimate responsibility for every decision and every action.
2. Unlimited potential: As an owner, your business is limited only by your imagination. If you have a solid product or service that people want to buy and you stand behind it, you could achieve a high degree of success. Along with that comes business referrals, a good reputation and a great path for growth.
3. Financial rewards: Typically, someone who owns a successful business can reap financial rewards far greater than if he or she was an employee. A business owner can draw a much higher salary, use techniques to increase wealth such as deferred compensation, and take advantage of many benefits, such as paid health and disability insurance, retirement plan contributions, paid business expenses and more. These benefits are often just as essential as drawing a salary.
1. Personnel management: While some businesses can exist as solo operations, more often than not you eventually have to bring on staff. That means getting involved in human resources: Promoting the company to potential employees, screening job-seekers, hiring and training people, establishing personnel policies, defining job responsibilities, motivating employees and, unfortunately, firing people when necessary.
2. Funding: Depending on the nature of the business, you are likely to need startup funding. Some business owners "bootstrap" their business with their own money, but often, a business owner needs outside sources. It could be SBA loans from banks, funding from one or more investors, venture capital or some combination. Funding is critically important, but it can be very challenging to get the money you need at the most attractive terms and without giving up the control you want to retain.
3. Personal toll: There is no question that starting and running a business takes a huge personal toll on the business owner's life. If you have a spouse and children, they are likely to suffer some personal consequences since you will pour much of your time into starting and running your own business. Some business owners figure out how to balance the responsibilities of business ownership with their personal lives but it is never easy.
Barry recommends the following next steps:
- you are the boss of your own company
- you handles your own time
- no one to blame on the success or failure of the business but you
- you have all your profit and loss.
The cons are:
- time consuming
- you do not have partners to help you.
I do not own my own business, so this is not from a business owner's point of view, but looking from corporate employee perspective, one of pros in corporate working environment is that we have a group of experts for different aspects of running business. For example, we have HR, accounting unit, planning department, marketing & sales, etc. and they divide responsibilities within a corporation. If you own our own business, you would wear multiple hats and get involved in many different aspects of running business. In corporate world it tends to take longer time for things to move, however. Decision making is often based on institutional consensus which takes many meetings and phone calls. On the other hand, if you own your own business, important decision can be made much quicker.