The Pros and Cons of Owning a Small Business

Owning a business can be incredibly rewarding and incredibly stressful. If you’re considering opening a small business, it’s important to understand both the good and the bad that can come from it.

Pursuing Your Passion

When you own a business, you make a living pursuing your passion. There are few things as rewarding as working every day to build something you care about. You aren’t just working for a paycheck or building someone else’s dream; everything you do is in support of your goals and ambitions.

Equity and Earning Potential

Business owners profit directly when their business does well. That means you don’t have to hope for a bonus after a big sale or pitch why you deserve a raise to the boss. You’ll automatically reap the rewards from the business’s success. And if the business grows, you’ll continue to benefit from it. If the business becomes large and appealing enough to sell, you may get a significant pay day if you decide to do so.

Control and Being Your Own Boss

Many people value the control that comes with owning a business. As your own boss, you make the big business decisions. If you feel strongly about a direction, you can choose to pursue it. This can become more complicated if your business takes on investors that you’ll also be accountable to, but you’ll still have significant power to direct the business. An owner also gets to control the way they work with their business. This could mean setting your hours, determining where you work, and more.

Taking on Risk

Opening a business requires a significant amount of risk. Particularly when starting out, you’ll likely need to invest your own money and resources in the business. There is no guarantee that you’ll ever earn it back. If you tie personal assets to a business—like when you operate as a sole proprietorship— your personal assets may be on the hook if the business fails and cannot pay its debts.

Regulation and Compliance

As a business owner, it’s your responsibility to follow all legal requirements and regulations. This includes everything from making sure taxes are filed correctly, to having proper licenses and certifications, to following proper personnel requirements. It isn’t as simple as just doing the thing you love and are passionate about (selling something, creating products, etc.); there are also many operational considerations that a business owner has to manage. Once the business gets big enough, you may hire people to take care of these things, but at the beginning, it will likely all fall on your shoulders.

Unreliable Income

Especially at the beginning, it’s unlikely that you’ll earn consistent income from a small business. As the business builds its clientele and brand recognition, sales may fluctuate rapidly depending on the season, customer interest, and hundreds of other factors outside the owner’s control. That means that the money you take home can change massively from one day, week, or year to another. Sometimes the business may even have a net loss, where the costs of operating the business are more than what the business makes. This is particularly important to keep in mind if a small business is your primary source of income.

Responsibility

This con goes hand in hand with the pro of having control over a small business. As the decision maker, a small business owner is responsible for the outcomes of those decisions. If the business does well, it can feel incredibly fulfilling personally and financially, but if a decision leads to a bad outcome, it can be draining and stressful. This stress can feel overwhelming and even overshadow the benefits.

Think carefully about the pros and cons of opening your own business before making any binding decisions. It’s important to fully understand the commitment you are making and the ins and outs of being a business owner.