What Are The Advantages And Disadvantages Of Owning a Small Business?
Owning a small business entrepreneur has its advantages and disadvantages. To decide if you want to own a business, you must consider carefully and determine whether it is worth it.
So let’s start with the advantages first (good things come first, right?!)
Independence (Yes! I determine what time to work!!!)
Being a small business entrepreneur makes you your boss. You make all the decisions on whom to do business with. You decide for your working hours and your free rest days (yeah, amazing!). Many people enjoy this freedom of controlling their destiny above all the upcoming risks.
There is a great possibility to achieve more income as an entrepreneur rather than as someone else’s employee. A lot of young entrepreneurs admire the millionaires of today, like Jason Njoku, Maryam Gwadabe, Mark Essien, Tracy Batta, or Shola Akinlade (it is sha a lot of hard work oh!)
You understand every aspect of your business. Starting from the concept, the whole operation, sales, design, customers, everything you can think of. This is what gives pleasure to passionate entrepreneurs with a great vision for achievement. You create something on your own.
Equity (you own it)
You have a chance to build equity, which then you can keep, sell or pass on to the next generation. Some entrepreneurs do many businesses and this is a common thing to happen.
This gives you a chance to do good, to make a change for the economy, and contribute to society (this feels so good, we admit!)
Among everything else, small businesses also can maintain a close relationship with their customers, which is a key benefit.
Now let’s talk a little about the disadvantages.
As a small business, especially at the beginning, you will have a lot of responsibilities since there will be a few employees or mostly just you. So prepare to work for more than eight hours (and prepare your family and friends too!)
You can’t end the risk completely. If you leave a job to lead your own business and then fail, it would be hard to get on your feet again. This is very common globally. In Africa, there is an 80% chance of businesses in their first 5 years. So yes, be prepared for the challenges ahead.
You can’t predict all the potential changes in the economy (hmmm, naija oh!). So no matter how successful your business is, there will be always a chance that there is a government policy shift, which may have a direct effect on a business, industry or sector.
You need capital to start your small business. Many people use their savings at the start before turning to start-up funding or loans. Sometimes you need to secure the loan with a personal asset (collateral). This is a financial commitment that not everyone wants to make (yeah, sounds a bit too risky).
Now that we’ve talked about the pros and cons, we can continue a little bit with why some businesses fail.
According to the Small Business Administration (SBA), only half of the new businesses survive for 5 years, and only one-third for 10 years or more. The probability of success increases with time. But now these rates have changed a little bit. That is why you need to be aware of how and when things may start going wrong.
Here we cover four main reasons why small businesses fail (eyes open here):
Planning – Lack of planning is a challenge. Imagine going on a trip without having a destination or a plan on how to get there. Eventually, you will get lost! You need to have a goal and then plan to get there.
Delegate – You need to delegate and give some tasks to other people so that you can free yourself and focus on the big picture. Someone needs to have an overview of everything happening at the company and that person is you.
Changes – If the market moves forward, you move forward too. You need to adapt to the needs and be innovative and forward-thinking.
Track your money – You cannot lose track of your money. You need to keep track and analyze your income and expenses and make sure you are on the right track.
For that, you can use some help.
Here you can try dillali.com – Track your income & expenses – our income and expense management tool designed to be that assistant for you!
Having said that, it is time to sum things up. The challenge every entrepreneur faces is having the right balance of decisiveness and caution. You have to be ready to seize the moment, but you also have to be well informed and don’t take an unnecessary risk (tricky, right?!).
Preparation is the key here. Evaluate the opportunities in the market, develop your service or product, have a good business plan, and know your capital requirements.
We can’t say that there is a right and wrong way of planning. Each entrepreneur has his or her approach and experience. Gather as much information and advice before making the hard decisions! And good luck!