What are the advantages and disadvantages of a small business?
Some people think that that becoming a business owner an easy thing to accomplish. And will give you a stress free lifestyle with the flexibility to do what you want, while earning a lot more money. While business ownership has its advantages, it’s not smooth sailing all the time and there are disadvantages to consider. Show
Here are some advantages and disadvantages of being a business owner: Advantages of Business OwnershipTaking that step into becoming a business owner can be a hard thing to do but will be very rewarding when you do. Once you take that risk and start a business, there are lots of advantages. 1. You will gain independence: You are your own boss which means you make the decisions. There is no chance of getting fired and you can run the business the way you want to run it. Your business’s success is in your hands. 2. Lifestyle: You are in command of your business so you choose when you want to work which gives you the ability to live a certain lifestyle. You won’t have to ask for annual leave or wait and see if you get approved for leave. You can choose to spend time with the family and choose to run your business from home if you need too. 3. Financial rewards: Being your own boss gives you an increased ability to make more money than working for someone in a 9–5 job. The more work and effort you put into your business, the higher the financial rewards will be. 4. Knowledge: Being involved in all aspects of your business will allow you to learn and gain knowledge about things like information about your industry, business processes and functions. This information you learn about is knowledge you wouldn’t have normally learnt. 5. A sense of fulfilment and creative freedom: Having the opportunity to run a business in a field you are passionate about will allow you to let your creativity loose. Achieving your goals within your business and watching your business grow will give you satisfaction and a sense of accomplishment. Related Article: 5 Tips for Startup BusinessesDisadvantages of Business OwnershipStarting your own business has some disadvantages as well. There is a certain amount risk involved with being your own boss. There are great advantages but also some great disadvantages: 1.Financial risk: The funds needed to start your business and keep it profitable can be considerable. Taking the step into business ownership will most probably deplete all your savings and you may not enough to live off as there is no guaranteed income. You may also need a business loan until your business grows profitable. 2. Increased stress levels: As a business owner, you are responsible for everything including the running of your business, customers, employees, expenses etc. There is a huge amount of pressure put on business owners which can build up into stress. Find it hard to switch off. Related Article: Why Stress Management is so Important for Small Business Owners3. Less free time: A lot of people think that if you start a business, you will have more free time. This is not true. Business owners are their business and usually work 24/7. Even though you are your own boss and can choose your hours, most business owners can’t get away from business operations. The more time and effort you put into your business to make it profitable, the less time off you have. Once your business gets to a self-sufficient point in its life then you can afford to take time off. However, it can be hard for business owners to actually switch off and relax as the business is an extension of themselves. 4. Perform undesirable tasks: As a business owner, you will have to do things that you don’t enjoy for the sake of the business. All the responsibility falls on you so you will have to make the hard decisions and put in the hard yards to become successful. Business ownership has some great rewards and benefits but there are risks and downfalls with being a business owner as well. Preparing yourself for the ups and downs of business ownership will give you the best chance of succeeding. Most business owners will agree that the advantages tend to outweigh the disadvantages and it’s well worth taking the risk. Check out our other articles here. Do you want to be a business owner someday? Before deciding, you might want to consider the following advantages and disadvantages of business ownership.[1] Advantages of Small Business OwnershipBeing a business owner can be extremely rewarding. Having the courage to take a risk and start a venture is part of the North American dream. Success brings with it many advantages: Disadvantages of Small Business OwnershipAs the little boy said when he got off his first roller-coaster ride, “I like the ups but not the downs!” Here are some of the risks you run if you want to start a small business: In spite of these and other disadvantages, most small business owners are pleased with their decision to start a business. A survey conducted by the Wall Street Journal and Cicco and Associates indicates that small business owners and top-level corporate executives agree overwhelmingly that small business owners have a more satisfying business experience. Interestingly, the researchers had fully expected to find that small business owners were happy with their choices; they were, however, surprised at the number of corporate executives who believed that the grass was greener in the world of small business ownership.[2] Starting a BusinessStarting a business takes talent, determination, hard work, and persistence. It also requires a lot of research and planning. Before starting your business, you should appraise your strengths and weaknesses and assess your personal goals to determine whether business ownership is for you.[3] Questions to Ask Before You Start a BusinessIf you’re interested in starting a business, you need to make decisions even before you bring your talent, determination, hard work, and persistence to bear on your project. Here are the basic questions you’ll need to address:
After making these decisions, you’ll be ready to take the most important step in the entire process of starting a business: you must describe your future business in the form of a business plan—a document that identifies the goals of your proposed business and explains how these goals will be achieved. Think of a business plan as a blueprint for a proposed company: it shows how you intend to build the company and how you intend to make sure that it’s sturdy. You must also take a second crucial step before you actually start up your business: You need to get financing—the money that you’ll need to get your business off the ground. The Business IdeaFor some people, coming up with a great business idea is a gratifying adventure. For most, however, it’s a daunting task. The key to coming up with a business idea is identifying something that customers want—or, perhaps more importantly, filling an unmet need. Your business will probably survive only if its purpose is to satisfy its customers—the ultimate users of its goods or services. In coming up with a business idea, don’t ask, “What do we want to sell?” but rather, “What does the customer want to buy?”[4] To come up with an innovative business idea, you need to be creative. The idea itself can come from various sources. Prior experience accounts for the bulk of new business idea and also increases your chances of success. Take Sam Walton, the late founder of Wal-Mart. He began his retailing career at JCPenney and then became a successful franchisor of a Ben Franklin five-and-dime store. In 1962, he came up with the idea of opening large stores in rural areas, with low costs and heavy discounts. He founded his first Wal-Mart store in 1962, and when he died thirty years later, his family’s net worth was $25 billion.[5] Industry experience also gave Howard Schultz, a New York executive for a housewares company, his breakthrough idea. In 1981, Schultz noticed that a small customer in Seattle—Starbucks Coffee, Tea and Spice—ordered more coffeemaker cone filters than Macy’s and many other large customers. So he flew across the country to find out why. His meeting with the owner-operators of the original Starbucks Coffee Co. resulted in his becoming part-owner of the company. Schultz’s vision for the company far surpassed that of its other owners. While they wanted Starbucks to remain small and local, Schultz saw potential for a national business that not only sold world-class-quality coffee beans but also offered customers a European coffee-bar experience. After attempting unsuccessfully to convince his partners to try his experiment, Schultz left Starbucks and started his own chain of coffee bars, which he called Il Giornale (after an Italian newspaper). Two years later, he bought out the original owners and reclaimed the name Starbucks.[6] Ownership OptionsAs we’ve already seen, you can become a small business owner in one of three ways— by starting a new business, buying an existing one, or obtaining a franchise. Let’s look more closely at the advantages and disadvantages of each option. Starting from ScratchThe most common—and the riskiest—option is starting from scratch. This approach lets you start with a clean slate and allows you to build the business the way you want. You select the goods or services that you’re going to offer, secure your location, and hire your employees, and then it’s up to you to develop your customer base and build your reputation. This was the path taken by Andres Mason who figured out how to inject hysteria into the process of bargain hunting on the Web. The result is an overnight success story called Groupon.[7] Here is how Groupon (a blend of the words “group” and “coupon”) works: A daily email is sent to over 6.5 million people in over 70 cities across the United States and Canada offering a deeply discounted deal to buy something or to do something in their city. If the person receiving the email likes the deal, he or she commits to buying it. But, here’s the catch, if not enough people sign up for the deal, it is cancelled. Groupon makes money by keeping half of the revenue from the deal. The company offering the product or service gets exposure. But stay tuned: the “daily deals website isn’t just unprofitable—it’s bleeding hundreds of millions of dollars.”[8] As with all start-ups cash is always a challenge. Buying an Existing BusinessIf you decide to buy an existing business, some things will be easier. You’ll already have a proven product, current customers, active suppliers, a known location, and trained employees. You’ll also find it much easier to predict the business’s future success. There are, of course, a few bumps in this road to business ownership. First, it’s hard to determine how much you should pay for a business. You can easily determine how much things like buildings and equipment are worth, but how much should you pay for the fact that the business already has steady customers? In addition, a business, like a used car, might have performance problems that you can’t detect without a test drive (an option, unfortunately, that you don’t get when you’re buying a business). Perhaps the current owners have disappointed customers; maybe the location isn’t as good as it used to be. You might inherit employees that you wouldn’t have hired yourself. Careful study called due diligence is necessary before going down this road. Getting a FranchiseLastly, you can buy a franchise. A franchisor (the company that sells the franchise) grants the franchisee (the buyer—you) the right to use a brand name and to sell its goods or services. Franchises market products in a variety of industries, including food, retail, hotels, travel, real estate, business services, cleaning services, and even weight-loss centres and wedding services. Figure 6.7 lists the top ten franchises according to Entrepreneur magazine for 2018. Franchises apply to be on the list and are then assessed used Entrepreneur’s five pillars.
In Canada, 1 out of every 14 workers is directly or indirectly employed by the franchise industry and there are an estimated 1,300 franchise brands operating in Canada. Individual investments vary widely – from $10,000 to millions. KFC franchises, for example, require a total investment of $1.3 million to $2.5 million each. This fee includes the cost of the property, equipment, training, start-up costs, and the franchise fee—a one-time charge for the right to operate as a KFC outlet. McDonald’s is in the same price range ($1 million to $2.3 million). SUBWAY sandwich shops offer a more affordable alternative, with expected total investment ranging from $116,000 to $263,000. Visit Canadian Franchising Opportunities [9]to see franchises by level of investment required. In addition to your initial investment, you’ll have to pay two other fees on a monthly basis—a royalty fee (typically from 3 to 12 percent of sales) for continued support from the franchisor and the right to keep using the company’s trade name, plus an advertising fee to cover your share of national and regional advertising. You’ll also be expected to buy your products from the franchisor.[10] But there are disadvantages. The cost of obtaining and running a franchise can be high, and you have to play by the franchisor’s rules, even when you disagree with them. The franchisor maintains a great deal of control over its franchisees. For example, if you own a fast-food franchise, the franchise agreement will likely dictate the food and beverages you can sell; the methods used to store, prepare, and serve the food; and the prices you’ll charge. In addition, the agreement will dictate what the premises will look like and how they’ll be maintained. As with any business venture, you need to do your homework before investing in a franchise. What are the advantages of small business?7 Benefits Of Owning A Small Business. Do What You Love. This is the No. ... . Set Your Own Schedule. With your own business, you decide how many hours you'd like to work—and what those hours will be. ... . Feel Pride. ... . You're The Boss. ... . Build Self-Confidence. ... . Opportunity To Create. ... . You Can Take Time Off.. What are the disadvantages of a small business?While there are multiple advantages of owning a small business, there are also some potential disadvantages, including:. Possible income instability. ... . Potential of financial risk. ... . Some uncertainty. ... . Longer working hours. ... . Possible lack of guidance.. What are 2 disadvantages of a small business?Disadvantages of Small Business Ownership. Financial risk. The financial resources needed to start and grow a business can be extensive. ... . Stress. As a business owner, you are the business. ... . Time commitment. People often start businesses so that they'll have more time to spend with their families. ... . Undesirable duties.. What are the 8 advantages of small businesses?Advantages of Small-Business Ownership. Independence. Entrepreneurs are their own bosses. ... . Financial gain. Entrepreneurship offers a greater possibility of achieving significant financial rewards than working for someone else. ... . Control. ... . Prestige. ... . Equity. ... . Opportunity.. |