No one would deny that starting a new business is fraught with risks, but given the uncertainty involved why is it that the US sees over 500,000 new business starts every year? After launching and running several successful businesses, along with my fair share of duds, I’m confident in my explanation. Despite the potential pitfalls, entrepreneurs launch new ventures because the benefits can be equally if not more significant than the chances that something might go wrong.
Nonetheless, it’s up to everyone to decide whether the rewards outweigh the risks of going into business for yourself.
Risks Associated with Starting a New Venture
Again, there numerous risks associated with starting a business. Here are five of the most common ones to consider before jumping in feet first.
- Long and Erratic Hours. Whether you’re adequately funded and staffed or not, as a new business owner you can expect to put in many more hours than you would at a 9 to 5. In fact, you’ll probably work more hours than anyone else in your company and with good reason–entrepreneurs wear many hats. Plus, at the end of the day when all is said and done, as the business owner, the buck stops with you. So, the moment you start your new venture you’re signing up for long and often erratic hours.
- Many Ruffled Feathers. Again, long and unpredictable hours are often commonplace when starting a business. So, as you might imagine the hectic schedules that often come with entering a new venture often leaves little opportunity to cultivate what matters most–relationships. Hence, family and friends can often find themselves on the short end of the stick when you begin your new venture; therefore, it’s important to build breaks into your schedule because if you don’t force yourself to stop and smell the roses, it won’t happen.
- Unforeseen Changes in the Market Environment. Sometimes as entrepreneurs, we start businesses oblivious to massive shifts that are occurring all around us. Many of which could easily have the potential to negatively impact your new business concern. For example, I’ve seen so many sink tens of thousands into new storefronts only to be told by local authorities – after the fact – that upcoming zoning laws will require them to make expensive renovations to ‘stay within code’ or close their doors. Of course, you can sometimes offset these types of scenarios by performing your due diligence. Nonetheless, there are some changes that you just won’t see coming no matter how much planning and preparation you do, which is why you must factor a certain degree of the unknown into all that you do as a business owner.
- Lack of Management Experience. There is a notion that I’ve seen among many new entrepreneurs that if they hire good managers, the owner’s lack of management experience won’t matter. Unfortunately, as many find out this is often not the case because without the requisite experience, how will you be able to identify whether your managers are making mistakes. This inability to distinguish between wise or poor business decisions is why many business experts recommend that entrepreneurs take on management positions for someone else before striking out on their own.
- Potential for Financial Loss. Running a business requires careful budgeting and financial management. However, the problem with many entrepreneurs is that we tend to start businesses without understanding key management functions, like how to forecast profits and losses or create financial reports.
Our lack of financial know-how is often compounded by the fact that many new businesses start before they’ve had an opportunity to secure adequate funding. Hence, it’s not uncommon to see new business owners scrambling to find odd jobs to make ends meet. One way to avoid severe cash shortages is to set aside six to twelve months of personal expenses before starting your business.
Rewards of Starting a New Business
While there are vast challenges that come with starting your own business, the rewards can often make up for it.
- The Opportunity to Grow through New Challenges. One of the best things about being an entrepreneur is that you get to break away from the monotony of punching a clock and doing the same job duties, day in and out. As a business owner, you’ll face new challenges and tasks on a regular basis. In fact, it is rare that you’ll do the same thing two days in a row! And the best part of performing new activities on a regular basis is that it gives you the opportunity to grow and learn, which will ultimately help you become a better business person.
- You Get to Surround Yourself with Great Folks. Let’s face it, as nice as it is to earn a steady paycheck, a 9 to 5 certainly has its drawbacks. Perhaps chief among them is having to work in an environment, not of your choosing. Doing so means that you have zero say in who you will work alongside. Hence, a common complaint among those who choose to work for someone else is that they can’t get along with their supervisor or other co-workers. However, when you’re the boss you get to choose the folks that you work with, and if it turns out that you hired someone that’s hard to get along with, you have the option of letting them go.
- Chart Your Own Course. The ability to determine the success or failure of your business is a big draw for many entrepreneurs. In fact, many business owners cite this as their sole reason for going into business. Given that entrepreneurship tends to attract those with a take charge mentality, the business arena is a great place to go if you enjoy making weighty decisions.
- A Flexible Schedule. Although we often associate entrepreneurship with long and unpredictable hours, there is another side to it. Running a new business sometimes gives you more flexibility than you’d have as a full-time employee. For example, many business owners have more time to travel and participate in volunteer than full-timers.
- Financial Potential. There are many different motivations for doing one thing or another. For instance, some are motivated by helping others, while others find motivation in facing new challenges. But whatever helps you wake up in the morning, it’s difficult to overlook the hefty financial rewards that could await those who can successfully manage business risks. As a business owner, you’re usually only one deal away from reaping huge financial dividends.
There you have it, the most common risks and rewards of starting a business. Learn how to mitigate them, and you’ll be well on your way to big things in the business arena. Here’s to entrepreneurial success!
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