The Pros and Cons of Starting Your Own Business
31st January 2019
If you’re thinking about starting your own business you’ll know it’s a big decision that will have a huge impact on all aspects of your life.
I’ve been my own boss for more than 20 years, and I have friends who work for large corporations or the public sector, so I have a good idea of the pros and cons of employment vs striking out on your own.
Let’s look at 8 Pros and 8 Cons of starting your own business:
Pro: Take Control of your Future
When you start your own business you’re taking control.
You choose the business model, which market to enter, where you’re based, and which customers you’re targeting.
You’ll decide what products or services to sell, choose your marketing strategy, and decide your customer service policies.
Do you want a lifestyle business that gives you a great work/life balance, or do you want to grow as fast as possible?
Are you going to bootstrap the business and grow organically, or find investors to help you scale faster?
As your business grows, you set the culture, and select your team.
You’re going to be the boss so you’ll be in control. Your future will be in your own hands.
What could be more exciting than that?
Con: You Have to Do Everything
When you think about your new life running your own business, it’s natural to focus on the bit of the job that you enjoy most.
So if you’re a florist, you’re probably thinking about creating beautiful arrangements, and if you’re an architect you may be dreaming of designing bold and exciting buildings.
But at first, you’ll have to do everything else as well:
Who’s going to vacuum the office floor? Who’s going to do the taxes and paperwork? Who’s going to make the sales calls?
Unless you’re starting with a partner, or hiring a team straight away – the answer to all those questions is “You”.
That will change as you grow, create systems, and hire people to do the things you don’t want to do – but initially, you’re going to be doing everything yourself.
Pro: Follow your Passion
Some people start a business in an area they think will be profitable, but don’t really care about.
That approach sometimes works – but I don’t recommend it.
Have you ever heard this quote?
There’s a lot of truth in that.
Of course it IS important to choose a business that has potential to make a decent profit, or it won’t be sustainable.
But for most people, starting their own business is a golden opportunity to change their life, and do something they love.
Make the most of that opportunity, and don’t settle for something you’re not truly passionate about.
When you’re working in a business you love, your enthusiasm will shine through, and make your business stand out.
And your passion for the business you’re in will help you power through the hard times and overcome any obstacles along the way.
Con: It'll be a Rollercoaster Ride
When I ask entrepreneurs about their journey since starting their businesses – they often tell me they’ve had many ups and downs.
A friend of mine once said that the last 20 years of his business had either been “feast or famine” – and that’s a pretty typical story.
It’s a real contrast to a career in a big company which is usually more predictable.
To those of us who love running our own business – the ups and downs are all part of the fun – it’s so much more exciting than having a job!
But if you prefer your life to be steady and predictable – the ups and downs might be one of the disadvantages of running your own business.
Pro: Your Earnings will be Based on Value Delivered
As a business owner your income is determined by how much value you create for each client, and how many clients you can serve – not on how many hours you work.
And that’s a great thing – because you’ll finally be able to earn what you deserve.
As an employee – even if you create millions of dollars in value for your employer, you’ll only receive a tiny fraction of that in salary.
Do an outstanding job and you might get a few thousand dollars as a bonus – if you’re lucky.
Your boss is never going to walk up to your desk and say – “Amazing job you did last week landing that big new client – have a four million dollar bonus”.
But when it’s your own business – there’s no artificial cap on your earning potential.
- Get twice as many customers – you can make twice as much money.
- Get 10x the customers – you make 10x the money.
Don’t imagine that’s unrealistic. Online businesses in particular are very scalable.
You can reach a huge worldwide audience online, so with the right product and marketing, you can make a lot of money.
Look at Pat Flynn of SmartPassiveIncome.com:
When he stopped publishing his monthly earnings in December 2017, he’d averaged more than $125,000 net profit every month for the previous 12 months:
Or Michelle who runs Financial Advice blog MakingSenseOfCents.com who made $145,319 in October 2018 while travelling!
If you want to see more examples, check out our article Top Bloggers’ Income Reports which reveals the incomes of successful bloggers and tells you their stories.
I’m not pretending that earnings like these are typical – but these examples show what incredibly hard working and talented people can achieve when they apply themselves over a period of several years.
And they show what’s possible when you start your own business.
Con: You Don't Get Paid for Turning Up
Yes – there’s another side to this coin: If you work for a big corporation, you’re either paid by the hour, or you get a monthly salary.
And provided you keep turning up and doing your job to a reasonable standard, you’ll keep getting paid.
But when you start your own business, that completely changes:
You might put in hundreds of hours getting your business underway, and not receive a penny.
In the first year or two (depending on how fast your business grows), you might not be able to afford to pay yourself very much at all.
As a small business owner your earnings depend entirely on the value you deliver for each customer, and how many customers you can serve.
Turning up and warming a chair for 8 hours a day won’t cut it. As a small business owner you’re paid by results! No results = no pay.
For me – the upside of your earnings being based on the value you deliver FAR outweighs the downside.
Pro: No Boss
One of the things many employees hate most about their job is… their boss.
If that’s you, then you’ll love the idea of being able to go to work, and not have anyone telling you what to do, or how to do it.
And if you feel trapped under a “glass ceiling”, or you feel discriminated against as an employee – these problems are greatly reduced when you start your own online business.
Many online entrepreneurs find that they can turn their gender / race / sexual orientation and other characteristics to their advantage as they use their life experience to serve others.
Not having a demanding or unreasonable boss to answer to is certainly one of the big advantages of running your own business.
Con: No Automatic Progression
People who work in a big organisation often get used to the idea that they will progress within their company over time.
They’ll get annual salary increases and promotions to more senior positions with better benefits. In other words – they’ll have a career.
You don’t get that automatic progression in your own business. You’re already holding the top spot!
Of course, things shouldn’t stand still – it’s critical that your business progresses – and that’s the way you’ll get greater rewards.
But that progression won’t just happen over time – it’s up to you to make it happen by driving your business forward.
There’s an old joke about being an entrepreneur: You have total flexibility over your schedule – each day you can work any 18 hours you choose!
But seriously – one of the biggest advantages of owning your own business is being able to alter your schedule to suit your lifestyle.
It doesn’t work in every business of course – if you open a shop, you’ll need to be there during normal opening hours – at least until you can hire some staff.
And some businesses need you to be available to talk to customers on the phone during office hours.
But many online business models such as Affiliate Marketing, or selling Online Training give you great flexibility over when you want to work.
Don’t underestimate what a big deal this is. A lot of entrepreneurs go into business to make a lot of money, but end up valuing the freedom and flexibility even more.
The ability to choose how you spend your days, and to change your mind at short notice is something even wealthy CEOs often can’t do – they’re usually tied to a demanding schedule of meetings, decided weeks in advance.
But as an Online Business owner, if you wake up tomorrow and it’s sunny – you can choose to go to the beach! Just don’t forget to do some extra work next time it rains.
Don’t try this in California – but it works quite well here in Scotland!
Con: No Pension or Health Insurance
Depending on the company you work for, you may have benefits like a company pension scheme or health insurance that come with your job.
But when you’re running your own business, you’ll have to make your own arrangements.
If you live somewhere like the UK where the state provides medical care, you may not need health insurance straight away – it’s more of a perk that allows you to get faster treatment.
But in many countries, health insurance is essential, and you’ll need to budget for it when you’re planning your financials.
When you’re young, it’s easy to put off setting up a pension scheme until later in life. You tell yourself it’s something you can do once the business is established.
That’s fair enough – but don’t leave it too long. Not having a pension is fixable – but the older you get, the more expensive it becomes to fix it.
Pro: Work from Home - or Travel
Along with flexibility of time – an online business can give you flexibility of location too:
I’ve certainly made good use of this with my business: I used to have to travel into London to meet with clients – it was a waste of time and I hated it.
So when I moved my business entirely online – I could work from home every day.
And that meant that as a family we could choose where Home should be – provided we could get Internet access.
We chose to move to the beautiful Scottish Borders – an area that offers wonderful countryside and a great standard of living.
I know lots of other Online Entrepreneurs use their flexibility to travel the world, and run their business from their laptop.
It’s up to you.
Con: No Job Security
According to Forbes, 8 out of 10 entrepreneurs starting a new business in the US fail within 18 months.
Alternative (and contradictory) statistics are available.
But whoever’s stats you believe, it’s clear that the failure rate is high.
And that might make you think that starting a business is a risky proposition with no job security.
But you need to ask yourself how much job security you have now.
Our parents and grandparents generation may have had a “job for life” – but there aren’t many of those around any more.
I’ve always felt that taking my future into my own hands, rather than entrusting it to an employer was my best bet.
And I believe the best possible job security is to make sure you have skills that are in demand – that way you can always get a job if you ever need one.
Building a business – starting out with nothing but an idea, nurturing it and helping it grow into a thriving enterprise is one of the most satisfying things you can do.
When you start your business – it’s often just you. But as it grows and needs more people, you’ll have to create the systems that make the business run – and the culture that will make it unique.
Once it’s been growing for a few years, you’ll be able to look back over one of the most rewarding journeys of your life and think: “I built this!”
You can’t beat that for satisfaction.
Con: You Can't Leave Problems at the Office
One of the good things about going out and working a 9-5 job is that at the end of the day you can leave your problems at the office.
But when you work on your own business, especially if you work from home – there’s not such a clear dividing line between work time and your own time.
You may find it difficult to switch off from thinking about your business 24×7 – and it’s easy to drift back to your home office and do an extra hour or two of work at night.
Pro: Work with People You Like
While getting along with a range of people is a key skill in any business – as an employee, you sometimes find yourself stuck working with people who make your life difficult.
Whether it’s negative and cynical people who drain everyone’s energy, or the office politician who’s always undermining others – co-workers you don’t get along with can be a real problem.
But when you have your own business – you get to choose who you work with.
As your business grows, it’s up to you to hire the right people, and make sure they understand and support the culture you’re creating in your company.
You may still have awkward clients to deal with from time to time – but at least you’ll be working with a team that has your back!
Con: You Need to be Good at Financial Planning
Especially in the early days, you’ll probably find that your business’s income (and therefore your ability to take a personal income from it) can fluctuate from month to month.
So you’ll need to be good at budgeting, and keeping some money by you, in case you can’t afford to pay yourself next month.
As your business grows and becomes more successful, revenue tends to smooth out, or at least (in the case of seasonal businesses) it becomes more predictable.
But if you’re the sort of person who spends their whole salary every month and can’t wait for payday – you’ll need to fix that before starting your own business.
So that’s my summary of the Pros and Cons of starting your own business.
I hope you’re not put off by some of the drawbacks – I’m certainly not – but if you’re thinking of starting out on your own, it’s important that you go into it with your eyes open.
Like a lot of people, I started my business so I could do the sort of work I enjoyed, and make more money than I would as an employee.
But what I ended up valuing most was the flexibility for our family to live wherever we wanted, and to work when we wanted to.
It means that I’ve been at home to see our daughter grow up – she’s a teenager now, and I haven’t missed a single day. You can’t put a price on that – and it wouldn’t have been possible if I’d been working in a corporate job.
Do you have your own business?
What have you found to be the best things about being your own boss?
Have you found any down-sides that you can share?
I’d love to hear about your experiences in the comments section below.