Merits and demerits of starting your own business
Merits and demerits of starting your own business
Self-employment is having your own business. A business is an activity that creates and delivers something people want to buy and provides a profit for the owner. Running your own business seems attractive, but it has pros and cons you should consider before setting up your business. Here are the pros and cons:
Merits of Self-Employment
The following are the advantages of self-employment:
Freedom and flexibility
With self-employment, you do what you want to do, when you want it, where you want it, and how you want it. In short, you have personal freedom to decide what to do and who to work with.
Limitless growth
Whether the economy is booming or not, it does not affect your salary. The salary can only rise once a year due to review, notch increments, or one-off bonuses. With self-employment, you can grow with a growing economy and even become a millionaire because your efforts determine your earnings. How an economy affects your income depends on your role in that economy. If you are a bystander or a salaried employee, you are not likely to feel any effects other than the effects of inflation. However, a business grows with the economy, and the potential for riches is unlimited. It is rare to become a millionaire from a job salary. For example, if you have a net salary of US$400 per month and save and invest every coin, you would need about two years to accumulate US$10,000 from these savings. If, for example, you persuade one of the Nongovernmental Organizations (NGO) to give you a contract to supply 2,000 bags of beans for relief food and make a profit of US$5 per bag, you will get US$10,000 in a month or so. That is the power of operating a business.
Creating your dream job
Salary jobs in many jurisdictions are scarce. You rarely get the right fit and are hardly ever fulfilling. The jobs can, for many reasons, come to an abrupt end. On the other hand, in self-employment, you create your job, giving you meaningful work and self-actualization. It can also go on as long as you like or can work.
Learning opportunities
Self-employment allows you to make mistakes, learn from them, and explore your full potential. In employment, one or two mistakes could spell the end of your job.
Demerits of Self-employment
Risk of failure and loss
One downside of self-employment is you and the enterprise are one, and any success or failure solely depends on your efforts. Without effort or ability, the business may fail with losses.
Long hours of hard work
Self-employment requires a higher level of commitment than is called for by a salary job. Successful businesspersons are individuals who are fully committed to their businesses. In the beginning, you have to be prepared to put your entire mind into the company, have trust, and believe in it. You must be passionate about the business and forget about leisure, luxuries, and necessities until the business truly takes off. The failure rate of many startups is very high, and part of the cause of failure is the lack of commitment. You will, for sure, make near-fatal mistakes. But the possibility of failure and the real prospect of making mistakes should not deter you. If you persevere and stay positive, your mistakes will turn into valuable lessons to make you succeed. You cannot learn and grow without trying and making mistakes.
Higher financial responsibilities
On a day-to-day basis and at the end of the month, you are the one to figure out how things will run and the source of the money for operating the business and paying the monthly expenses. The many financial needs mean you could sometimes go without adequate money for necessities if the company is yet to do well.
Higher operational responsibilities
In a large enterprise, various functional departments and heads of those functions take care of many operational activities and business issues. The owner is responsible for all the operations in a sole proprietorship or a small startup. You are the production, marketing, sales, purchasing, human resources, credit controller, operating, administrative, and accounting manager/officer. All the decisions are up to you and the assistants you may need to employ.
Less free time.
A business requires planning, organizing, decision-making, guiding, administration and control, all requiring the owner's attention. This work leaves little free time for the owner to do anything other than run the business.
Insecurity and uncertainty
A salaried job has relative job security compared to a freelance business. A personal business can fail for various reasons, including ability, fierce competition, and lack of market, making the owner jobless.
No employment benefits
Most salary jobs have benefits like staff loans, medical schemes, education funds and retirement pension arrangements. An individual business owner must provide these benefits for himself from the business.
No job security
In most cases, in a salary job, many people higher up the ranks ensure that the company survives and continues to offer employment. In a freelance business, the owner must ensure the company survives. If the business does not succeed, the owner becomes jobless.
Starting your own business may seem a daunting task that you should avoid. However, most companies we see today were started by individuals or a small group. Where there are challenges, there are seeds of success.
These are excerpts from the book How To Start & Run Your Own Business in Amazon/Nuria Bookstore.