The risks and rewards of starting a small business

Inasmuch as being your own boss sounds rosy, be sure that you are aware of what you are getting into when starting a business. As most financial advisers will say, “start small but dream big”. For some, this saying becomes quite literal. Some people might find themselves operating from an old building, using old worn-out milk crates as seats and a drum covered by boards as a table. However, that should not deter you from meeting those big dreams incubating inside you; because that is just but the beginning!

It is not always a guarantee that your expectations will come to pass, rather the reality could be different. In case you don’t succeed, stay positive, at least you gained a whole lot of experience that cannot be obtained from any book or lecture.

In a bid to create more job opportunities, the government has been on the forefront selling the idea of women and youth joining the entrepreneurship bandwagon. Moreover, with difficulties in finding employment increasing by the day, a business start-up could be very appealing. However, before embarking on that ride make sure the business has a unique if not superior market niche, a sound business strategy and reasonable funding. Here are some of the risks as well as rewards that this ride could take you.

First, before the company breaks even or even brings in any revenue, be ready to start with a low or no salary at all. According to many researchers, at least 90% of all start-ups face sturdy cash-flow challenges, leading to business failure; therefore you could end up being paid in stock, and if possible a combination of stock and a small salary. This is because in its formative days, small businesses are poorly funded and their revenue is slow coming, and since the paychecks could delay, the revenue generated so far could end up in further product development and marketing instead of bonuses or salary increment.

Second, don’t expect to work within the expected office hours. Most start-ups need you to pump in extra working hours or even work over the weekends and public holidays in order to meet those dreams. According to 2005 Well Fargo/Gallup Small Business index, while your previous job may have been a 40-hours-a week job, owning a small business could make you work up to 52 hours a week. Even with all those demands, be ready for no compensation in overtime pay or reimbursement. The only return you might get is your business flourishing.

Third, as we mentioned earlier, with cash constraints it’s impractical to think about getting top of the range gadgets when it comes to production equipment, software, hardware, cleaning equipment or even support staff.

Fourth, do you remember that line that never missed in your job applications? “…other duties as required”? This line now becomes the norm. In order to cut running costs, you may at times have to double up on duties that are far from your normal job description. For some, this could be disturbing and stressful, but for some this could be an extraordinarily exciting experience, since no day is ever the same.

You will have to purchase your own medical cover as well as other benefits that were either fully provided or subsidized by your former employer. These could really be costly.

The scariest of all risks is running out of business. According to research, an overwhelming 50% of startups will not survive their first year, while 95% of those will not survive the first five years of operation.  As scary as this may sound, not all businesses fail.

Nonetheless, it is not all pitfalls and challenges when starting a small business, rewards are also included in the package. The first major benefit is the great financial returns once the business becomes successful. This can be from significant salary increment, huge bonuses, profits, and other monetary incentives. A validation to this is a US research done by William Danko and Thomas Stanely for their book ‘The Millionaires Next Door’, which stated, “Self-employed business persons were four times more likely to be millionaires than those in traditional employer-employee roles.”

For start-ups that take a while to break-even and rake in profits, your multi-functional and hands-on experience is priceless and will be a vital asset in propelling your business towards its long-term goals as well as scaling new heights in your career life.

As most existing businesses have reputable vendors and clients in their catalogue, many start-ups are always in search of new vendors, clients and strategic partners. For those that are social, such experiences are never a dull moment, especially when meeting new people that build your business contacts that will last, or even lead you to your business breakthrough.

The mere thought of owning a successful start-up gives a sense of accomplishment and pride. The long working hours as well as the low or no salary moments suddenly become least of your worries.

Finally, even if the working hours are long and tiresome, you have the advantage of flexibility. You can also manage your own work environment; and enable yourself to pursue your career dreams depending on your interests. In addition, this can give you that sense of freedom to unlock your potential compared to the limitations faced when working for another person.

Start-ups are surely not for everybody, but for those willing to face the risks and reap the rewards then go ahead, don’t hesitate, realize your utmost career altitude. Go for the ride!