Entrepreneurship Risks and Rewards: We all grow up dreaming of running our own business, even maybe, a multinational enterprise (MNE) or conglomerate. Entrepreneurship has many risks and rewards, but sometimes we can become too focused on the risks or the rewards. While reading this article keep in mind the age old phrase, “There is no such thing as free lunchâ€. The average person most fears losing a stable income to start a business. That gap of time where there is no guarantee of income and no guarantee of success for your business can be terrifying. One reason people fail at starting their own business is because they are not properly prepared, for example to overcome the income gap it is generally agreed that you should have six months to one years worth of living expenses saved in the bank; while also having your business ready to go before leaving your current work. The problem with soon to be entrepreneurs is they focus too much on that income gap, and not enough on the other risks associated with starting a company. If you look around on the internet you will find that most websites and informational sources focus on the risk of security. Here are a few other risks that can be associated with entrepreneurship: Social Risks – Putting your family and friend relationships at risk. Risk of Failure- Generally they say “9 our of every 10 new business’s fail†Risks of Inadequate Support – Family and friend support is needed to start a successful business, as well as functional support. Lack of Financial Backing (Financial Support) Miss-interpreting Market (Market Support) Poor economic conditions (Economic Support) Social risks can be most easily described as the tension placed on relationships with family members and friends generated by continued stress from your new business. This includes items such as, the prolonged hours (60-70+ per week), down time, your business not meeting up to your expectations. The risk of failure generally occurs when someone is unprepared to start a business, but moves forward anyways because they lack the restraint necessary for a successful business. (Preparing for Entrepreneurship will be in another article) Lastly, support from personal relationships and the functional sections of business is the largest area of failure for entrepreneurs. Your idea may be great, but if the execution of your idea is done incorrectly it could lead to a failure even if the idea should be a success. While there is tons of risk associated with starting a company the rewards can be great as-well… But don’t get too excied. Most entrepreneurs have the dream that their company will become a billion dollar enterprise and they can sit back and make millions without worrying about life. This is a common mistake made by entrepreneurs for many reasons. Initially, the chance that your small business will be successful, which means to not fail, is approximately 1/10. The chance that your company becomes a mid cap company (50-250M) is less than the 1/10 previously stated. Secondly, the ability to let a company run itself while you make millions is almost never the case. Michael Dell still works at Dell, Steve Jobs still worked at Apple, and Bill Gates still worked at Microsoft. Most small companies have the owners working in them for at least 40 hours a week if not around the 50-60 hours per week mark. This means you will work seven days a week for 8 hours every day. When you are off, you will spend most of your time marketing your business and building your brand, so effectively you are working your entire life. Lastly, not worrying about anything because you have a successful business is never the case. Lets look at Hostess, the company had $2,500,000,000.00 in revenues during fiscal year 2011, and went out of business in 2012. The key factor here is that as stated above the economic conditions were a risk that followed the company even after they became successful. So now you ask yourself whether the rewards off-set the risks and the lifestyle of starting your own company? Well lets look at the rewards. The most idealistic reward is the millions of dollars the company can be worth, this way we can sell the company off for $100MM+ and then live off the money. If this is your goal, you will most likely fail because your initial reason for starting the business is greed. Here are a list of realistic rewards that even a small business owner can realize: Higher Salary – The average American family take home pay is around $55,000/yr. A successful small business can bring home a higher paycheck for the family. “Time†Freedom- After becoming a success, you may still have to work 40-70 hour weeks, but planning a vacation is much more simple. Recognition, Respect, and Personal Satisfaction- While these are intangible, they still provide a great deal of confidence and happiness. Once your business has become successful, you can realize a greater salary. A larger salary will help ease any financial tension that may have become of starting the business, while allowing for a family live more comfortably moving forward. Time freedom is the ability to take a day off, or a vacation more often. Time freedom generally has a cost associated with hiring an employee to fill the void, which allows the owner (you) to choose how much your time is worth to you. Lastly, and for some people most importantly, the recognition and respect gained from starting a business releases tension and stress. Most successful business owners tend to never stop talking about their own company.
My belief has always been risk can be managed. Rather then investing money to double it i think internet marketing provided oppurtinity to make money through means of passive income. Adsesne, Amazon, CPA, Affiliate programs all have the platform to be able to reap money year by year even after you have finished a project.
OfficialRTS - I agree with you, however this post is geared more towards starting a business. Adsense is not a business rather a tool used by people who have a passion for some niche that they want to tell the world, this is the same for CPA and most affiliate programs as-well. Rarely do people make $50,000+ off using Adsense, CPA, and affiliate programs. Amazon and Ebay on the other hand can be used as online stores and more similar to a business however that is not completely passive in terms that you still have to deal with customers, pack and ship items, order inventory, make advertisements etc. But I do agree with your overall point that risk is manageable. It is possible to lower the overall risk by starting a website prior to starting your business and building it up so that one can cover their living expenses off their websites revenue. It still requires some level of work though.
The mistake most entrepreneurs make - and one I suffered from myself for years - is to attempt to monetize a service instead of a product and try to be too price competitive in offering it. All service work will eventually cap - period. There are only so many hours in a day. You might be the world's greatest web designer, search engine strategist, or I.T. guru, but if you're under-charging for your time then you can't afford to hire someone as good as you once you reach capacity. How many of the Fortune 1000 companies are service companies vs. product-based companies? Very few - and among them, 100% were well capitalized from the beginning. The money is in selling something - a product, a book or other information, etc. Not your time. But in order to do that, as a solo entrepreneur, you need an audience. The good news is this isn't that difficult to get... just start sharing what you know. Everyone is an expert at something. Show your hand, share your knowledge, and build credibility as an expert first. Build a mailing list. You can do this without quitting your day job. Then, when you're ready to launch a product or start a business, you have the attention of thousands of interested parties.