The idea of business ownership is very appealing. Be your own boss! Instant promotion to CEO! YOUR ideas, YOUR schedule & YOUR staff picks! The sky is the limit! All of this is true, and more. Business ownership has provided me the most fulfillment in my professional life, so I deeply recommend it to those who can do it. Business ownership provides a wonderful journey. But beware! There are many risks and pitfalls to business ownership.
Far too many people start doomed businesses. The business start-up failure rate is eight out of ten in less than two years. So, please look at the cons of business ownership first. They must be realized. They must be understood. You should’t start a business unless you have what it takes to succeed!
The 5 cons of business ownership
As you read through the following five cons to business ownership, please evaluate yourself objectively. Failing at business ownership can be very devastating to you and everyone connected to you. You can lose your house, end up divorced, become disassociated by everyone you know and worse – you can end up on the street. Food stamps.
Those are very real outcomes, so please take the cons of business ownership SUPER seriously. My goal is to help reduce the business-failure-rate by discouraging business ownership by those who don’t have what it takes. Then, I wish to encourage those who do.
1. Patience and dedication is required
Turning an idea into a business is quite a large undertaking. Business ownership requires great patience. You must be dedicated. Practicing careful strategic business planning and execution through each step of your venture is paramount. You’ll do this over a great many months before you can get to the prize at the bottom of the box. Your prize may be financial freedom or a market-share milestone. It is success, as you define it.
perform proper market research
Patient due-diligence is the name of the game with business ownership. You must perform proper market research and you must know all about your competitors. You’ll dive into the nitty-gritty each step of the way to protect your business from being blind-sided. Business ownership is a marathon, not a sprint.
Expect the unexpected, which is cliche, is valid regarding business ownership. It means to look at every angle and do your homework. You must know what to expect ahead of time. Taking shortcuts and shooting for quick success is the more common approach with business ownership. Failure is the more common outcome. Please learn from this and plan to suffer through the difficulties without giving up. Your business CAN be in the 20% that succeed. But business ownership requires that you do what it takes.
If you truly care about doing what it takes to be successful with business ownership, for as long as it takes, and you have the focus to stay on-track, you can be successful with any type of business. Stay dedicated, educated, focused and patient. Know what steps you need to take and how to take them. This will all go into your business plan ahead of time. Use every resource available and perform research often to stay informed. Keep your focus on business plan execution and avoid distraction.
Sometimes you’ll find a better solution, or you may discover a better plan. Use a formal process to test your new idea. Then formally amend your existing business plan. Business plan changes should be the exception…changes must be resisted. Avoid plan-execution-spin-out, which is my fancy term for losing sight…losing your focus…being distracted by new ideas. Keep your eye on the ball! You’ve done your due-diligence already, so trust it, and stay focused.
2. Responsible for EVERYTHING
So…Did you think you could just delegate that task? With business ownership, your plate will be overflowing most of the time. Until your business is running smoothly, you’ll need to do everything, including cleaning. Responsibilities of business ownership is a broad topic. Let me list some of the major responsibilities you will face as a business owner:
Run your business properly, legally and by following all government regulations with open transparency to remain accountable. Business ownership opens you up to scrutiny by the public and by the government. Stay informed, and keep every aspect of your business honest.
Obey all obligations to your financiers, employees, and customers. They are the foundation that you stand on with business ownership, so please pay them the respect they deserve!
Ensure your business has ample funds to operate at all times. Planning is key to keeping money in the bank, so stay on top of that. Unforeseen expenses occur frequently, so always be prepared for them.
Make sure money is received, handled and spent properly. Accounting is paramount with business ownership, so be sure to track all money coming in and going out. The general ledger should always be open. It should be one click away so you don’t miss an entry. Business ownership requires that you keep consistent accurate financial records.
Always ensure that money is never misused. Do not use company funds for personal uses. Businesses have failed from this act alone. All spending must be accounted for, prioritized, and authorized. Finances are the life-blood of business, so please take care of them at all times!
As a business owner, you are fully responsible for the upkeep, security, health and safety, insurance, and legal and government regulation compliance. Unless you rent an office in a managed and maintained complex, all of these are assumed by the business owner. Please sweep, mop and dust frequently!
Maintaining insurance is a required fact of life with business ownership. There are many types. To list a few: Employee liability, commercial auto, general liability, property, worker’s compensation, professional liability and data breach. There are many other types of insurance that an agent would love to sell you, so get the information about what is available, and what each one covers, but then be shrewd. Insurance is a service, even if much of it is mandatory, so treat is as a product and weight the cost vs. value for each type. Don’t over-insure. First, comply with what is required, and then go with your instinct, based on research and shopping around.
Contracts and agreements
You may offer services with a contract, or with an SLA (Service Level Agreement). Also, you might have a lease contract for your business location. Certainly insurance and other services provided, like building security, entail contracts. Honor these and you will maintain a solid reputation, and you will stay out of court.
Keep all of your business receipts and do your taxes regularly. The government is not there to hurt you, and if you’re not making any money yet, you have nothing to worry about. Be sure to file quarterly. If you don’t, and you’re not making any money yet, you’ll go from owing very little, to owing very much because of the penalties for not filing.
Stay on top of it to avoid “crunch time” when it’s time to prepare your taxes. Better to spend “crunch time” doing business and achieving success…not doing taxes. It is very rewarding, come tax time, when you only need to spend 20 min putting it all together, since you’ve kept up with them regularly. Don’t let your taxes or your tax preparation fall behind!
Planning and strategy
As I mentioned in number 1: Patience and dedication are required. Planning and strategy is YOUR responsibility. From long-term to short-term planning and strategies, prepare them, use them, revise them, and follow them strictly. Preparing them is paramount.
Put in the due-diligence up-front, and be thorough. Test your plans and strategies against your industry research so you can trust them. Certainly use them for all you do with business ownership. Every decision you make must be calculated and thought-through. It’s easier to be decisive when you have a business plan. Again I’ll state…eight-out-of-ten biz-failure-rate. Don’t become a negative statistic! Follow your business plans and business strategies daily. Be strict about it. The business with the best plan will always lose when they suffer from plan-execution-spin-out.
This word is like a can-of-worms needing to be assembled. Each worm must be carefully prepared, and then stuffed into the can. When you open it, there should be explosion of high-volume. Remember my blog post: Effective Marketing Strategies?
Marketing is the act of promoting what your company has to offer with the intention of selling it. Marketing contains four P’s…Product, Price, Place, and Promotional strategy. Product is determined by much more than an idea. It must be evaluated and proven. A great deal of research and calculation is required to fix upon the total cost and market value of your product.
That, in turn, determines the Price. Place, being where the customer resides, will be driven by economic indicators like regional employment statistics. Then demographics…your target audience. Plan your promotional strategy based on your industry. This is how you’ll inform the public about your product and will be the most important endeavor in each of your marketing strategies.
Customer service is arguably just as important as the product itself. In today’s marketplace, the public expects good customer service. It is your responsibility to deliver stellar customer service that goes above and beyond what is expected, and with a carefully calculated, strategic approach. In my blog post: Gaining Customer Loyalty, I break down all of the bad, and then the good elements of customer service. Then I show how to bring the best customer experience to your clients. That paves the road to gain strong customer loyalty, which is very important part of business ownership.
As your business ownership expands, you’ll probably hire employees. In doing this, you take on the responsibilities of screening, interviewing and hiring them. Then, you’ll be responsible for training, managing and paying them. Employee benefits are certainly important. As the business owner, you need to pay half of their social security payments. You must also pay unemployment insurance. Tax withholding management is required too. And don’t forget insurance!
3. Long extra hours
If you think you can limit your work to 40 hours per week when when involved with business ownership, you’re clearly mistaken. If that’s your desire, get a regular full-time job. You may then consider business ownership on the side. Full-time business ownership, especially in the early days, requires about 55 to 70 per week. That is when everything is running smoothly. When issues arise, you need to address them and stay on them until resolved.
With business ownership, you are the responsible party. The rule-of-thumb for business ownership is…you are on-call 24 hours per day, seven days per week. Please remember, there is no overtime pay with this type of gig. Expect to get paid very little for your time in the early days of business ownership.
4. Personal issues
You’ll likely encounter some or all of the following personal issues while involved with business ownership:
Any of these can hinder your ability to run a business successfully. The first three…fear, self-doubt and burn-out will probably occur at some point so prepare yourself for them. There are some good self-help resources online to assist you as you conquer them. And conquer them you must!
If you prepare your family ahead of time to fully understand that your time will be limited for the next few years, family issues can be mitigated. Unfortunately, unexpected family drama can occur, and it can literally cause a business to fail completely. Don’t neglect them…they care about you!
Illness is a sad truth, and a part of our humanity. Take good care of yourself. Most successful entrepreneurs exercise daily, and eat properly. Stay active and eat healthy. Your longevity depends on it, and your well being will also be improved by it. There is nothing better for stress than a healthy lifestyle.
5. Fierce Competition
If you find or create a new market, you may fall victim to a lion in search of prey. Whenever a smaller animal makes a kill, a lion soon finds it and takes it. Big companies are always in search of new avenues. When they find a company that has started to exploit one, they come in and take over. Maybe, if you were able to establish yourself…position yourself well in the new space, a large company may purchase your company. But that is usually a pipe-dream.
It’s good to have an exit strategy…to be purchased at some point, and you can put a sound plan together for that. But large companies have great power and huge bank accounts, so it’s up to them to decide whether to squash you or to purchase what you’ve already established.
Entering an existing market is tough. Companies with large bank-rolls and well established market-share will always put up a fight. They can squash you. So you must be able to compete or you won’t make it. Be shrewd and clever. Navigate the marketplace properly.
Carve out a portion of the market-share for yourself. Business ownership requires strength, resilience, perseverance, determination, and stamina will all be needed to compete.
Many of those customers who are a part of your competition’s market-share are loyal. They may see you like a Coke lover sees Pepsi. It’ll never happen. They literally have Coke ingrained in the part of their brain used for religious beliefs. Apple Computer is another example of that.
In 1984, Steve Jobs put out a commercial that caused new Apple customers to consider IBM and Microsoft as an enemy. Even today, having a phone that performs better, and costs less, just doesn’t matter. Apple has a super loyal following. They don’t care about performance or cost. There is no logic to it at all! But, you must contend with this. Having a religious following is the customer loyalty stretch-goal, with business ownership.
The 5 pros of business ownership
Finally, we can get positive about business ownership! As I so eloquently stated at the beginning of this post, if you start a business, you will be CEO. You’ll no longer be stuck in a pay bracket. There’s no limit to how much you can make. You call the shots, all of the shots. After reading the cons of business ownership, you now understand the responsibility that goes with that.
Now that you’ve considered all of the cons to business ownership, and you’ve addressed your concerns systematically, it’s time to answer the question: Do you have what it takes to run a business?
If you’re unsure, please don’t proceed. You may be tempted to begin business ownership after seeing all of the pros. That wouldn’t be good. You’ll only become another negative statistic. The odds of success are too poor to enter business ownership without 100% confidence you have what it takes.
Those with doubt, thank you for reading the first half of Business Ownership – Cons Before Pros. I wish you all the best in your career. There are many good companies out there to work for.
Okay…I trust you have what it takes for business ownership…entrepreneurship. There’s nothing more rewarding for those who are cut out for it. If you have passion, drive, creativity, and a vision, get ready to see what the possibilities are! Business ownership is quite an adventure.
1. Business ownership means you are CEO
There is a satisfaction in knowing you have total control of your career. You’re now the CEO of a company. You may now embark on the journey of your choosing. Design your own environment, and procure your own products and services. Place your ideas and preferences on everything produced by your company. Come to your own conclusions, based on careful research based on YOUR interpretation of the data. Hopefully, you’ll use proper judgement, but I have confidence your judgement will be sound, since you have what it takes for business ownership in the first place.
Now that you’ve been crowned king of your world, put away your throne and get ready to work harder than you ever have before. Hard work is so much nicer though, when you’re striving for your own success, right?
2. Unlimited potential for success
Achieving success is hard.. Don’t forget that. But now that you know you can do it, how far can you go? How successful can you be? There is no limit. Set your goals, work at your own pace…set your own schedule, and track your success. You will see that the smarter you work and the more you apply yourself, the more successful you will become. Define your own success ahead of time.
Long-term, mid-term, and short-term success should be mapped out ahead of time and monitored regularly. If you know your industry well, you can find a way to stand out. Fill a niche and beat the competition knowing that many of your competitors will fail, statistically.
3. Put your personal vision to good use
You probably have a clear vision for how you want your business to be run, and what you wish to achieve in your industry. Create a mission statement. Come up with a good tagline. Jot down your vision for success. Then put these into action. The vision you have for the future of your company can come true, and more than likely will come true, since you belong to the 20% club of business ownership.
4. Make your own rules
You get to decide what the rules are at your company. Define the culture of your company. I work for Intel, which has a culture of meritocracy. The achievers are rewarded and the slackers are penalized. Politics, which are human nature and can not be avoided, may at least be contained by your own policies. Be an active political leader at your company. If you don’t, someone else will…that is just a fact of life. Own it…embrace it! Even with business ownership, there’s no way to avoid politics.
5. Earn your own money
One time, while driving on the highway, I realized I needed a little extra cash for a family get-away. I called a client who had a monthly payment coming due soon. I told him I’d offer him a discount if he would pay for three months in advance. The Three-Month Discount! Upon receiving the check, I was off to Disneyland with my family. Although I was on the phone much of the time speaking with my assistant to ensure deals were closed properly, I was able to have fun with my family, enjoying the freedom offered by business ownership.
When you put forth additional effort, you can watch that extra money come in like clockwork. These efforts may include: Promotions, extra targeted ad campaigns, adding additional products or services, or offering special combo discounts. Working smart means implementing the most effective and efficient methodology. Working hard at working smart will increase income proportionally.
Optimization has a similar affect in business ownership. Tweaking your ads, product displays, promotional wording, and so on, to optimize response, has an amazing affect on growing income. Always track statistics, from every angle, and then watch them change with each tweak, to each item. Be calculated and strategic about it, and keep it metered at all times. Once you find that winning combination that clicks with your target audience, POW! The money rolls in.
Final thoughts – business ownership
I hope I’ve successfully separated the entrepreneurs from the wannabes who may love the idea of business ownership but don’t have what it takes to be successful at it. I’m saddened by the many businesses run by people who have “If I open my doors, they will come” attitudes. You see it in strip malls, and you see it online. Success requires due-diligence, regardless of your industry. It is just a fact of life with business ownership.
Due-diligence and hard work are not the same thing. Hopefully, and I know this isn’t true, everyone is a hard worker. It’s the person who’s willing and able to put forth the effort at each stage, from discovery, design, development, and then deployment. The four D’s. Hey, there’s a new topic for a blog! Noted!
Hard work, in itself, can apply to all jobs. From ditch-digging to brain surgery. Only apply hard work after implementing the most effective and efficient methodology (working smart). Do this after performing all of the necessary due-diligence. Then, success will truly come, regardless of your business ownership venture. Good luck!
Thank you for reading:
Business Ownership – Cons Before Pros
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