It’s laudable to aspire to become an entrepreneur. Not only do you actually get to become the boss of your own firm, you also give jobs to people. Doing so makes you a productive member of society. However, starting a business is not easy. It’s probably one of the most difficult things that anyone can do. The primary reason for this is the fact that entrepreneurship always has corresponding risks. You need to know what these are before you jump right into the water. Otherwise, you could get burned from becoming an entrepreneur for life.
1. A lot of startups fold even before they’ve had a chance to make profits.
The most common risk that entrepreneurs take is the chance that their business will fail. When that happens, you lose all the money, time and effort that you have placed in it. That can be a very heartbreaking experience. The trauma is so painful for some that they end up not trying anymore. While you certainly wish that your business will succeed, realizing that many other ventures did not make it will serve as a source of inspiration in case you fail—that you can always move on with the next stage of your life.
2. Your business is going to take up your time and energy.
Once you start your own entrepreneurial venture, you will realize that it is going to take up a very huge part of you. That means you won’t really have a lot of time for anything else. You’ll find that your mind is constantly immersed in the issues surrounding your business. It will come to a point when you are physically present with your family but mentally present with your business. There will be nights when you will lie in bed tossing and turning trying to figure out how to solve an obstacle that’s been plaguing your entrepreneurial venture. While this can be healthy and good for your business, don’t let it take control over the rest of your life. Have time for your family and yourself so you can live a well-balanced life.
3. You will see a lot of business opportunities but that does not mean all of them will work.
What is admirable about the entrepreneurial mind is that they seem to see a lot of opportunities that most people don’t. They might pass by a shuttered store in a sleepy town on a road trip and say they could reopen that store and succeed. Unfortunately, what they haven’t factored in is the fact that there are hardly enough people in that town for a store to survive. This point is simply to stress the importance of conducting research, such as a feasibility study, of any entrepreneurial venture you plan to make so that you don’t only base your plan to start your business on nothing more than enthusiasm and a pipe dream.
4. You won’t get a lot of honest opinions from friends.
This isn’t to say that friends are going to try to ruin you. Rather, they might not want to see you get hurt when your endeavor fails. When you ask your friends what they think of your business idea, some will say yes, it’s going to work because they just want to encourage you even if they think that it has no future at all. There are others who might say that it won’t work because they don’t want you to waste time and energy on a futile venture. While it’s good to listen to what your buddies have to say, it’s always a good idea to make decisions based on what your research tells you and your gut instinct as an entrepreneur.
5. The business is going to put a lot of stress on your family life.
There is no hard data that exists on this but there seems to be reason to believe that entrepreneurs are more prone to divorce. Actually, this isn’t surprising when you consider the fact that starting a business is one of the most challenging of endeavors. Even when the venture actually gets off the ground, the pressure to sustain it can put its toll in the lives of the entrepreneur’s families. More often than not, it’s the time of both spouses that gets sacrificed, especially if the other spouse continues to work.
6. Staying competitive is always going to boil down to sustainability.
When you open your doors, the first customers are going to be those who were looking for your kind of business in the first place. However, this does not mean that they are going to keep on patronizing your enterprise. For your business to continue to operate, you have to be able to reach out to more people and get new customers. While you can celebrate a well-received opening day, the survival of your business is always going to boil down to whether you can sustain it in the long-term. If you can’t do that, it would be virtually impossible to continue operations.
7. You could get booted out of your own company.
If you get funding from private equity or venture capital sources, there is a very good chance that you’ll lose control of your own enterprise down the road. One way to wield full control over your own firm is if you funded your venture using your own money—and even then, nothing is certain. That’s just the dynamics of running a business, especially when you’re not hands on with your venture. It’s not a very pretty picture and it certainly isn’t for the weak. If you want to make sure that your business stays in your hands, you have to make sure that you are part of every single aspect of its operations.
The government recognizes the contribution that entrepreneurs make in society and as such, gives them various tax benefits for their endeavors. If you figure in these tax advantages, you might realize that they might actually be able to offset some of the losses incurred, making entrepreneurship less risky.
If you run the business from your home office, for example, you could apply for a depreciation expense reduction on the part of your home which you use for business purposes. You don’t have to spend for anything for this. By simply devoting a portion of your home for your endeavor makes you qualify for a deduction.
You can also be eligible for a mileage deduction for as long as you use your car for business purposes. Take note that this is when you are based from your home office and you drive around to attend to the needs of your enterprise. Now if your business is located outside your home in an office downtown and you have to use your car to get there every day that expense is not tax deductible because you are just commuting.
You may also deduct the expenses used to run your business. These may include your cellphone expenses, office equipment as well as magazine subscriptions that relate to the industry you are operating in.
Take note, however, that your losses in the business may not be deductible if your business never makes a profit. The IRS might conclude that this is just a hobby of yours and won’t allow you to make the deductions.
In addition, while you may think that it’s cost-effective to continue running your business at home even when it has grown quite large, this isn’t actually the case. A typical home-based business only has expenses of less than $10,000 annually so the deductions are just modest. It would be much better to operate your business outside the home after it has reached a certain scale if you really want to take advantage of all the tax benefit eligible for businesses.
A final thing that you have to understand is that when you become the boss, you get to pay the full share of taxes for Social Security and Medicare. This is opposed to when you are working for someone else where you only get to pay half while your employer shoulders the other half. Of course, if you have other employees in your roster, you’ll have to pay the employer’s share for these taxes as well.
Opening a business is fraught with a lot of risks but for the entrepreneur at heart, there is always reason to continue on. While the much-sought after fame and fortune are the material benefits of succeeding in your endeavor, there are also more important effects when you become an entrepreneur. One of the most important of these is the ability to provide for jobs for other people and consequently, the chance to improve their lives.
However, opening an entrepreneurial venture is no joke. The pressure of launching a business and of sustaining it is going to take its toll on your family. Make sure that you talk about your plan with your loved ones ahead of time so that they will also know what to expect.