Pros and cons of starting your own business
No boss to report to, setting your own hours, and doing something you truly enjoy entrepreneurship is at the heart of the American Dream. And a lot of people have that dream! There’s an estimated 33.2 million small businesses in the country1 and as many as 1 million more open every year. For many, working outside the office during the pandemic may have clarified that they prefer independence. If this describes you, you might be thinking of opting out of that 9-5 job entirely.
Why do people start their own business?
There are plenty of reasons to start your own business: being your own boss, unlimited potential for growth and earnings, feeling more invested and passionate about your work, and not being subject to someone else’s whims (or limited by their budget).
Men and women may have different reasons for starting their own business. 42% of all businesses in the US are women-owned,2 but these women-built businesses lag in terms of high growth and high impact.3 This may be because men tend to start their own business for growth opportunities and profit potential, while women are more likely to start a business to gain feelings of achievement and accomplishment.4According to a Global Entrepreneurship survey, 80% of women want to start a business to become a role model for younger women and 62% are motivated by unfair treatment in a previous job.5
Whatever your reasons, starting your own business comes with challenges as well as advantages, and it’s important to consider and plan for these challenges before taking the leap into self-employment. Here are some pros and cons of starting your own business:
Pro: you’re in control
As a business owner, you’ll have flexibility over when, where, and how you work. You’ll decide the product or services you offer, the clients or customers you’ll work with, and how much to charge them. You don’t need to choose passion or profits, both can be a priority. And whatever profits you do make will be all yours — you’ll earn the full value of your work instead of just your salary or wages.
Con: you’re responsible for everything
Make no mistake: if you start your own business, you’ll likely need to be more committed than you were on the 9-5 grind, especially in the early years. You’ll be responsible for launching with a strong business plan in place, ideally with a clear opportunity to enter a high growth area, not a saturated market. If you start as a sole proprietor, you’ll literally be doing everything, from admin to customer service and beyond. Your compensation will be directly tied to the business’ profitability. There may be times when there are no profits and as a result no income, again this is especially true in the early years.
Pro: you can make your own schedule
During the Covid-19 pandemic, many workers around the world were forced to turn pandemic-related disruptions into opportunities. While overall millions of small businesses were started during the pandemic, particularly microbusinesses (i.e., businesses with 10 or fewer employees), several countries also marked an increase in women entrepreneurs.6 Mothers in particular had to rethink childcare when schools and facilities were closed or went remote. Many solved the problem by starting a business, allowing them work at home permanently. While running a business and simultaneously caring for a child is its own unique challenge, the flexibility of business ownership can be preferable for many people who have demanding responsibilities outside their professional lives, like parents to children or adults with aging parents who need assistance.
If you’re a woman starting or running a small business, The US Small Business Administration is one of several resources with advice, programs, and funding for women-owned businesses. Don’t be afraid to ask for support.
Con: paying your taxes is even more complicated
New small business owners should be especially careful with taxes: switching from a straightforward filing on an employee’s W2 to a self-employed small business owner or sole proprietor will be a big adjustment! Among other changes, you may need to file tax returns quarterly instead of annually. You’ll also be dealing with an entirely new world of tax deductions — you’ll need to track business expenses and operating costs for potential write-off during tax season. One expense a new business owner should consider is engaging a professional tax preparer!
Pro: you can give back to your community
Business owners, particularly those in smaller communities, can have an outsized impact. Whether you’re creating jobs or sponsoring a team in the local little league, as a business owner you have an opportunity to affect positive change for those around you. Even on a small scale, this can make your work more meaningful and improve the community you call home. And if your business becomes a success, the opportunities for larger philanthropy are limitless. One study found that 8 in 10 entrepreneurs consider charitable giving a critical part of their identity. And while men and women may have different reasons for starting a business, they give similar amounts to charity and spend about equal time volunteering.7
Con: no more employer-sponsored benefits
Self-employment also requires going without employer-sponsored benefits. As a business owner, you’ll be responsible for your own benefit package such as health, life, disability insurance, and others — as well as saving for retirement. The US government provides guides to health insurance for small businesses, which can be a good place to start. When it comes to other protections and retirement saving, your best bet is to talk to a financial professional ASAP — they can help you develop a savings strategy and identify the tools that will best work for you and your business.
Starting your own business shouldn’t be taken lightly. You’ll need to put the time in to selecting a business with growth potential, planning, and preparing before making the leap, and you’ll need to be prepared to work hard. But, if you can manage the challenges, the rewards can be enormous — both professionally and personally.
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2023-157185 Exp. 6/2025