How Hard Is It to Be a Small Business Owner?
There are a lot of misconceptions about being a small business owner. Like…
People often think that being a small business owner is easy because you get to be your own boss and set your own hours.
The Reality: Most small business owners work harder than they used to work when they had a corporate job.
People think that being a small business owner is glamorous – you get to make big decisions, make big money, and have a carefree lifestyle.
The Reality: Most small business owners have to wear many hats – sometimes getting to be a strategic visionary, but other times having to serve as a front-line customer service person, amateur psychologist, or office janitor.
But one of the biggest misconceptions about being a small business owner is that it’s too “hard.” I recently read an article on the Naked Capitalism blog entitled “Tech Titans Promoting Basic Income Guarantee as a Way to Shrink Government, Kill Social Programs”, which suggested that being an entrepreneur is a raw deal for most people:
But who wants to be an entrepreneur? Seriously. If you can hold a job with any stability and you don’t mind the work and get on with your boss and co-workers, it’s a vastly better deal than running your own show…being in business for yourself is almost a roll-back for the whole rationale of advanced economies: that of specialization. In a larger organization, the really good sales guy can mainly do sales, plus the unavoidable internal politics and bureaucratic tasks. The accountant can mainly do accounting, and so on.
By contrast, starting a business requires lots of skills, including selling, negotiating, having common sense about priorities, being able to size up potential backers and employees, being able to budget and manage funds. It’s a drag if you are really good at one particular thing to have to do all that other stuff, even if you are capable of it.
The payoff curve for entrepreneurship looks a lot like that of lines of employment that most parents would tell their kids to avoid: acting, playing sports, writing novels. Remember, 90% of all new businesses fail within three years. And like J.K. Rowling, A-list Hollywood stars, and football pros, the lure of the huge payoffs at the top end masks the steep falloff after that.
First of all, it’s not true that “90% of all new businesses fail within three years” – according to statistics from the Small Business Administration, about half of small businesses survive for five years or more, and one-third survive for 10 years or more. That’s a lot longer than I’ve lasted at any corporate job.
This article also makes it sound like entrepreneurship only offers rewards to the people at the top – as if most small business owners are a bunch of low-paid losers who would be better off trying to make it as actors in Hollywood. But even if we’re not going to be the next Bill Gates, most small business owners make a decent living – according to an American Express OPEN survey on the average entrepreneur’s salary, as of 2013, small business owners paid themselves an average annual salary of $68,000 – which is significantly more than the 2013 U.S. median household income of $52,250.
But more broadly, I disagree with the premise of the argument that it’s “too hard” to be a small business owner because you don’t get to specialize in what you do best.
It’s true that when you work for a big company, there are certain “economies of scale” that enable the big company to do things faster, cheaper, and perhaps better than a smaller company could. This is a basic principle of economics. However, for small business owners today, in the age of the Internet, there are so many great online small business tools and resources that can help you be more productive! You don’t have to be a big company to get big results in 2015 – you can use business-grade tools and resources to outsource, automate, and delegate various business tasks and daily operations, whether it’s basic back-office functions like simple accounting, invoicing, or payment processing, or more advanced skills like marketing, building customer relationships, and business inventory management.
As a small business owner today, you’re in business “for” yourself, but not “by” yourself. You can get help with almost any business topic imaginable online. You can connect with other entrepreneurs on LinkedIn for advice and ideas. You can get free business mentoring from SCORE, the Small Business Administration’s mentoring program. Even if you’re a solo entrepreneur or small business owner with only a few employees, there are many ways to make your business seem “bigger” without the bigger costs.
It’s simplistic (and wrong) to think that it’s too “hard” to be an entrepreneur, so no one should want to do it. I think it’s actually the opposite – while it’s never “easy” to run your own business – there are always financial risks and stresses, and lots of hard work – the Internet is making it easier than ever before to run a business. Not everyone has the right combination of ambition, hustle, vision, and sheer willpower that makes for a successful small business owner – but if you do, the rewards (and the daily sense of freedom) make it all worthwhile.
Ideally, as a small business owner, you should get to specialize more than ever before in doing what you do best every day. Use some of these cheap (or free) online business tools and mobile apps to outsource or automate the daily tasks that you don’t like to do or aren’t as good at. Being an entrepreneur helps you unleash your productive, creative potential like nothing else!
What do you think? Is it really “too hard” to be a small business owner? Do people underestimate or overestimate the risks and downsides of entrepreneurship? Tweet us at @KabbageInc and let us know!