Advantages and Disadvantages of Being a Small Business Owner

There are many pros and cons to being a small business owner, and we believe it’s important that you’re aware of them before taking the leap into self-employment. Becoming your own boss – making your own rules, having your own schedule, doing only the work you love – is an attractive possibility, and we understand that knowing all the ins and outs of small business ownership can set you up for success.

So, take a look at all the reasons why self-employment is right for you or, likewise, if it’s something you still need to think about more – we hope this article can help you to make a decision!

What Are the Pros of Being a Small Business Owner?

There are several benefits to starting up a small business, so, if you’re considering leaving full-time employment, you can look forward to things like:

Have More Independence

Something that all self-employment individuals can enjoy is more control and independence over their careers and every single decision they make, such as holidays taken, hours worked in a day and contracts accepted.

For example, if you want to set up your own IT business, then you’re free to choose only the projects that interest you the most, instead of having to take on work you’re not passionate about. For many, this freedom and flexibility appeal more than continuing to work for an employer, especially because they won’t have to report to anyone or depend on other people’s decisions.

Make More Money

As you’re aware, you choose how much you get paid when you own a business, as your wages can be a lot higher than when you’re employed by someone else. You might have to take more risks, since everything falls on you, but the rewards are also bigger.

You also have ownership of all the profits, meaning there are no restrictions to how much you could be earning, and you keep all after-tax profits you make, unless you have partners or shareholders.

Get More Satisfaction

Another reason to set up a small business is that you can build a career that you love, using your passion, skills and interests – this also means that you get more satisfaction out of it too, since you’ll be doing what you love.

In addition, this helps you to grow professionally as well, and you’ll be more motivated to brainstorm ideas, implement decisions, invest in training and development, and more. After all, because it’s your business, you’re more likely to be eager to face the day!

Enjoy Tax Benefits

Business owners can also benefit from tax breaks that people in self-employment don’t have, such as being able to claim certain expenses. For instance, business owners are often able to claim things like travel costs, office equipment costs, and even utility bills.

As contractor accountants, we can help you understand which expenses can be claimed and which can’t, so speak to us and we’ll be happy to help.

Have an Impact on the Community

This may not be the first thing that springs to your mind when you think about setting up a business, but, for many, it’s still an important consideration to make when you’re trying to reach a decision. By virtue of being a small business owner, you can contribute to the local economy, whether by giving people jobs or by creating revenue that goes back to the community.

Having an impact on people’s lives and careers can be a driving force for many, so keep in mind that building a business can also mean building a platform to make all this happen.

Enjoy Equity

This is another big reason why people choose to become self-employed. By owning a business, you also have equity – or something that you own – that you can build on and even pass on to future generations. You can sell your business as well and use that money to create a new company or to retire early; it’s up to you and, in this regard, having equity also means preparing for the future.

Develop Your Knowledge

Being self-employed allows you to become more knowledgeable as well, and to grow your expertise in a way that you, otherwise, wouldn’t be able to. You’ll have to learn more about your industry, about how to set up a venture, about how other companies are doing, how to best promote a service or product, and so much more.

For example, you may not have sought this knowledge if you haven’t taken the leap into self-employment. So, you’ll be able to grow your career more rapidly as well.

Are There Disadvantages to Being a Small Business Owner?

Like with any other career path, being self-employed and owning a business is not for everyone. It’s important that you consider all the things that can go wrong and everything that doesn’t make self-employment appealing to you – only then you can make a more informed decision and choose whether this is the right option for you.

So, here are some of the downsides of being a small business owner:

It’s Riskier Than Being Employed

There’s no denying that being your own boss has a lot of benefits but it’s also true that there’s more risk involved as well. You’re the one investing capital (or seeking a loan or investment) and making all the decisions and, no matter how well-prepared you are, it’s impossible to plan for everything.

You may find that you end up using all your savings or that you’re not saving enough money for retirement, at least not at the start. You may also have debts right off the bat that you need to pay off and you’ll have to pay your bills and living expenses too, which can quickly become costly – all of this needs to be taken into consideration before you leave everything behind!

There’s More Uncertainty

Owning a business also means going through more uncertainty than when you’re in full-time employment. You’re not guaranteed to find new gigs or to have your products accepted by your target market, which can lead to financial problems.

Of course, even if you’re employed, you never have one hundred per cent job security either, since things can change at any moment. So, if your dream is to build and grow your own venture, don’t let this hold you back from achieving all your goals.

As small business accountants, we’re here to help you maximise your profits and make sure that your accounts are running as smoothly as possible, meaning we can help you with your cash flow as well.

As a business owner, it’s also important that you save up for a rainy day, even if you end up not needing to use your emergency fund – hope for the best but prepare for the worst!

There’s More Financial Commitment

As mentioned, you may have to use your life savings to set up your business or even take on more debt than you’d like. This sort of financial commitment may leave some people uncomfortable, which may make them hesitate when it comes to taking the plunge.

Being in full-time employment doesn’t require this of you, so it’s up to you to weigh the pros and cons and decide what you’re more comfortable with – and what your dream career truly is.

Longer Work Hours

The dream is to work as little hours as possible and spend the rest of your time with family, friends and hobbies. However, at least at the start, this may be downright impossible. Most business owners have to work long hours to build their venture from scratch and to get it to a point where they can take a more hands-off approach, although this, of course, depends on many factors, including the type of business you want to run.

You May Be More Stressed

Because you have financial and time commitments, and everything hinges on your decisions, you may also feel more stressed than if you remained employed. Owning a business means you need to be motivated and determined and have the ability to push through these stressful moments without feeling demoralised.

Also, stress can arise from having to do everything, from creating products and promoting them to having to hire or fire people and deal with suppliers and late deliveries. There are many things to think – and worry – about when you’re a business owner, and this can make it harder for some to continue.

You May Have to Do Things You Don’t Like

This doesn’t just mean having to take on work you don’t love when you’re just starting out in order to build a reputation and grow your business – it also means making hard and difficult decisions that help steer your venture in the right direction.

Firing people can be one of these tasks – it’s probably one of the hardest things you’ll do as a business owner, so you must be ready to face challenges like this when you want to scale up and employ staff.

What Gorilla Accounting Can Do for You

We’re sole trader accountants and limited company accountants (and we were once start-ups too), so we understand very well what it’s like to start a small business from the ground up! We’re here to help you every step of the way, so don’t hesitate to talk to us if you’d like to know what we can do for you.

From helping with your tax returns to assisting with HMRC records checks, we provide many different services designed to help you succeed. There are many challenges to being a business owner, but the rewards are more than worth it, so let us know if you’re thinking about dipping your toes into self-employment.

We’ll even help you decide which business structure is right for you, so that you can take home the most amount of money and relax knowing that your accounts are taken care of while you focus on building your venture.