Small business?

[Nika]

Everyone is gaga over small businesses, and praises are sang for small business owners.

You can call yourself entrepreneur for instant status. I know two CEOs and a CTO that I would guess make less than a PA for a larger company.
Starting your own business is touted as the best, most American path.
Does it generally deserve all that glow?

Majority of jobs created by small businesses are at low pay with little potential for growth. Yes, there are exceptions, but it holds true for most.
You are often at a whim of one guy (sometimes a woman, but most likely a guy).

Most posts on small businesses seem to center on how to cheat on taxes, and how small businesses are great for that. Pretty much getting the idea that everyone does it.

Corners are often cut. For example, independent hotels tend to be not so good, family restaurants are often ran down, less clean, and wait staff is generally less professional, and food is rarely good. Most of good restaurants I know are ran by a restaurant group that owns 10-20 different restaurants. I guess it can still be considered small, but at that scale/level there is a lot of corporate management structure and training to them.

If you are leaving a minimum wage job to start a small operation, I there is potential for upside. But if you are making decent salary with good benefits and vacation time, what kind of business could present the upside large enough to offset the risks?

[disneysteve]

Wow! Could you get any more negativity or bad stereotypes into one post?

Almost every "big" business you can think of started out as a small business. It doesn't matter if you are talking about a restaurant, a retail location, a tech company, or anything else. They generally started as small businesses. WalMart was once a five and dime in Bentonville, Arkansas in 1962. Starbucks started with a single location in Seattle in 1971. Steve Jobs and Steve Wozniak started Apple in their garage in 1976.

Those restaurant groups that own 10-20 restaurants started with just one. I don't know about you, but we avoid chain restaurants as much as possible. The quality of food and service at a family-owned place is almost always exceptional compared to that of a national chain. You can keep Olive Garden. I'll go to any one of the many local single-location, family/chef-owned Italian places near us.

Is starting your own business a big risk? Absolutely. That's part of why most financial consultants advise doing it on the side in your free time from your regular job until you really get it established and generating enough income for you to do it as your only job. Do many small businesses fail? Yep, often because the people running them don't really know what they're doing, don't have the skill set needed, and don't seek out the necessary support. But talk to anyone who is their own boss and I think you'll find lots of people who wouldn't have it any other way.

[TexasHusker]

Some of your assertions are on the mark, some of them miss.

I don't perceive going into business as the "thing to do." If it was, more people would be doing it.

I don't consider myself of any great stature because I am a business owner. My company job was much more "prestigious" than owning a few hair salon franchises and a vacation rental company.

The "majority of jobs created by small business are at low pay" simply isn't factual. I have a number of employees who do quite well. Of course, well is relative. Most of the employees in my franchise business do not have a higher education. But considering that, they do quite well which is why we have such low turnover.

Cheating on taxes is something that folks of questionable morals do, whether or not they are small business owners. I am very conservative on my tax deductions. The last thing I want is to draw ire of the Treasury.

"Corners are cut" isn't accurate, at least for small businesses that actually stay in business. Many small business owners are actually franchisees - McDonald's, Burger King, UPS Stores, Chevy, Ford, Mercedes, Ace Hardware, Hilton, Comfort, Best Western, Hyatt, and any number of thousands of other companies are franchises.

The non-franchise small businesses have to work extra hard to survive in the franchise world, but the success stories are many.

As for leaving the comfy confines of a well-paid job to go into business...there is a lot more to that decision than income: I was in a comfy, $250K-a-year gig in which I worked literally 2-3 hours PER WEEK actual brain time. I hated it.

I left it to grow my businesses, knowing full well I might end up making half or less what I did working for the man. For a year or two, that was spot-on, but oh how much happier I was. After a couple of years, my income exceeded my company income, but even had it remained half, it was a life-changing decision for me, for the better.

Going into business for oneself requires a certain mindset - not necessarily more smarts. One has to have a greater (sometimes much greater) tolerance for risk. One has to have a tremendous amount of self-motivation to get up every day and make things happen - there is no boss checking in on you three times a day and sending you reminder emails.

The risk was worth it for me. I literally never miss my kids' concerts, sporting events, and chaperoning/volunteering at their schools. I go fly fishing during the middle of the week, not knowing when I might return, because the day of the week matters not to me.

If my kids have an out of town volleyball or golf tournament, we might leave a day or two early to do something fun, because I want to and I have the freedom to.

Soon, I will be spending several months per year living in a vacation home three states away, because I have managers who can run these businesses. If I need to be here for something important, that's easy - I catch a flight, stay a day, and go back.

Of course, things could go south tomorrow. I take nothing for granted. You plan as well as you can, and then trust the Lord. He's never left me wanting.

Hope this helps.

[AJ444]

I'm personally not willing to take the risk but I sure am glad there are people that are. I have worked for two fortune 500's in the past and both of them began from someone taking a risk starting a small business decades ago. My current mid sized private company also started that way.

Sure a lot of them fail, but the success stories drive the big company stock market gains we see today.

[kork13]

I'm personally not willing to take the risk but I sure am glad there are people that are. I have worked for two fortune 500's in the past and both of them began from someone taking a risk starting a small business decades ago. My current mid sized private company also started that way.

Sure a lot of them fail, but the success stories drive the big company stock market gains we see today.

That's pretty much my perspective as well. Small businesses are great for those with the grit & drive to be successful with them. Personally, that's just not my bag. I do better with a task list than imagining up ways to improve a customer base. But I'm glad that others are drawn to it.

[Fishindude77]

I did very well running and owning a small business for many years, but would agree that most are not cut out for it. There will be times when the hours are miserable and the pay is lousy. It takes real nose to the grindstone determination and hard work to succeed in small business.

We took our little business from $1.6 mil volume the first year to $36 mil volume at it's peak, always remaining profitable and some years very profitable. Provided full time employment at above average paying jobs for an average of 60 people. Taking care of the people and seeing them be successful, buy houses, raise their families, put kids in college, etc. is what gives me the most satisfaction.

It's a risky thing, giving up that steady 8-5 job with the steady paycheck and benefits you get working for the other guy.

Like someone mentioned earlier ..... all of those big fortune 500 companies started as out a small businesses.

[phantom]

I've spent most of my career working for small businesses. The risk of trying to start my own isn't something I'm interested in. But, I've enjoyed being a part of small companies that do big things. Even not being the owner, the opportunities to influence the direction of the organization, to grow, and to try new things have been amazing for me. I've put out some quality products and been very well compensated for my efforts.

Larger companies can be great in terms of pull and influence. The company I'm currently with, which was bought by a larger company, is currently working on some big new things that would have been nearly impossible when we were smaller. But, size also makes change harder, which can make it harder to find new ways of being more efficient.

I think there are good and bad businesses of all sizes. There are also people who are well suited to forging their own paths, people who want some control but don't want to do be responsible for everything, and people who really just want to sit back and enjoy the ride. I think there is plenty of room in this world for all sizes of businesses and all types of people.

[scfr]

Everyone has to find their own path in life. Just like any major life decision (college? marriage? children? where to live?), choosing to be an employee works best for many.

If you are an employee with a good wage, decent benefits, paid vacation and sick and holiday and maternity leave . . . the attractions of that are obvious.
One thing I would suggest being cautious about, though. Ageism is a real problem in this country. By the time you hit 50 or 55 or 60, this problem may have been fixed. But maybe not. If you are an employee, you can lose your job anytime because the company closes or the program you work on is slashed from the budget or there is no longer a demand for whatever you do due to changing demographics or customer tastes. If you lose your job at 35 or 45 and you are skilled/talented at what you do, you will probably find a job quickly. But if you are 55 you may never again find a job like the one you have now. (Not many think that will happen to them. But of the recent hires where you work, how many of the jobs with good wage, decent benefits, and paid time off were filled by someone 55 or older? And are you absolutely certain that some new technology or innovation or changing demographics won't make the work you do now obsolete?)

It might be prudent to build your financial plan around the possibility of forced early retirement or significant loss of income later in your career. If that never happens, then you'll be in terrific shape. But if it does happen, you'll be prepared. If you plan to keep working until 65 but also plan to have enough saved so that you could retire by 50 if necessary, for example, you'll be in a great position financially.

[harvie]

Every big business started from their humble beginnings. It is the owner’s positive and driven attitude that makes his business flourish. In order to expand it, manpower and leverage are applied to make the business grow.

[~bs]

your earning potential through a business can be much greater than a normal salary. It can reach crazy exponential growth, as evidenced by many companies that had very humble beginnings.

Even if you own a small business, you can generate returns far in excess of other passive investments or a salary. Example in percentage terms - assume you take 2 weeks to turn your inventory, and generate a 10% return after all costs are accounted for. If you invested in the stock market, it may do the same return, but takes an entire year to do it.

With the business, you'll compound the 10% return 26x per year of making that 10% return. Assuming you're constantly 100% invested throughout the year (not likely), your return on initial investment would be around 1100%.

[TexasHusker]

your earning potential through a business can be much greater than a normal salary. It can reach crazy exponential growth, as evidenced by many companies that had very humble beginnings.

Even if you own a small business, you can generate returns far in excess of other passive investments or a salary. Example in percentage terms - assume you take 2 weeks to turn your inventory, and generate a 10% return after all costs are accounted for. If you invested in the stock market, it may do the same return, but takes an entire year to do it.

With the business, you'll compound the 10% return 26x per year of making that 10% return. Assuming you're constantly 100% invested throughout the year (not likely), your return on initial investment would be around 1100%.

This is all quite true. I own three locations of a franchise. It cost me about $500K to get them going, but they throw off about $150K a year. And I don't work any more.

Today is Thursday. I slept in today, then took my son out to the golf course to practice for a golf tournament. Tomorrow, I'm in charge of delivering drinks to the tournament. Then I'll video the players all day. No PTO. Just living.

Having your own business can deliver things that working for the man cannot. I will never again worry about missing a meeting, office politics, dress code, must-attend parties, rah-rah sessions, kissing up to the boss, taking too much PTO, or taking too long at lunch.

If I want to take a 2-hour lunch, sleep in, and then go fly fishing in the middle of the week, it's my call.