Advantages & Disadvantages of Small Businesses

Advantages Whether you plan to start a full-time entrepreneurial venture or one you work on during evening and weekend hours, starting a small business comes with a variety of benefits and responsibilities. From increased income and personal satisfaction to long hours and potential bankruptcy, the risks and rewards involved in starting your own company should be weighed carefully.


One of the main advantages of starting a small business is the personal satisfaction you get from taking an idea from concept to reality, being your own boss and using your talents to make your business thrive and grow.

Working for others can lead to frustration based on unfair managers or knowing you could do better if given more authority. When comparing employee and entrepreneurial situations that pay relatively the same amount, many people use personal satisfaction as the deciding factor.

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Long Hours

Running your own business often results in working long hours, seven days each week. This occurs because small-business owners often don’t have enough money to hire enough people to share the workload or because the entrepreneur is the expert and must handle many key responsibilities himself.

If you have a problem with delegating, it’s very easy to take on too much responsibility at a small company. Consider your family and other personal relationships and how the long hours and stress of starting a small business will affect them and your health.

Financial Reward

You’re more likely to make millions of dollars working for yourself than for someone else. Even if your goal is only a higher salary than you’re currently making, a small business offers you the chance to make an exponential leap in your annual income, while working for someone else usually only comes with an incremental annual pay raise.

Even if you keep your current job, starting a part-time business can help you move from a comfortable lifestyle to an affluent one. Turning a hobby into a part-time business lets you write off business expenses that might be enough to justify launching the business even if you don’t make much money.

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Financial Risk

No matter how hard you try to separate your personal assets from your business, there’s often considerable personal financial risk involved with starting a small business. Even if you aren’t completely responsible for the liabilities of a failed business, you might lose your personal investment and damage your credit.

If you use credit cards or take out a loan against your mortgage, the damage can be severe. Meet with an accountant before you launch to determine if you need to incorporate, which type of incorporation to choose, how to create budget projections and what financial procedures to follow to minimize your financial risk.


Starting a small business often requires a low cost of entry and first-year overhead expenses, making it better able to compete with larger, established businesses on price. The reverse can be true if the company starts with little operating capital and immediately depends on sales to cover its operating costs, requiring higher prices to stay in business.

Sometimes, people are often curious about and willing to try a new brand, while in other instances, new companies can have a tough time cracking customer loyalty.