Disadvantages of Starting Business
October 5th, 2008 . by ClivetThe common disadvantages of starting a business are rarely talked about and it is thought to be important that these are discussed so that a fully appreciation of the journey towards self-employment can be assessed.
Whilst there seem to be very few people around who have regretted setting up a business, it is important to present a balanced view so it is never assumed that this particular course of action is the road to complete happiness.
Those who frequently champion the actions of leaving employment and working for yourself do describe how hard it was and some of the difficulties that were faced, however little is written about the elements which would be classed as unequivocally as disadvantages. Two of these are:
1. To begin with, the first disadvantage is quite often the forces of synergy that are lost. More prevalent in situations where a single person is starting a business, the fact that they are no longer part of a team and have to cerate and execute strategies on their own might actually limit the effectiveness of the business.
When employed, the person may have been part of a larger group who shared and discussed ideas and through this interaction produced something which no single member would have been able to conjure up on their own.
2. Financial and personal risk is a significant disadvantage of starting and running a business. Working for an employer means that they largely accept the risks and the consequences of employee actions.
When working for yourself, the responsibilities and resultant events which lead from the owner’s actions are borne by them. If operating as a sole trader or partnership, the risks might be significant due to the absence of limited liability which separates the business from the people who own it.
Limited companies do have limited liability protection, but this would be a small consolation where the shareholders contribute significant amounts of their own money to get the business started.
Another disadvantage of starting a business is the taxation situation. There are just so many business taxes to consider which were never an issue when working for someone else.
Although an Accountant could be used to deal with VAT, corporation tax and the intricacies of self-assessment, which does represent a cost to a small business at a time when funds are typically in short supply.
The time where a standard deduction was taken from the salary has now disappeared and even though there were always grumblings concerning the amount of tax and national insurance which was taken, the small consolation was that the payer was not required to calculate it.
Following the formation of a company one must subscribe to VAT almost immediately, complete a CT41G and register for payroll. This is quite a lot of work for a newly incorporated company to undertake. As such, this represents the largest disadvantage of the business start-up novice seeking to launch a new venture.
Uncertainty is certainly the biggest disadvantage I have found since beginning trading. The logic of starting a business in a recession is currently elusive and the fact that our company is existing day to day without knowing whether a particular week in result in any sales or even enquiries is a hard reality.
The only saving grace seems to be that there is no guarantee that had I remained in my old job I would still have it. With that in mind, my fellow directors and I believe that the current economic uncertainty and the stress being caused by it is marginally better to the prospect of being made redundant and having no business to fall back on.
Other disadvantages of starting a business would include the ruthlessness of others with whom you have to deal with. Particularly in a difficult economy, we constantly find that our open and well- hearted approaches are sometimes met with fierce and money driven responses.
We are in business to make a living but not at any cost; we want to have fun. The significant motivation for others seems to be money and that alone. This was the biggest culture shock we faced and the obvious move would be for us to become hard-faced and mean ourselves.
Instead, we will continue to smile and enjoy ourselves when we can and hopefully, one day, begin to fulfil the promise of having better lives which we believe running your own business holds.