Deciding Whether to Own a Small Business

Assuming that you've determined that you have what it takes to own a small business, now you need to decide whether you want to dive in. After all, there are as many compelling reasons why you should not own a business as there are why you should.

The reasons to own

The following are some reasons why people choose to own a business:

• The satisfaction of creation: Have you ever experienced the pride of building a chair, preparing a gourmet meal, or providing counseling service that helps someone solve a vexing financial problem? The small-business owner is treated to the thrill of creation on a daily basis, not to mention the thrill of solving a customer's problem.
• Establishment of their own culture: No more standing around the water cooler complaining about "the way things are around here." After you've started your own business, the way things are around here is a direct function of the way you intend them to be.
• Financial upside: Consider Oprah Winfrey, Ted Turner, Steve Jobs, and Martha Stewart. It's no surprise that these one-time small-business owners are among the nation's wealthiest individuals.
• Self-sufficiency: When working for someone else has proven to be a less-than-gratifying experience, some people have learned that a better way to provide for themselves and their families is to create the opportunity themselves.
• Flexibility: Perhaps you prefer to work in the evenings because you want to spend more time with the kids during the day. Or you may prefer taking frequent three-day-weekend jaunts. As a small-business owner, despite the long hours you work, you have more control over keeping a schedule that works best for you. After all, you're the boss, and you can usually tailor your schedule to meet your personal needs, as well as those of your customers.
• Special perks: Small-business owners can sock away up to $30,000 per year free of federal and state income taxes into their retirement accounts. And similar to those corporate execs who wine and dine clients and then write off the expenses, small-business owners also have the option to write off such costs as long as they adhere to IRS rules.

The reasons not to own

In light of the resounding potential benefits, why would any reasonable soul elect to continue receiving a paycheck? Why wouldn't everyone want to own a business? Let us count the nays:

• Responsibility: As a small-business owner, not only does your family depend on your business success, so do your partners, your employees and their families, your customers, and sometimes your vendors. As much as you may love your small business, every now and then even the most enthusiastic owner waxes nostalgic for the good old days when she could punch a time card and leisurely walk out the door. If you're the type of person who sometimes takes on more responsibility than you can handle and works too many hours, beware that another drawback of running your own business is that you may become a workaholic.
• Competition: When push comes to shove, the lure of competition may prompt you to open the doors of your small business, but that same competition can undermine your security. A host of hungry competitors may be pursuing your customers and threatening your livelihood, whether by cutting their prices or offering a more complete package of unique services.
• Change: Products and services come and go, and the pace of change today is significantly faster than it was a generation ago. If you don't like change and the commotion it causes, then perhaps the stability of a larger organization is best for you.
• Chance: Interest rates, the economy, theft, fire, natural disasters, sickness, locusts — the list goes on. Any of these can send your business reeling.
• Red tape: Taxes, health care reform, bureaucracy, tariffs, duties, treaties, OSHA, FDA, NAFTA, glurg, glurg, glurg.
• Business failure: And finally, as if this list of a small business's enemies isn't enough, the owner faces the specter of the ultimate downside — bankruptcy. At this point, the owner stands back and watches the creditors walk off with everything he or she owns, from the president's desk to the fax machine to the potted plants. Now contrast the small-business owner's failure to the Fortune 500 employee who fails, collecting a tidy severance check as he packs up his calculator and waves good-bye on his way to register for unemployment compensation. No life's savings lost for this person, no second mortgages hanging over his or her home, no asterisks on the credit report. More than any other reason, this cost of failure is the primary reason that owning a small business isn't for everyone.

These two lists, incidentally, are in no particular order. Everyone is different. The reasons Bill Gates may have decided to start Microsoft may be vastly different than the reason Jane Dough decided to buy her own pizza business. You won't find right or wrong reasons to start or buy a business; you'll only find right or wrong criteria that go into forming those reasons.