The Owner’s Perspective
Why does someone decide to start their own small business? Is it because of their financial aspirations? Is it because they are part of a corrupt economic system? Or perhaps, is it a desire to create something new? In today’s article, I’ll attempt to describe what it’s like to own a business and the common misconceptions people believe.
The world of business is divided between those who create new things, and those who organize and facilitate them. Very few people are inclined to do both. In one way or another, those who decide to start their own small business do so because of some primary motivation; a passion for a product, design, or idea. In most cases, I believe these people are “bit by a bug” of the worst kind. Once an entrepreneur starts formulating his or her own ideas, it becomes nearly impossible to just shake them off. These people are creators, not organizers.
This creates all sorts of problems. In my own experience, it comes down to time, and the compensation for that time. The crazier the idea, the more time it takes to develop, which inevitable multiplies costs and reduces compensation. Let’s look at an example.
Imagine for a moment that I’m 35 years old, with a wife, two kids, and a house (essentially every nightmare possible, combined). Now suppose I want to start my own car dealership. What are my options? Obviously I need to support my family financially and emotionally, but what about my new-found “passion”?
Starting a business is like running full-speed into a hurricane. You don’t realize how brutal, hostile, and dangerous it is until you’re right in the thick of it. What appears to be one large issue is actually an infinite amount of smaller issues. Elon Musk once said, “Starting a business is like swallowing glass and staring into the abyss of death.”
In my example of starting a dealership, the cost of entry into that field is high: unimaginably high. But let’s imagine I can overcome the financial hurdles through enormous loan amounts. What about the organization itself? Hiring employees, developing organizational systems, and properly managing inventory may prove to be a more difficult challenge.
One common misconception about business is how much the financial side matters. Although businesses primarily exist to generate revenue, revenue alone cannot keep a business alive. All of the other externalities (market forces, risk management, HR, etc.) matter just as much.
To keep this short, I’ll only focus on the risk management aspect of a company. Taking on loans, hiring employees, purchasing inventory, etc. is extremely dangerous. Half of all businesses shut down in the first two years. And two in ten make it to see their ten year anniversary. Starting a business could ruin your life in mere days. In fact, it’s pretty much the rule.
Financial prosperity is so unlikely, nearly any other career field would be more financially stable. It pains me to see how poorly society treats those who took the risk, made the hard decisions, and struggled through, just to see their prosperity sucked up through rising corporate tax rates and endless attacks from social justice advocates. The notion that business owners exist simply to rake in cash is such a dimwitted idea. Businesses are only profitable if the products or services they provide are valuable to the rest of society.
True entrepreneurs are cursed with a disease: consistent sacrifice to create value for someone else. Maybe some gratitude should be in order for the very few people who live this life.