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Updated Oct 24, 2023

Pros and Cons of Being a Small Business Owner

While there are plenty of reasons entrepreneurs love owning a small business, it isn't all glamorous. Weigh the pros and cons of entrepreneurship before launching your business.

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Skye Schooley, Business Operations Insider and Senior Lead Analyst
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Starting a small business is no small feat. You must be resilient and dedicated if you want to build a business that makes a profit and stands the test of time. According to the Bureau of Labor Statistics, roughly 20% of new businesses don’t make it past the first year. What’s more, opening a small business during a major economic crisis (e.g., the COVID-19 pandemic) can make your chances for survival even slimmer.

Although entrepreneurship can be a challenge, it’s not all doom and gloom: There are currently 31.7 million small businesses in the U.S., which accounts for 99.9% of all businesses nationwide. Small businesses are the cornerstone of the American economy, and for good reason. If you have a great business idea and want to try your hand at entrepreneurship, weigh the pros and cons first.

Benefits of owning a small business

Being a small business owner may be one of the toughest jobs, but it’s also one of the most rewarding. There are many benefits of small business ownership, and they often far outweigh the negatives.


When you own the business, you are the boss. You do not have to rely on others or discuss decisions with them. The independence that comes with entrepreneurship is great for those who like to work autonomously.


Entrepreneurship gives you the flexibility to decide your own hours. It may seem like you are working all the time while you are first building your business, but eventually, you will be able to decide when and where to work – no more 9 to 5. This flexibility is ideal for anyone who operates more efficiently outside of regular office hours.

Power and control

Another benefit that many entrepreneurs enjoy is having power and control. As the head of the organization, you make the rules. You get to establish your company culture and determine what is and isn’t acceptable in the workplace. When you hire employees, they will all ultimately report up to you. This control is ideal for people who don’t like working under authority or reporting back to a boss.

Passion and creativity

Another important benefit of owning a business is the satisfaction of knowing you are the creator of whatever product you put out. You are the vision behind it, and you put it in motion. You get to do what you love in a field you enjoy. You no longer have to drag yourself to a job you hate every morning. Many business owners also love that they can build their business on their beliefs and values.

Financial gains

Although owning a business comes with financial risks, you also reap the financial rewards. If you do not have a business partner or employees, you don’t have to worry about paying them. If you have only a few employees, that means fewer people take a cut of your earnings.

FYIDid you know
Once you start making money, you can start paying yourself a salary. However, experts advise paying yourself a modest salary or taking periodic owner's draws to meet your expenses.

Challenges of owning a small business

Entrepreneurs face many challenges on a daily basis. By understanding what common challenges you may face, you can prepare yourself to overcome them.

Diversifying customer bases

Of course, if you are selling a product or service, someone must purchase those from you for you to make money. You should make your customer base as diverse as possible to balance your revenue.

Managing cash flow

Managing cash flow is another large challenge for small business owners. Of course, you need money to make money. You typically need a way to make capital and to access cash reserves quickly. Small businesses don’t typically have this, so entrepreneurs typically have many sources of income. This way, when one source of income slows down, there is still money coming in.

Maintaining legal compliance

You’ll have to jump through many legal hoops when starting a business. Federal, state and local government regulations are constantly changing, which can make it difficult to maintain compliance. For example, understanding your small business tax obligations is a common compliance challenge. You’ll also need to comply with a litany of HR rules and regulations once you hire your first employees.

Sustaining quality while scaling

You may get to a point where your business expands suddenly – intentionally or not. Demand for your product or service may explode, and if you aren’t properly prepared, you may experience a decrease in the quality of what you are offering, which is never a good thing.

It can be a challenge to always think one step ahead when you are focused on day-to-day operations. However, as a business owner, you should keep this potential challenge in mind as much as possible. Plan ahead to strategically scale your business as soon as demand for your products or services increases.

Avoiding burnout

Entrepreneurs work long hours and get little rest. In many cases, until you begin to make money, you will have to do all the work yourself. There is a large potential for fatigue, which can lead to poor decisions and the desire to give up. A healthy work-life balance, even for early-stage entrepreneurs, can give you the motivation to build your business for the long haul.

If you are struggling with workplace burnout, check out our article on how to combat burnout.

Weighing the pros and cons of entrepreneurship

Although starting a business requires great sacrifice, it can also come with great rewards. Evaluate these pros and cons to assess whether entrepreneurship is the right path for you. How much weight each of these benefits and limitations carry will be unique to you. For example, one person might place high importance on independence and flexibility, whereas another might not want to give up the stability of working for someone else.

Another factor to consider is whether your business idea is financially feasible. Some business types have hefty startup costs. In this case, you can either consider another business idea that has fewer startup costs or explore creative ways to obtain funding. You should also test your business idea before fully launching to ensure its viability.

Chad Brooks contributed to the writing and research in this article.

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Skye Schooley, Business Operations Insider and Senior Lead Analyst
Skye Schooley is a business expert with a passion for all things human resources and digital marketing. She's spent 10 years working with clients on employee recruitment and customer acquisition, ensuring companies and small business owners are equipped with the information they need to find the right talent and market their services. In recent years, Schooley has largely focused on analyzing HR software products and other human resources solutions to lead businesses to the right tools for managing personnel responsibilities and maintaining strong company cultures. Schooley, who holds a degree in business communications, excels at breaking down complex topics into reader-friendly guides and enjoys interviewing business consultants for new insights. Her work has appeared in a variety of formats, including long-form videos, YouTube Shorts and newsletter segments.
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