Small businesses are a major driver of job creation in the US, and there sure are a lot of them!
- There are 31.7 million small businesses in the US; half are home based
- 25.7 million small businesses have no employees, and are solo businesses (56 percent home based)
- 87 percent of non-employer small businesses are sole proprietorships
- Over half of small businesses with employees are S-corps; just 14 percent are sole proprietorships
- Two in three small businesses with employees survive their first two years, nearly half survive five years, one in three survives 10 years, and just over one in four survives 15 years
- Small businesses with employees may use different sources of capital — nearly two in three used personal and family savings, one in seven take out a business loan, one in 11 use credit-card debt, and fewer than one in 11 use personal and family assets other than the business owner’s savings
My Personal Journey as a (Multi) Small-Business Owner
I started my first business, a consulting practice, in 2005.
It was very part time, in parallel to my then day job as an overworked university research scientist.
Three years later, I resigned from my university position, and started working at a small engineering services company doing contract work for NASA. A couple of years after that, they let me go because they couldn’t find enough work to justify keeping me on payroll.
Instead of looking for another employee position, my wife and I decided it was time to take my consulting practice to full time.
It took months to find my first contract.
Those months were very stressful, since my salary had provided the bulk of our income, and with health insurance no longer subsidized by an employer, our expenses jumped.
By a lot.
We persevered, and by the end of my first full calendar year all in on the practice, I billed over 1300 hours and brought in more than the 6-figure salary I’d lost.
Though there were ups and downs in the years since, that first year was my lowest-income calendar year.
Since then, I started two other businesses. In 2013, I bought an office condo and started renting out office space to therapists. In 2017, I started what became a (part-time) Financial Strategy business.
How My Businesses Compare to the SBA Stats
Like 81 percent of small businesses, I have no employees beside myself in any of my businesses.
Like the majority of non-employer businesses, I operate out of my home. Unlike the great majority of non-employer small businesses, all my businesses are set up as LLCs, with the full-time one set up to be taxed as an S-corp.
My consulting practice is now 17 years old, of which nearly 12 years were full time, putting it in the quarter of businesses that survive 15 years. Since the only “capital” I needed was to buy a laptop, printer, etc. it was easy to fund from ongoing revenue.
My micro real estate business is now nine years old, close to putting it with the ~33 percent 10-year survivors. This one required a business loan to buy the property, like one in seven small businesses with employees, and likely a far smaller fraction of solo businesses.
My Financial Strategy business is just five years old, putting it in the good half of the five-year survivorship rate. Like my consulting practice, this too didn’t require capital investment.
The Five Emotional Benefits I Noticed Working in (and on) My Own Businesses
As you can imagine from what I shared above, starting new businesses must have some pretty significant benefits. While these are mostly financial (at least on their surface), there are multiple emotional benefits too.
As the owner of a solo business, nobody guarantees you’ll have income next month.
Stressful? Sure, especially at first.
However, in this situation I find myself super motivated. I have more “skin in the game” than I would as an employee who knows their next paycheck will be deposited on schedule.
As with any game where your performance is a major factor in your success or failure, it makes me feel more alive.
Sense of Control
When you have a boss, she can (and in my experience does) go beyond telling you what you need to do. She tells you when to do it, where to do it, how to do it, and what tools and resources you may or may not use.
As my own boss, all my client gets to say is what they want me to do, by when they want it, and if they agree to pay what I’ll invoice them for it.
They can’t control (and usually have zero interest in doing so) when I do the work. They may want me to participate in a reasonable number of meetings, but if I have a conflict, they’ll reschedule. Try doing that with most bosses…
They can’t control what tools I use (except that if they have high info-sec requirements, some require me to use a secure laptop they provide).
They can’t control how I perform my work.
They can’t control where I do the work. If I want (as long as I don’t need to be in person or on a Zoom meeting), I can do the work wearing pajamas in bed, sipping a latte.
Personally, I don’t choose to exercise that freedom, but the point is that I could if I wanted.
As long as I deliver the agreed-upon deliverables on time, at the quality I agreed to, they pay my invoices.
Sense of Challenge
Related to the above-mentioned motivation, when my performance completely determines my reward, I find that I often challenge myself to do more, better, and/or faster.
Usually, that’s a plus.
Sometimes, I find that I bite off more than I should. When that happens, I don’t bite off anything more until the extra load is resolved.
Again, if you have a less-than-understanding boss, you may find yourself forced to bite off more, even when you need to pull your foot off the gas pedal.
Sense of Variety
In many positions, people find themselves required to do the same old same old, day in and day out.
Whether it’s flipping burgers, washing dishes, filing paperwork, entering data, etc., they fall into a deadening, boring routine.
Owning my business lets me pick my clients and the tasks I’ll take on.
If something becomes too boring, I’ll ask the client if we can shake things up. Upgrade how we do things. Refresh what we do, etc.
I can also take on next a client project that’s different from what I already do.
That variety ensures that things stay fresh, and I can start most days with a sense of anticipation rather than dread or resignation.
Fulfilment and Pride
As much as anyone, I take pride in the work I do, and in my professional and financial accomplishments.
Knowing I’ve made a real difference for my clients and my family is fulfilling and rewarding, far more than delivering another work assignment to my boss ever was.
What Are You Likely to Enjoy if You Start Your Own Business?
I suspect that if you start your own business (assuming it doesn’t fail), you’ll find the above mostly true for you too.
Does this mean you’ll be motivated each and every day? Probably not.
There will be days when you feel overwhelmed, stressed, burned out, or just plain down.
It’s called being human.
The good news is that, as long as you don’t break a promise to deliver something on time, you can simply take the day off, relax, read, watch TV, play with your kids, etc.
Whatever helps you recharge.
Does starting your own business mean you’ll always follow your passion?
But you’re more likely succeed if you follow your skill-set instead. Hopefully, that will have at least some overlap with your passion.
The Bottom Line
Starting your own business isn’t for everyone.
You need to have a marketable skill. You have to provide a product or service that enough people want badly enough that they’ll pay you what you need and want to be paid.
You need to be willing to take full responsibility for your outcome — be it success or failure.
You need to have a long enough financial runway to be able to take off before (figuratively) crashing into the fence.
However, if you have what it takes, there are few paths in life that offer the emotional (and financial) benefits of working for yourself.
This article is intended for informational purposes only, and should not be considered financial, investment, business, tax, or legal advice. You should consult a relevant professional before making any major decisions.