written by: Ivy N. McQuain MBA•edited by: Linda Richter•updated: 5/23/2011
Entering into the world of entrepreneurialism is a risk that many individuals are not willing to endure. However, there are millions more who are willing to brave the life of an entrepreneur, foregoing their full-time jobs...
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A Look at the Risks of Entrepreneurship
Not many individuals are willing to undergo the risks of entrepreneurship. However, many people willingly venture down this career path for a chance to earn a higher income potential. For many, becoming an entrepreneur is the only way to live. If you are one of the many who are thinking about becoming an entrepreneur then you should understand the top 10 risks associated with being an entrepreneur. While these risks may not be applicable to every entrepreneur, they will prove helpful once you make that permanent step toward entrepreneurship.
Here are the Top 10 Risks of Entrepreneurship:
1. Losing stable income. This is the primary risk associated with being an entrepreneur: You lose a steady weekly, bi-weekly, or whatever the pay frequency, for an income potential. Income potential simply means you may or may not earn money. You may have months of steady income but you also may have months of not having an income at all.
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2. Lack of family support. If you are married, engaged, or supporting a family of any size, you run the risk of losing the support of your family when you decide to become an entrepreneur. This happens primarily because of number one, above, and also because of the lack of understanding many individuals have when it comes to being an entrepreneur.
3. Long hours. When you worked a traditional job, you had set hours and maybe some additional overtime opportunities. Unfortunately, the set hours stop and you often work from sun up to sun down trying to earn at least a decent income.
4. No health insurance or needed benefits. Again, the comforts of having a regular job include being able to use the company-supported healthcare and insurance options. When you leave your job for entrepreneurialism, you are on your own unless you can afford COBRA or out-of-pocket medical expenses. Other than that, you have to be careful you don’t get sick or hurt.
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5. All expenses are your responsibility. Being an entrepreneur means every expense for your business--from advertising, marketing, business growth, office supplies, equipment, and other important business needs--is your responsibility.
6. It’s ALL your fault. No more days of calling your supervisor or deferring a client to your associate when he becomes upset or irate, because once you become an entrepreneur you are responsible for every complaint, insult, or similar irritation.
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7. You don’t work, you don’t eat. Well, maybe not that harsh. But when you become an entrepreneur, 100 percent of your income is based upon 110 percent of your efforts. You really can’t afford to take a day, week, or month off or you will not have the income, unless you saved, to take care of your business and personal monthly expenses, which might include eating.
8. Didn’t do your research. This is a common problem among the risks of entrepreneurship. People have a great idea, or so they think, and they leave their jobs without doing any research on the market they are entering. Before you know they are closing up shop and looking for a new job.
9. Start-up costs. Unless you have a large savings account prior to becoming an entrepreneur, it is highly unlikely that you will have the start-up capital for your business endeavor. Becoming an entrepreneur entails your having at least six months to a year of income saved to live on and an additional $10,000 or more to start your business.
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10. Thinking, ‘I am my own boss.’ While you no longer answer to a manager or supervisor, you do have to answer to the IRS and other federal agencies that police small business owners, creditors whom you take out loans with, and clients.
Becoming an entrepreneur is a great reward, but it can also be a costly one if you don’t perform due diligence to understand the ins and outs of owning a business and making it grow. I have witnessed several entrepreneurs who rushed into entrepreneurialism because they had a good idea but they didn’t maintain their business habits. They failed because the risks outweighed the benefits. Find your niche as an entrepreneur and go be great!