So many try entrepreneurship but many don’t make it after their first year. What exactly is the cost of being an entrepreneur and what do you need to prepare for?
In charge of your own time, having unlimited earning potential, and not having to answer to anyone but yourself — the path towards entrepreneurship sure looks glamorous from afar. The entrepreneurial life is so attractive that there are now over 582 million entrepreneurs all over the world. Even the younger generation seems to have noticed the glitzy life of an entrepreneur online that more than half of the Gen Z population reports wanting to start their own company.
If you’ve clicked on this article, you’ve probably thought about becoming your own boss, or you’re already on your way to becoming one. It’s a rewarding journey, but not without sacrifices.
It is estimated that about 22.5% of small businesses fail within its first year.
Why are the numbers so high?
There are multiple reasons for the high rate of failure, but one thing’s for sure: there is a cost of being an entrepreneur. If you’re not ready to take on these challenges that come with being your own boss, it will be extremely difficult to succeed.
One of the first questions to ask if you want to start your own business is, “Do I have enough money to start one, and when do I see results?” So many brilliant business ideas get tucked in the corner due to the lack of capital or the lack of patience.
Some aspiring entrepreneurs who do manage to start one fail in the first year of starting their business simply because they weren’t able to consider the total financial cost of running one, or how long it would take to reap results. As self-development author and motivational speaker Brian Tracy puts it,
“The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term, is the indispensable prerequisite for success.”
Working harder or working longer hours
“Leaving your old desk job for a life of entrepreneurship, aka becoming your own boss, means working less hours” — sorry, but that’s not always true.
Sure, switching to entrepreneurship and becoming your own boss can be liberating. However, starting your own business is not as easy as it looks! If you have complained about your 9 to 5 job in the past, prepare to work harder (and sometimes longer hours) as an entrepreneur.
A few budding entrepreneurs might be surprised, but starting your own business needs you to put in more work. Since it’s your own brand you’re working on, expect yourself to want to work harder and want to be available 24/7 as well.
Of course there is no right answer as to how many hours an entrepreneur should work, but depending on what you do and how big your business is, brace yourself to the idea that you may be working longer hours at times.
Seeking out clients and dealing with rejection
One of the biggest challenges as a new business is getting clients. For young entrepreneurs who are just starting out, the challenge of finding clients can be difficult to overcome. Even harder is the challenge of dealing with rejection.
Let’s be honest. We don’t always like every offer that comes our way. Every time someone tries to offer us a really good deal, we don’t always reach for our wallets and make the purchase. Neither do our prospective customers. This means rejection is inevitable. It is part of the process. This does not mean, however, that we should just bottle all these feelings of frustration inside and hope they’d disappear.
Acknowledge your emotions and move forward, learning from the experience. This is the step many entrepreneurs do not make. Understand that rejection happens in any business, but also remember that this can always fuel your motivation to move forward.
Having little to no benefits
Your earning possibilities are endless once you switch to entrepreneurship, but as far as benefits are concerned, you’re on your own! Not only are you no longer relying on stable income, you are also bidding goodbye to employee benefits such as paid vacations, insurance, retirement plans, social security, and so much more.
Entrepreneurship can be financially promising, but dealing with these payments on your own is an added expense. Check out an article we wrote about how to get a pension if you’re self-employed. We also wrote about the grants you can get as a self-employed worker if you’re struggling during COVID.
Dealing with self-doubt and loneliness
Combining the pressure to succeed and the limited support, starting a business is difficult. Unlike being in an office environment where you get to interact with workmates all the time, entrepreneurship can be a lonely road. In the beginning, the loneliness may be fun and even liberating, but without human company the fun feeling could wear off after some time.
Human connection is a need, whether you’re a freelancer working from home or a CEO running a multi-million dollar company. In fact, according to studies, a lack of strong social connections is even worse for your health than obesity, smoking, and high blood pressure. Yikes.
Self-doubt also comes in many deceiving forms such as questions that could keep your business from growing.
“What if I can’t do it?”
“What if no one wants to buy my products?”
“I don’t have much money left. Is this even enough to sustain my business?”
Questions like these can trigger self-doubt, and self-doubt can be crippling, especially if you’re only starting out. It stems from the desire or the pressure to be successful. When you’re on your own, this can be frightening sometimes.
If you want to start your own business, start preparing for the challenges that come with it such as loneliness and self-doubt. Thankfully, you are not alone in this journey. We wrote an article about how to overcome loneliness if you’re self-employed, and another one on how to ask for advice as a small business owner.
The cost of entrepreneurship is definitely high but the reward is worth it. Sure, being an entrepreneur and becoming your own boss can be costly, perhaps even requiring sacrifices every now and then, but at the end of the day, you are in charge and no one is telling you what to do. Remember that while 22.5% of startups fail within their first year, 77.5% still make it. Acknowledge what it means to be your own boss, and prepare to succeed.