4 Risks and Payoffs to Running Your Own Small Business

For most of the risks that you face in running a small business, there tends to be a corresponding payoff that goes hand in hand with it. Business insurance will deal with some risks that can damage your company and work on ways to mitigate them, but there are more general risks that a business faces that are far from insurable. Luckily, these less insurable risks do normally come with a silver lining to balance things out.

Risk: No financial security

If you run your own business, you are the one that pays the wages. This means that your financial security is far from guaranteed. You have a responsibility to keep your staff in employment and to nurture their development, all the while being careful not to overwork them and drive them into the ground. Not only that, but you will answer to a higher power if you have share holders who should be breathing down your neck to make sure you are doing the best you can in maximizing their investments.

The lack of financial security will really hit you when you realize that holidays and sick days are less of an option. When you work or yourself, it can be difficult to schedule that kind of time off and keep the business afloat at the same time.

Payoff: No fear of losing your job

Of course, you could argue that while financial security might be in short supply for you, job security is in fact much better. Working for yourself does ensure that you won’t be made redundant.  That might sound like an issue of semantics and psychology (a journalism tutor once described to me the fine line between “freelance” and “out of work” in that there is so very little practical difference between the two but one is a more positive state of mind than the other) but running your own company makes you the master of your own destiny when it comes to continued employment. You might have to work harder and for longer periods of time, but at the same time this should be easier because you’re doing something that you’re passionate about and you’re able to better act on your own ideas. That has significant advantages over working for someone else in an area that maybe you have less interest in.

Risk: Burnout

What started as a passionate effort that you find yourself pouring all your time into can quickly turn into a soul destroying struggle to stay committed if you start to burn out from it. The burnout can have the added impact that comes from knowing you’ve destroyed a genuine passion through all work and no play in an effort to get your start-up off the ground. Burnout can strike at the most inopportune times and cripple a business with significant potential. It is most likely to hit you if you have bitten off more than you can chew and find yourself facing a seemingly insurmountable workload. A company that burns out can survive, but it risks a demoralized staff and could sack its reputation if it fails to deliver on promises. Additionally, once things plateau in terms of progress, it can be difficult to get that ball rolling again.

Payoff: Relative freedom

Running your own business does give you a remarkable amount of freedom. Although declarations of being able to do whatever you want might be overstretching it a bit as they ignore the commercial realities of your situation, you really can run the show the way that you think is best. Your potential to adapt and change the way you do things is an ideal counter to stave off burning out or address it if it hits you.

Risk: Not enough clients or business

Struggling to drum up enough business or clients can be a significant problem for small businesses and the self-employed. Larger businesses might have larger contracts and longer running agreements whereas your business might take a lot more short term work which can quickly dry up depending on your trade or profession.

Payoff: Choosing your clients

Which clients you take on is entirely up to you when given the option to pick between those interested in working with you. It is your responsibility to maintaining new and recurring business and keeping your schedule full, but if there are contracts that you would rather pass up on, that’s entirely up to you. Small businesses still in their early start-up stages might be a little more under pressure to take on anything that comes their way, but ultimately once you find yourself more established and in more of a selective position, the direction you take your business and who you want to work with is your decision.

Risk: Failing in your responsibilities

Being employed within a company can limit the responsibilities that you have in place. Depending on your role, you might manage a whole division or particular function of a company, but unless you are particularly high up the corporate ladder, the buck does not stop with you. With your own company, it’s all on you. You are responsible for pretty much everything that goes on as part of your business activity, regardless of the division and often regardless of delegation. There is a lot to stay on top of and be held accountable for and the risk is that you ignore a critical area which ends up landing you in significant trouble.

Payoff:  Direct rewards

There is a direct link between how much work you do and how much money you earn when you’re running your own small business. Other factors can sometimes work their way in such as favorable market conditions might mean you are on the right side of a boom in industry and simple good luck could also mean you inadvertently strike a virtual gold mine with your products or services, but when it all boils down to it, your rewards for hard work are much more direct than the vague commission structures and rumored promises of potential promotions that you get in full time positions.

Written by David Hing for YOUR Insurance a broker that understands insurable risks for small businesses and knows a little about non-insurable risks too.

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.

Recent Posts

The Ultimate Guide to Creating a Business Plan in 2025

Can you believe it? It’s almost the end of the year! 2024 has flown by…

2 weeks ago

Have You Filed Your BOI Report Yet? If Not, You Should.

There has been a lot of buzz about BOI (Beneficial Ownership Information) and what it…

3 weeks ago

Stop Overthinking How You Market Your Business, Start Documenting

Many businesses make the mistake of trying to look bigger than they are, sound more…

3 weeks ago

How The Election Results Could Affect the Small Business Market

With inflation and interest rates higher than normal, small business owners watched this year's election…

1 month ago

How to Get Scrappy: Creative Strategies for Business Success

When the economy isn’t doing as well as you’d like, you lose a client or…

1 month ago

5 Ways Social Media Helps You Run Your Business

Social media is one of the biggest topics in business. It seems like every day…

2 months ago