Chicago’s Rollout–The Pros and Cons of Small Businesses

In the last segment of Chicago’s Rollout radio program on Friday, March 6th, Bert Howard and I were talking about small businesses.    He and I are in the process of setting up a small business, and we wanted to encourage those out there who might be thinking of creating a small business of your own.

Let’s talk about the pros and cons of creating a small business.   First, let’s deal with the advantages:

  1. Community involvement–small business owners often become involved in the life of the community by getting to know customers who live there
  2. Ability to adapt to change–through the personal relationships with customers, owners of small businesses become aware of changes in people’s needs and can adapt quickly to those changes
  3. Simplified record keeping–record keeping doesn’t need to be complicated; all you need are a checkbook, and two journals, a cash-receipts journal to record all sales, and a cash-disbursements journal to record all amounts paid out.
  4. Independence–small-business owners are the masters of their own destinies, which for some is the prime advantage of owning a small business.

Of course, to give a balanced picture you need to know the disadvantages of having a small business.

  1. Risk of failure–a business recession can hit hard if you do not the financial resources to weather an extended difficult period.
  2. Limited potential–a small business is unlikely to grow into a big business, and the potential for advancement for employees is limited.
  3. Limited ability to raise capital–most small-business financing comes out of the owner’s pocket.   36% of new firms begin with less than $20,000, usually provided by the owner or family members and friends.

(Pride, Hughes, Kapoor, Foundations for Business 6th Edition, pp. 141-142)

But besides the possibility of starting a small business, each of us needs to think of ourselves as the CEO of our own business, and the book The Financial Diet shows how to manage your personal finances.   I will discuss this book in the next few posts.


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