The biggest drawbacks of entrepreneurship are risk (no guaranteed income and your own money on the line), loneliness (no team or boss to lean on early), constant unfamiliar problems you have to solve yourself, and red tape like licenses, taxes, payroll and insurance. Each one can be softened with a cash cushion, a peer group or mentor, good advisors and simple systems.
- In a job you're paid for time. In a business you're paid only for results, and you cover the costs too.
- About half of new business establishments are gone within five years, so plan for a slow start.
- Loneliness is real. A mentor, a peer group and one monthly coffee with another owner help a lot.
- You'll face problems you've never seen. Good advisors and written systems shrink the list fast.
- None of these are reasons not to start. They're reasons to start with a plan.
Why we're being honest about the downside
Rob started Feedbackwrench out of his living room with no outside money, and before that he helped build Nuance Financial Tax and Accounting. Since 2015 our team has worked with 550+ small businesses, most of them owner-operators. We love entrepreneurship. Small businesses create something where there was nothing, and that's worth celebrating.
But the people who struggle most are often the ones who expected it to be easy. Here's what the numbers say about how often new businesses last.
Source: U.S. Bureau of Labor Statistics, survival of private-sector establishments born in 2013 (published January 2024)
That isn't meant to scare you off. Not every closure is a failure, since some owners sell, retire or move on. It's a reminder that the first few years are the hard part, and that knowing the drawbacks ahead of time is how you end up in the half that lasts.
Drawback 1: It's risky
At a job, the deal is simple. You put in the hours and you get the paycheck in your offer letter. Owning a business flips that.
When you're an entrepreneur, putting time into "working" means absolutely nothing, only results matter.
Rob Satrom
It's like a commission-only sales job, with one big twist. You also have to deliver what you sold, and you pay for the tools, the truck, the software and the insurance before the first check clears. If you botch the delivery, you're on the hook for the refund and the one-star review. All while your own mortgage still comes due every month.
- Pre-sell a few customers before you quit, so you know people will pay.
- Know your break-even number: the monthly revenue that covers every cost, including your own pay.
- Get the right insurance before your first job, not after your first claim.
Drawback 2: It can be lonely
Somewhere in the second or third week, most new owners notice how quiet it is. At a job, someone else unlocked the doors, set up the email, chose the software and was down the hall when you had a question. As a solo owner, all of that is you, and there's no one to talk shop with at lunch.
Rob still misses the teams he worked with before he started his own companies. Your friends with regular jobs won't be wrestling with payroll or a client who won't pay, so even good friends can't always relate.
The dollar-sign problem
There's a stranger side to it, too. Rob calls it business utility syndrome. Because you always need new customers, you can start seeing everyone you meet as a possible sale. Your friends and family want to support you, but nobody wants to feel sold to at a birthday party. Every owner has to find their own balance here.
Meet another business owner once a month. Make it about friendship and learning, not referrals.
Trade associations, local business groups and mastermind groups give you people who get it.
Find someone a few years ahead of you in a similar business, and ask them good questions.
Drawback 3: You'll face problems you've never seen
Every day as an owner brings questions nobody trained you for. Often you don't even know a problem exists until it shows up at your door. Rob's original list of questions he's googled as an owner included all of these:
How do I hire the best people? Is it time to hire, or should I use a subcontractor? Should I fire this client?
How do I bid this job? How should I balance salary and distributions in an S corp? How do I track sales tax?
How do I get my website found on Google? Which CRM should I use? Which email service?
How do I reduce my legal liability? How do I get through a workers' comp audit? Where did my laptop charger go?
You don't know what you don't know. The good news is that most of these questions have been answered by someone already. You don't need to solve them all yourself.
Drawback 4: Red tape and admin slow you down
The fourth drawback is everything between you and the work itself. Licenses and permits. Sales tax filings. Payroll, withholding and workers' comp. Insurance audits. Contracts and lien rules. Privacy and data rules. Each one makes sense on its own, but together they take real hours every month.
These rules also land harder on small companies. A big competitor has a compliance department. You have yourself, after the kids are in bed. Licensing rules in some industries can make it slow and expensive for a newcomer to get started, which is exactly what keeps some people from ever trying.
Find out what's required before you start
Check your city, county and state requirements for licenses, permits and sales tax. Your local Small Business Development Center can help for free.
Put every deadline on one calendar
Tax filings, license renewals, insurance renewals and payroll dates. Set reminders a few weeks early.
Hand off the paperwork you hate
A payroll service and a bookkeeper usually cost less than the late fees and the stress of doing it wrong.
Use simple systems for the rest
Digital contracts, saved templates and automatic reminders cut the admin time a lot.
The drawbacks nobody mentions
Beyond the big four, a few quieter costs catch new owners off guard.
Great months and terrible months, often back to back. Cash flow planning matters more than revenue.
Customers text on Saturdays. It takes discipline to set hours and stick to them.
Until you have a team and systems, a sick week or a vacation means no revenue.
Long hours and money stress hit your family too. Talk about the plan with them before you start.
Job vs owning a business: the honest comparison
Here's how a regular job and owning a small service business stack up on the things that matter most.
| Regular job | Owning a business | |
|---|---|---|
| Income | Steady paycheck for your hours | Uneven at first, paid only for results |
| Ceiling | Set by your employer | Set by your profit, team and systems |
| Risk | Low. Someone else's money is on the line | High. Your money and time are on the line |
| Benefits | Often health insurance and retirement match | You buy and fund your own |
| Taxes | Withheld for you | You file, plan and pay quarterly |
| Schedule | Set for you | Flexible, but often longer |
| Support | A team, a boss, IT and HR | You, until you build a team |
| What you build | Skills and a resume | An asset you can grow, pass on or sell |
The last row is the one that makes the rest worth it for a lot of owners. A job pays you while you work. A good business can keep paying you and eventually be sold. We dig into how that happens in our 11 principles for building wealth with a business.
So should you start a business?
If the drawbacks above made you nervous, good. That means you're taking it seriously. Here's a quick gut check before you take the leap.
- You have several months of personal expenses saved, or income that keeps coming while you test.
- You've done the work for someone else long enough to know the trade and the customers.
- At least a few people have paid you, or promised to, for what you plan to sell.
- Your family understands the hours and the money risk for the first couple of years.
- You have at least one person, a mentor or peer, you can call when it gets hard.
If you can check most of those, the drawbacks are manageable. Entrepreneurship is hard, lonely, risky and full of paperwork, and it's still one of the fairest ladders there is. Anyone willing to learn and serve customers well can climb it.
Questions people ask
What are the main disadvantages of entrepreneurship?
Financial risk with no guaranteed paycheck, loneliness in the early years, a steady stream of unfamiliar problems you have to solve yourself, and the time cost of licenses, taxes, payroll and other admin. Uneven income and long hours come with it too.
What percentage of new businesses fail?
According to the U.S. Bureau of Labor Statistics, about 80 percent of private-sector establishments born in 2013 were still open after one year, about 51 percent after five years and about 35 percent after ten. Not every closure is a failure, since some owners sell or retire.
Is it better to have a job or own a business?
It depends on your goals and risk tolerance. A job offers steady pay and support. A business offers a higher ceiling and something you can sell, in exchange for more risk and responsibility. Many people keep a job while they test a business idea.
What are the risks of being self-employed?
Uneven income, no employer benefits, personal money on the line, quarterly taxes you have to plan for yourself and revenue that stops when you stop working. A cash cushion, the right insurance and a good CPA cover most of it.
How can I reduce the risk of starting a business?
Start lean, keep some income while you test, pre-sell your first customers, build a cash cushion, form an entity with a separate bank account and get the right insurance before your first job.
Rob built Feedbackwrench and Nuance Financial Tax & Accounting. Since 2015, our team has helped transform 550+ small businesses with marketing, strategy and systems.
