6 Reasons Why People Are Afraid to Start a Business
June 16, 2010
Starting a new business can be a turbulent undertaking. For one thing, there are no guarantees of success. Businesses fail every single day, and plenty of entrepreneurs come away with nothing to show for months or years of hard-fought effort. The idea of sacrificing a steady salary for an uncertain, hoped-for payday also tends to provoke anxiety.
While some are undeterred by these obstacles, others opt to play it safe and scrap their business plans altogether. Below are six of the most prevailing reasons why people are afraid to start businesses (and whether they make sense.)
1. The Economy
Some of the most common fears about starting businesses relate to how “the economy” is doing. If the economy is in a lull, many would be entrepreneurs assume that now must necessarily be the wrong time to get started. This belief is reinforced by nay-saying politicians and journalists who exaggerate even the very worst economic news.
Remember, though, that there is no single entity called “the economy.” What is loosely referred to as the economy is really just the vast, interconnected web of buyers and sellers accommodating each other through the market and price system. Moreover, there are two sides to every transaction. While some sectors of the economy may be hurting (such as finance and housing today), those on the other side of the affected transaction (like foreclosure specialists and storage facilities) could be thriving.
2. Uncertainty
Another fear that stops entrepreneurs from getting started is the uncertainty inherent in owning a business. Unlike a salaried job, business ownership provides no immediate or guaranteed pay. Income, if any, is commensurate with the company’s sales or profits. If you have grown accustomed to being paid on a regular schedule regardless of outcome, trading that in for the uncertainty of business ownership can feel like a leap of faith. It is entirely legitimate to wonder if your business will be capable of providing for you or your family.
That said, there is a flip side to the uncertainty. If and when your business does produce an income, no boss or employer can take it away. Never again will you have to plead for a raise or demonstrate why you “deserve” more. In business, your income is entirely determined by what you produce and/or sell.
3. Indecision
Others have reservations because they are undecided about what type of business to start. More often than not, these are people who know they want to be self-employed, but not in what capacity. This, too, can be a legitimate fear to have. If you currently work in a steady career, it is not enough to simply “go into business.” In order to credibly go off on your own, you must be confident about what kind of business you will open. You must also have the skills and expertise to succeed in that business.
Current or previous jobs are a good reference point. If you currently work for an accounting firm, starting your own is perfectly reasonable. Deciding to abruptly change course and buy an Alaskan crab fishing boat might warrant more scrutiny.
4. Debt
Debt can constitute a serious obstacle to entrepreneurship. If you are saddled with student loans or credit card bills, it will be difficult to obtain any start-up financing you might need. In severe instances (such as if your wages are being garnished), any income your business produces will go directly to your creditors anyway.
Needless to say, concern about your pre-existing debt is a completely defensible reason to fear starting a business. Rather than trying to juggle both at once, focus squarely on repaying all of your debts first. Once your financial slate is wiped clean, you can move on to business ownership with a clear mind.
5. Family Obligations
Financial concerns are not the only reason people fear starting businesses. The early years of a new company can be incredibly taxing, and some fear having little time to spend with their families. After all, everyone gets the same 24 hours in a day. There is only so much of yourself to go around, and if you’re putting in ten or twelve hour days at work, there is no way to also spend that time at home. (Unless you have a home office, that is.)
It may truthfully be that family time is a deal-breaker for you. On the other hand, don’t be too quick to relinquish your ambitions. Discuss with your spouse whether arrangements or sacrifices can be made for the early days of your company.
6. No Benefits
Finally, other would-be entrepreneurs worry about what losing benefits, such as employer-provided health insurance or 401(k) contributions, will do to their overall finances. This, too, is a serious concern worth addressing. Perhaps you or a family member has a long-standing health condition. In such a scenario, a sudden lack of coverage could prove devastating.
Not every situation is so dire, however. Retirement accounts (including IRAs, Solo 401(k)s and self-employed pensions) can be opened and funded on your own without the help of any employer. It may also be possible to form a pool with other entrepreneurs and buy health insurance at lower group rates, which is essentially how large employers buy it.
23 Comments
I started my business while still working full time, and once it grew enough for me to quit my day job, I did. (took about 2 years)
lmfao — seriously? Wheres the positive or how to get passed those reasons. — pathetic “article”.
Hmm nice article
An excellent article as far as it goes. The Internet has changed the way the world does business today. And Internet marketing is growing by leaps and bounds. There is NO recession on the Internet. Entrepreneurs who recognize this and step up are placing themselves far ahead of the masses who may lose everything, including their businesses, during the next two or three years. God Bless the entrepreneurs.
Very good article,you mention all the points you need to bear when set up your own business. Though I had that questions too,I still built up my own business by myself.
Cheer again for those who build up their own business.
Those are great factors to take into consideration. I’m looking on opening my own pizza store soon.
Being the son of someone who has started a Landscape architecture, maintenance, and installation business, Economy is definitely is the number 1 influence in our business’ well being. If people have less money, especially play money, how their front yard looks starts to go down on the list of financial importance.
You missed one – fear of government. As long as you are working for someone else, they have to deal with all the government B.S. – they even take care of making sure your taxes get paid (as long as you don’t have a lot of additional income). When you open a business, not only are there obvious issues like accounting and taxes (which can be quite daunting for someone that’s not good with numbers or finances) but also you have to worry about running afoul of a myriad of local, sate, and federal agencies, some of which you may never have heard of. And if you have employees, there are a whole bunch of laws that tell you how to deal with your employees, and if your employee knows about one that you don’t, you might find yourself on the wrong end of a lawsuit.
I would guess that fear of government stops a lot of people from going into business for themselves. I even suspect it’s one reason we have such a high percentage of people on welfare (even in good times) – for people with some personality types, it’s much easier to just sit back and take money from the government than to try starting a small business and risk a confrontation with government officials that might result in a fine or even jail time. I think you’d see more small businesses started if we could just get the government off our backs!
Heck, there’s a lot of people who would have fared much better over the old feudal system where the prince sent his tax collectors around every so often to take what they want. At least those guys couldn’t take more than the person actually owned, and they didn’t make people fill out forms or keep records. From time to time you might lose everything, but you still had your skills (which did not become obsolete within months!) and could hopefully start over, and you didn’t have to hire a lawyer or a accountant to keep you out of trouble!
You make it sounds as if those are all reasonable fears. I guess if you see life through employee eyes, they might make sense, but ask anyone who is successfully self-employed if they have benefits and you’ll discover that they not only have the ordinary ones, they have a long list of benefits they hadn’t even imagined before they started building a business.
Fair enough, but the first three concerns are valid for looking for a job, too. As to family, depending on the nature of your new biz, you may be able to work that in so that you can spend time with family as well as working, maybe even while you are working.
I think you have given all accurate reasons behind the fear of beginner entrepreneurs but we all should think about it and will find the very common result as if you have nothing to believe on you and taking risks for the gain no ways to become a future entrepreneur while will go back to your previous work and worries.
The sheep will fail and say this is misinformation. While the wolves will feast on the sheep; and continuing to prosper. remember my sheep money is an illusion as soon as you figure that out. You are already on your way to financial freedom. -DrQXX
nice brief, and i would rate point no 2 ( the uncertainty ) to be most appropriate point.
point no 6 could be ruled out in few cases.
Great thoughts and I hope it pushes a few people to make the first steps.
I am an entrepreneur having founded 4 companies. I am a past Area Director of the worldwide Entrepreneurs’ Organisation.
I recently wrote a post “Why you should not be an entrepreneur”. We need entrepreneurs, but we need realistic entrepreneurs. There are some important factors to look at before making the jump: http://www.conorneill.com/2010/02/why-you-should-not-be-entrepreneur.html
I really like this post. I can definitely relate to indecision because I had so many ideas about things that I was interested in but wasn’t sure which one I would want to dedicate most of my days and nights to. In order to figure it out I’m trying out a few different ideas to see which one I naturally gravitate to. It seems that the one that I am spending the most time on is the one that my partners are also spending time on which makes a lot of sense – you feed off each other and it’s less scary to start something with other smart people than going it solo.
I tried a couple of other projects with people who weren’t so passionate about them and they just died. It’s kind of a bummer because at least in one case someone else implemented our idea. Finding the right people to work with is definitely key and filtering out the ones that aren’t into it is better upfront than later down the line when you’ve invested your time (and money).
I would add to “uncertainty” or a new category all together is not knowing how to come up with the money to start the business. A lot of people don’t know the proper channels to either get a loan or get investors.
Very good article! congratulations. I tend to think that indecision is the number one reason. But once the decision is made, it requires massive action to follow through.
Great comment from Dr. Smithdeal above.
All good points to analyze. No matter which direction the social economical pendulum swings there will be and always are amazing opportunites. By identifying structural holes, or a niches, people who are true entrepreneurs grasp an amazing unique perspective on a particular market. Read about Paulson and his 15 billion dollar profit after analyzing and predicted the housing boom.
Needless to say there is are currently incredible opportunities with a level playing field like never before in history that is available to anyone currently with the werewithall and determination it takes to pursue ambitions.
True entrepreneurs don’t let little ideas, setbacks or things get in the way. There are amazing funding angels, deep pocket agencies and ways to build a business. Quit whinning and do it. I just saw 3 ungraduated college kids come up with a timely idea. Put it on the internet, asked for 10k and received 130k in less than 6 weeks.
To Sarah… if you have ideas start researching the web for women in technology think tanks and bringing ideas to business. For gods sake don’t give up on your dreams. Build it and it will come.
Ok I’ve said enough. Im so passionate about this and will now go blog!
Great post and ideas! I’m going to share this with the rest of my team as we work more with enterprise-level clients.
Thanks and Regards/-
Jason Webb
I commend anyone who has the courage to begin their own venture. I made a drastic life change and invested my life and family into beginning Century 21 Canada. Now, over 30 years later, I couldn’t be more proud of the accomplishments I’ve made. I can’t imagine what my life would have been like if I hadn’t had been too afraid to commit to the challenge. Times are tough right now, but if you are prepared and steadfast, you can survive anything.
Don’t know what it’s like in other countries, but here in the UK, it’s never really mentioned as a possibility in school, college etc. You’re just expected to leave education and go straight in to a 9-5 job.
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I think the #1 reason why most people are afraid to start a business is failure. They don’t want to go through the feeling of building something and it not succeeding.
Amber Johnson, Author