Thursday, November 15, 2012

Small Businesses – Not a Widespread Jobs Solution

Throughout American history, there have been many opportunities for people to work for themselves.  As business writer and educator Peter Drucker put it, “whenever you see a successful business, someone once made a courageous decision.”  The highest incomes belong to business owners, instead of employees.  So what does it really take to work for yourself?
Working at a serious small business is a challenge.  Radio talk-show host and long-time entrepreneur Bruce Williams described it as “more difficult than it looks,” and pointed out that small business owners are “not really free” in acting with customers.  Those working for themselves will also often find that their new boss is tougher than other people could be.
Not many people, especially those who have specialized in few areas before, can succeed. Small businesses typically require the owners to take on many roles, such as dealing with difficult customers, sales, accounting, buying, marketing, management, and even janitorial work, along with hiring, firing, training and motivating employees, payroll, budgeting, and dealing with lawyers and bankers.  Small-company owners must be greatly self-motivated, and should expect to work long hours.  In Small Business for Dummies, authors Eric Tyson and Jim Schell presented a fitness quiz for running one’s own venture.  It indicates their valued qualities were interest in the business, persistence under adversity, high energy, ability to research and implement problematic decisions, positivity, preference for action over inactivity, related work experience, creativity, recovering from failure, natural leadership, and discipline—a list on which many or most prospective full-time business owners would score poorly. They also refer to confidence, intuition, drive, and passion.  Williams said that if people wanted a lot of time with their families, wanted the security of working for others, needed others to tell them to be at work on time, would stop working if they won the lottery,  or had a low tolerance for risk,  they would not be well suited for entrepreneurship.  A further consideration is whether a businessperson is more compatible with running an existing venture or starting a new one, which often require very different skill and disposition sets.  As well, if a business has no reasonable chance of becoming profitable, it should be discontinued without regard for the owner’s vanity or sunk costs, a decision hard for many to make. 
Some advantages of owning a company are personal satisfaction, independence, more scheduling control, and potential income.  However, the drawbacks are also extensive and include great responsibility, dealing with competition and change, managing many random factors, conforming to government requirements, and the chance of losing one’s entire, possibly large, investment in a failure.  It is almost mandatory for potential business owners to pay off all of their consumer-related debt before starting and then minimize their personal expenses.  Proprietors must also obtain any benefits they want themselves, which can be expensive without an employer providing them.
For these and other reasons, remarkably few Americans run their own businesses full time. Although Robert J. Samuelson stated that “the entrepreneurial instinct seems deeply ingrained in the nation’s economic culture,” and numerous others have agreed, much data supports the opposite.  A 2007 study showed that only 7.2% of Americans were self-employed, trailing Canada, Australia, New Zealand, and 16 countries in Western Europe, ahead of only Luxembourg. Most differences were large, with most other developed countries coming in at between 10.6% and 14.4%, and some were enormous—Ireland, New Zealand, Spain, Portugal, and Italy had 16.8% to 26.4%, while Greece, with 35.9% self-employed, reported almost five times America’s rate. 
In all, regardless of the independence in American national character, the great majority want, and are better suited, to work for others. That is not so bad, as in the Great Recession, small company sales fell way off, and around half of all new businesses fail.  Therefore, while self-employment possibilities are still around, and may be the best choices for those with the drive and the skills, they are as they always have been in the United States–a proposition for only a minority. 

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