Life is full of risks, but that doesn’t mean that everyone eagerly seeks out situations that could result in failure. There are countless stories of small business success where people have been willing to put their heart and soul into the work of creating their dream organization. Unfortunately, there are also many stories that have the opposite result. People can be smart, talented, and driven, but still experience the sadness of a failed business. With this in mind, here are a few specific reasons that people are afraid to start a small business.
Losing your shirt…literally
In order to get a small business started, some individuals commit their life savings or take out a second mortgage. Others take out a small business loan or borrow money from friends and family. The risk of this type of financial maneuver is that a business can fail before the business even gets going, which means that the borrowed money is still owed. This represents a frightening prospect for some people who do not want to take on such a major financial obligation. It is one thing to put a few purchases on a credit card. It is quite another to lose a house or nest egg because a venture did not succeed. This is why, for some people, the dream of a small business remains just an idea.
A blow to the pride
Another major reason that people do not start small businesses is that they do not want to experience failure on such a large scale. Obviously, everyone makes mistakes at some point, but a failed career move can be particularly devastating for those who invest a lot of their energy and pride into their vocational life. People do not want to be in a position where they have to admit that they failed. Granted, failure can spur some people on and motivate them even more to do better. However, others find small business failure to be a particularly damaging blow to their ego as it represents an inability to perform in a realm where others have found great success in the past.
The great unknown
Despite anecdotes and societal fears that many businesses fail, the United States Department of Labor suggests that small businesses continue to do well. However, their data is from the 1990s, when the economy was still doing fairly well. A more recent article in 2007 suggests that less than 45% of businesses reach the fourth year of existence. This is not particularly comforting odds for the nervous entrepreneur. The bottom line is that any small business venture is a risk. There are certainly those that will find success, but solid plans and adequate funding will not guarantee survival in a commercial world that can be unforgiving to the small business.