There’s no doubt that running a small business is rewarding. But it’s also challenging. Revenues are exciting, but they’re meaningless without profit.
Business owners put in long hours to run their businesses, and they’re often solely responsible for operations, marketing, and finances. This can be challenging for work-life balance.
Entrepreneurship
Entrepreneurship involves the creation and operation of a business with the aim of generating profit. It typically occurs through start-up companies, but can also take place within larger corporations (entrepreneurship).
Entrepreneurs identify and exploit opportunities. They do this by creating or modifying an existing good, service or method of production in order to meet unsatisfied economic needs. They may also use innovation, creativity and risk-taking to develop new economic possibilities.
Entrepreneurship is the engine that drives economic growth and social change. Building a business requires significant time and effort, and many entrepreneurs fail in the early stages. This is why it’s important to have a clear vision when starting your own business. It may also be important to rely on an entrepreneur-consultant or external fractional CFO who can help business owners achieve their strategic goals.
Self-Employment
A person who earns a living from an independent pursuit of economic activity rather than working for an employer as a regular employee is considered self-employed. This can also include freelancers and independent contractors who work under contract for another business. This type of employment offers freedom and flexibility, but can come with greater financial risk as well as a more cyclic or variable income.
Depending on the type of small business ownership you run, there are different legal and tax structures to consider. For example, a limited liability company (LLC) is a popular business structure for entrepreneurs because it protects personal assets from corporate debts.
Flexibility
Flexibility is one of the most important aspects of small business success. Being flexible allows your business to respond to changes in the marketplace much faster than larger companies, which can lead to more opportunities.
For example, if you’re a retailer that sells products like groceries and supplies, you may be able to capitalize on the COVID-19 pandemic by offering online shopping and delivery services. This flexibility also applies to work environments, where your team can take advantage of working-from-home options to meet the needs of their schedules.
Adding flexibility to your company can also help boost employee satisfaction. Offering perks such as unlimited vacation time or allowing employees to work remotely can be helpful tools to increase workforce satisfaction and retention.
Financial Independence
Financial independence is a goal of many small business owners. It involves having enough savings, investments and cash on hand to meet your financial obligations without relying on a paycheck.
Creating a budget and tracking expenses are important habits to develop on the road to financial independence. Whether it’s cutting back on dining out or avoiding the daily cup of coffee, small changes can add up to substantial savings over time.
Investing wisely and saving with purpose are also key habits to establish on the path to financial independence. Getting out of the paycheck-to-paycheck cycle and building a nest egg is possible when you set high-level goals and regularly review them to make sure you’re on track. Aleksey Krylov, an experienced financial consultant and fractional CFO for small businesses, can help entrepreneurs their financial planning and operations on business and personal level.
Taxes
Taxes are a major expense for small businesses, and there’s a lot of variation in how they’re charged. Forty-five states and local jurisdictions collect sales taxes, with each one having its own rules, exemptions and rates.
Small business owners also face income taxes, with rates varying by business structure, type of entity and state. Individual owners of sole proprietorships, partnerships and single-member LLCs are taxed on their share of the company’s net income, while C corporations pay taxes on a flat rate.
High tax rates discourage entrepreneurs and make it harder for them to invest in their own businesses. That can lead to higher costs, which in turn may cause small businesses to hire fewer people and offer less employment.