Advantages and Disadvantages of Small Business

Advantages and Disadvantages of Small Business

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"There isn’t such thing as a free lunch here and everywhere."

Advantages and Disadvantages of Small Business

Before start reading my article, let’s have a look on some fact about small businesses.

What Small Businesses Make Up:

  • 7 percent of U.S. employer firms
  • 64 percent of net new private-sector jobs
  • 2 percent of private-sector employment
  • 9 percent of private-sector payroll
  • 46 percent of private-sector output
  • 43 percent of high-tech employment
  • 98 percent of firms exporting goods
  • 33 percent of exporting value

These are not my words. This is said by U.S.A Small Business Administration.

The above mentioned facts prove the massive contribution of small business in the economy of the USA. Actually, whenever any persons want to start his or her career, maximum wants to do something of their own. Thus, approaching towards small businesses becomes their first choice. If you are one of them, you have to be fully aware of the advantages and disadvantages of small scale business. It would be really very unwise to take any steps without knowing anything.

Advantages and Disadvantages of Small Business

There is so such things exist in the world, which don’t have any advantages and disadvantages. It is also same for the small businesses. Besides having some advantages, small business also has some disadvantages. So, get ready to know these from here-

Advantages of Small Business
  1. Freedom: When you are the owner of your business, you have become your own boss. Nobody can fire you.  Most importantly, you have all the rights to take any decisions regarding your business. You won’t have to answer to anyone for your decisions.  You have the freedom to set your own work hours and work independently.
  1. Lifestyle: Being in charge of a small business provides you some certain lifestyle advantages. As you are your own boss, you can decide how, where and when you want to work. If you need to be with your family and give them some times, you don’t need to ask for the time off from anybody. It’s all your decisions whether you are in your business, or be with your family. Nowadays there are some small businesses that can be operated from the home very easily. These may include blogging (AdSense program, Affiliate Program, and so on).
  1. Financial Rewards: Though in small business, there are some financial risks, there also very high chances to be financially solvent, rather than if you work for someone else. You can be highly benefited from your small business by lots of hard work and passion to become successful. If you can be stick to your plan and dream, you can surely be succeeded. Businessman like Mark Zuckerberg has risen from the ashes, just because of the power of his dream and courage.
  1. Learning Opportunities: When you have a small business and you are the owner of that business you have the opportunities to knock every doors. You can be involved in various aspects of your business. Thus, you can gather bunch of information which was unknown to you. Your skills will be upgraded. You will learn something newer each and every day you spend in your business. This situation creates numerous opportunities to gain a thorough understanding of the various business functions.
  1. Personal Satisfaction: As you are the boss of your company, you have the advantages to work in a field that you really enjoy. You dream, and you plan. You can put your skills and knowledge to use, and you’ll gain personal satisfaction from implementing your ideas, working directly with customers, and watching your business succeed.
  1. Building Your Own Resume: Your business, your right, and your domination. You can use the title of owner, CEO, chairman or president, whatever you want on your resume.
  1. Nature of Demand: Usually the small businesses deal with the smaller demands where the larger business deal with the bigger ones. In this case, the small business owner enjoys a real advantage over the large business owner. Small business can easily emphasize on small and constantly changing demands, where it is really tough for the larger companies.
  1. Creating Employment: Unemployment problem is the crucial problem in today’s economy. In this situation, the establishment and development of small scale businesses are of great help to create more employment opportunities. Usually, maximum small scale businesses are production based, and so they frequently need to hire laborers. Thus, small business can create more employment.
  1. Need of small Capital: One of the main advantages of setting up a small business is it does not need huge sum of money as the capital. Because of its size of operation, some small capital is enough to run the business.
  1. Direct Relation between the Workers and the Employers: As the size of this types of business is relatively small, less workers are employed. So, it is really possible to maintain a proper communication with the workers. That is why, a close relationship exists between the owner and the workers. Because of this close relationship, the owner can easily get to know the problems of the workers and he can look after the well-being of his employees too. He or she can also motivate the workers by his or her own.

    Advantages and Disadvantages of Small Business
    Credit: Amazon Affiliate- The Honest Guide to Doing Business Differently–and Succeeding
  1. Direct Relation between the Customers and the Producers: As the business is small, it has to deal with less customers. Usually, it has to meet the local demand only. So, it can be possible to know the targeted customers, know their needs, demands and preferences. Hence, the owner can remain in touch with their customers. So, he can produce goods according to the taste and fashion of each individual customer.
  1. Easy Management: Actually, a small scaled business is easy to manage compared to the larger ones. Sometimes the owner itself can be able to manage his or her business single handedly.
Disadvantages of Small Business
  1. Financial Risk: When you are ready to start your own small business, you have to manage some capital and invest it into your business. But the problem is, you will have to take the risk on that money. Your business may not go well, you may not get much in return which you have expected, and then you have to lose everything. As you are the only owner, you alone have to bear the liabilities of your business. There might be times, especially in the first few years, when the business isn’t generating enough cash for you to live on, you may have to face worst financial consequences.
  1. Stress: You a have small business, and you are the only owner. So, you are the one who have to worry about the business. You have to think of everything regarding your business. You have to worry about the competition, employees, bills, equipment breakdowns, customer problems and so on. As the owner, you’re also responsible for the well-being of your employees. And all these thing can give you lots of stress.
  1. Time Commitment: I have mentioned earlier, in small business, the owner gets the opportunities to spend more times with family members. But to enjoy this advantage, conflict may rise to maintain the time properly. Yes, obviously you can take the time off, but the truth is, you may have to pay the price of taking that time off.  Despite having the opportunity, you actually cannot able to get away. Being the boss is not that easy.
  1. Undesirable Duties: When you kick off your business, you are undoubtedly the one who is responsible for either doing or overseeing just about everything that needs to be done. You cannot deny the work that you don’t enjoy. Sometime, you have to perform some undesirable duties like, impressing your customer or firing people.
  1. High Cost of Production: In the small scale of business, lesser machinery has been used. It increases the salaries and wages of labor. Even the proper division of labor is not possible too. Thus, the cost of production per unit increases. It is really tough for small business to cope up with high cost of production and generate the profit with that.
  1. Wastage of By-products: In the small scale production, it is not possible to make economic use of the by-products, as in the large scale production. By-products of the small producers generally go waste.
  1. Lack of Division of Labor: In the small sized business industries, it is not possible to make the huge size of production. So, it becomes impossible to make the division of labor with in this size of production. It reduces the profitability of the entrepreneurs.
  1. Difficulty in Getting Loans: For managing the capital, it often needs to get loans from banks and other financial organizations. But in most cases banks and financial organizations do not feel interested to provide loans to the small business. As it has low profitability, banks think twice to give it loans. If they get, they have to pay higher rate of interest.
  1. Difficult to Face Economic Crisis: When the small business face economic crisis, it becomes tougher for them to survive. With the limited number of resources and financial weakness, the small business owners cannot face the consequences. The entrepreneur alone cannot hold the business in crisis for long. Therefore, they have to shut down the business.
  1. Costly Raw Materials: Usually in the small business, it does not need huge number of raw material to produce. So it has to buy the raw materials in small quantities, but at high price.
  1. Lack of Standardized Goods: For the small business owner, it is not easy to deliver the quality product. As it is not possible to use the higher level of technology, the quality of products is not standardized or up to the mark. Hence, it gets much difficult to sell goods because of their low standard and inferior quality.
  1. Old Techniques: As it has been mentioned, the small business does not have the ability to use advanced technology, it has to use some old ancient process in production. It cannot get the access in the new form of techniques.
  1. Lack of Research: The small sized business has rarely means at their disposal. They cannot bear the price research in the field of science and technology. In this way, the small scale industries are a hurdle in the way of technical research and, industrial development.
  1. Difficult to Face Competition with Large Scale Producers: The large scale businesses have the far advanced technological advancement, strong ability to face the economic consequences, and a huge strength to challenge the competitors. Therefore, when a large scale business enters into the market, getting going gets tougher for the small scale business. Usually small business cannot survive competing with the large businesses.

As I have mentioned earlier, everything has both the advantages and disadvantages. Whenever, you chose to do anything you have to pay some opportunity cost. But, you should select that which gain you the best benefits. Think wisely and take the best decision.

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Think A Mentor is a blog related to giving resources and information for doing online or offline business. The blog consists of a team of experienced online professionals and entrepreneurs who share their experience through this site.


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