There are a lot of stories portraying how someone who started a certain business gets a handsome amount of income every month. Or maybe, a lot of profit money out of his business.
But that is just sweet talk. The fact is, there are many people who started a company and failed. And sometimes they go bankrupt!
It is a big decision one has to make when he wants to start a business. Sure, the reward can be greater than your current salary and you can be your own boss. But as in any capitalist state, greater rewards will incur greater risk.
Starting a new type of business
When you start a business that is currently not yet invented, the risk is very high. This is because you cannot copy existing companies' operations and the way they do their business. You are also unsure of your business profitability. Imagine if you are opening a cybercafe. You know there are a lot of cybercafes around, so you can easily infer that they are making profits (provided they have been in business for more than a year). You can also copy their operations, such as the number of computers to provide and the operating hours.
But when you start an altogether new type of business, you are not sure if you are going to make a profit. You can definitely do some market research, but this will be an additional cost and the research may not always be accurate. You may also have to introduce your products or services to the public which then requires a load of advertising money.
It is not easy. But then if you succeed, the return is potentially higher than if you start a non-new type of business. At least in the short-run. This is because for a short period of time, you are the only provider of this new product or service. And therefore if the product sells well, you will earn a lot of money because of the monopoly. Once there are other businessmen realized that your business is profitable, they will then try to copy your business, and your supernormal profit will be eroded.
Downsides
Yes, you can earn a lot of money by starting your own business. But if you are living in a developed countries, being an entrepreneur might not be so rewarding.
Firstly, although you have invented a popular product, your profit will be eroded once there are new players selling your product. You will then start scratching your head and look for ways to deter the competition. More money will be required in advertising your brand and this will ultimately reduce your bottom line. See, you will also be stressed and this is also a cost.
In developed countries, information is widely available. You can easily search for suppliers and sometimes the tax returns of a certain company. It is relatively easy for anyone to copy another business, especially if the start-up cost is not high. Even when start-up cost is high, if the business is profitable then richer businessmen will copy it.
Now, you are stressed with competition and your income is reduced. What's worse is that your company is incapable of handling the competition and goes bust. Yes, the risk in starting a business does not end once you have gained a good profit. Newcomers are also a threat to your business and it will last forever.
You may remember how Nintendo and SEGA once dominated the video games market in the early 90's. Even the owner of Nintendo was once one of the richest men in the world. But by the mid-90's and beyond, their sovereignty was compromised by Sony which introduced the Playstation. The mentioned owner of Nintendo suddenly slips in the billionaire's ranking due to the decrease in Nintendo's profitability. Now, Nintendo's rising with the Wii and this will also be part of your day-to-day life. You have to compete with others. Sometimes you lose some but sometimes you win some.
The story of Nintendo is a good one. There are however, other companies that fall back and never recovered. So the question is: Is it worth it? If you just stay in your current job, you can probably save yourself from the intense pressure inherent in any business owner. You can then retire peacefully when you reach 55.
Why some entrepreneurs remain rich
I have read in my marketing business that most businesses will not last beyond 8 years or so. Some business do because they have a high barrier-to-entry. For example: to start a petrol company you have to invest billions of dollars. To sell your new Operating System, you have to spend a lot of money in persuading computer users to dump their Windows system. And to compete with a popular chicken rice stall, you have to get their recipes, which may not be sold.
Most entrepreneurs will also sustain their high income by venturing to other businesses or to collude with their competitors. This is not ethical but can happen. Recently, pest companies colluded in tenders which results in consumers paying higher -than-normal price.
Conclusion
It is your choice to start a business. But you should consider if it is worth your time, money and lifestyle. I have personally started one and I can tell you that the first few months are very stressful. I now consider of studying hard in the university so that I can get a have career.
