Establishing a small business is a difficult task. If you want to develop a profitable and long-lasting business, you must be resilient and determined. According to the Bureau of Labor Statistics, approximately 20% of new enterprises fail within the first year. Furthermore, starting a small business during a significant economic crisis (for example, the COVID-19 epidemic) can reduce your chances of survival even further.
Although starting a business can be difficult, it is not all doom and gloom: There are presently 31.7 million small enterprises in the United States, accounting for 99.9% of all firms in the country. The American economy is based primarily on small firms and for a good reason. If you have a brilliant business concept and want to try your hand at entrepreneurship, examine the advantages and downsides carefully. Here we’ll see what it takes to be a small business owner and the factors that affect their salary.
Who is a Small Business Owner?
A small business owner usually starts a business in their neighborhood to provide a service to a specific target demographic. It’s simple: “Small business owners provide a specialized product or service to those in a particular community who require it.”
Small businesses are independent firms with less than 500 people, and there are roughly 32 million small businesses in the U.S.
Sometimes a small business arises based on an individual’s passion or experience, and they decide to go it alone in order to make a bigger effect. A mom-and-pop shop is sometimes passed down to a business owner by relatives. Small business entrepreneurs are concerned with adding value to their communities.
Benefits and Drawbacks of Being a Small Business Owner
It is a widespread misconception among small business owners that they have complete control over their schedules. According to a survey performed by the digital marketing firm Constant Contact, 56% of small business owners believe they can never be away from their enterprises, and 84% said they would start their businesses from scratch if they could.
Clearly, there are advantages and disadvantages to being a business owner. But most people think that the benefits far exceed the drawbacks.
Benefits
Why does someone decide to establish a business in the first place? One of the primary reasons is independence and the freedom to do things your own way. Small business entrepreneurs believe that two elements motivate them: the chance to pursue their hobbies and professional flexibility. Nothing beats being your own boss and developing your own product or service. It’s an even better feeling when clients are willing to spend their money on it.
Additional advantages include being able to select your own personnel (and who wouldn’t want to choose their own coworkers?) and establishing the tone for your business’ culture. Will you foster an environment in which people are expected to dress in suits on a daily basis? Or will you allow your staff to bring their canines to work and dress casually? It’s your call.
It’s also worth noting that because the majority of small business owners register as sole proprietors, partnerships, or limited liability companies (LLCs), filing taxes and registering a business is easier than it is for other forms of organizations, such as corporations.
Cons
Small business ownership has more benefits than drawbacks. Still, it goes without saying that business ownership is not for everyone.
Owners of small businesses put forth a lot of effort, investing their own time and money to run and promote their companies. As a result, they may not make a profit for a long time. They frequently have to say goodbye to 40-hour work weeks, at least initially. They frequently work 50-70 hours per week, making work-life balance nearly impossible. Even after putting in the hours, 56% report they don’t have enough time to complete everything.
Wearing numerous hats at once can also increase stress, anxiety, and failure fear. Yet, don’t allow these factors to deter you from starting your own small business. The secret sauce for success is perseverance and determination.
Examples of Notable Small Business Owners
Most small business owners progressed to become enterprise-level business owners, and some of the more well-known examples are:
Walt Disney began his business career as the owner of a small animation firm. Richard Branson began his corporate empire, Virgin, with a small record store. Sara Blakely founded the multinational underwear business Spanx with barely $5,000 of her own money.
Small Business Owners’ Income and Net Worth
Owners, industries, and states can all have a significant impact on the income and net worth of small business owners. According to some reports, the average wage of a small business owner in the United States in February 2023 was US$63,650 per year. Salaries ranged from US$30,000 to US$146,000 per year in general. The net worth of small business owners is harder to pin down, depending on their own personal income or value as well.
Qualities and Skills of a Successful Small Business Owner
That brings us to the second point: small business entrepreneurs need a specific set of soft skills to keep their businesses going. Being comfortable with taking chances, maintaining a budget, communicating effectively through business writing, and dealing with internet trolls are crucial abilities for business management.
With that in mind, here are 10 vital attributes of successful small business owners:
- Be approachable and friendly.
- Be ready to change.
- Taking chances
- Know when to take a break and be independent.
- Persistence and dedication
- Keep to your budget.
- Prioritize
- Consider the big picture.
#1. Be approachable and friendly.
Being polite to others may seem corny, but connecting with your employees, customers, vendors, and even competitors can increase your business. It is common knowledge that the more employees like and respect their employers, the stronger their sense of team motivation.
Furthermore, consumers are influenced not only by the product itself but also by what a brand symbolizes. Customers will identify your friendly manner with your product if you are friendly to people around you. Developing relationships with clients and key partners is a crucial aspect of any brand’s business development.
In fact, experts argue that compassion is a great leadership approach in and of itself. You are more likely to have return customers who will recommend you to their friends and family than the guy down the street. As a result, your bottom line will improve and consumers will receive the product they require (and, let’s face it, yours is the greatest out there).
#2. Be open to change
Small business operators must be willing to take risks. The market will unavoidably shift over time, and business owners must adapt to stay relevant. Refusing to adapt to what customers want or need can only harm you in the long term.
A wonderful example is how certain eateries adapted to the changes brought about by Covid-19. Alinea, a three-Michelin-starred restaurant in Chicago, is famed for its elaborate, avant-garde tableside presentations. Nevertheless, when the pandemic struck, Alinea rapidly altered gears and began serving fine dining meals to go. Its ability to quickly adapt allowed it to stay afloat and let the people enjoy its cuisine – a win-win situation.
#3. Taking Chances
Mark Zuckerberg, Facebook’s CEO, once said, “The biggest danger is not taking any risk.” Beginning a business is always a gamble; there is no way to know for certain if it will succeed.
Successful small business owners make intelligent decisions and use market research to advance their ideas, but the future is impossible to predict. It is always a risk to invest your own time and money in a business, but it comes with the territory of being a business owner.
#4. Maintain your independence
Entrepreneurship requires the ability to think for oneself and make significant judgments. Independence gives you the motivation to achieve where you want to go without the influence of other people’s ideas or outside noise. Perhaps you have a novel idea for a previously undeveloped product or service. Independence allows you to put yourself out there and take the initiative to make things happen.
#5. Have faith in yourself
Confidence and independence frequently go hand in hand. It is critical to have faith in your business and financial decisions. Because your business lives and dies with you, you must believe in yourself in order to continue forward and weather adverse times.
Furthermore, confidence instills respect and encourages others to regard you as a leader. This can have a significant impact on team management. Great leaders are rewarded with higher productivity and inventiveness from their people, resulting in a more efficient business overall.
#6. Recognize when to take a break
Small business operators know when to take a break. Burnout is defined by emotions of exhaustion, cynicism, and inefficacy, and it can result in feelings of overload and decreased motivation. The easiest approach to avoid it is to adopt effective behaviors in your daily life, such as scheduling time away from your business.
Even if you just have thirty minutes to focus on yourself or spend time with loved ones, make the most of it. Also, don’t look at financial reports or emails at this time. Successful business owners recognize the need of taking time away from their work, even if it is only for a few minutes each day.
#7. Dedication and persistence
Have you ever heard the phrase “success isn’t linear”? This is especially true for small business owners. It usually takes time for a business to become profitable and to iron out all of the kinks so that everything runs smoothly. You might not get it properly at first. You’ll most likely have to make adjustments along the road, such as prices, your business plan, or even your product itself. Yet perseverance and refusal to give up will see you through.
#8. Adhere to the budget
Overspending can be the downfall of your business. According to a US Bank survey, 82% of small firms fail to owe to poor cash flow management. A budgeting and business planning suggestion is to overestimate expenses and underestimate income. You’ll never be stretched too thin this way, and you’ll always be prepared for unanticipated charges.
#9. Set priorities
More often than not, the quantity of tasks you must do is daunting. This quality is especially vital if you work alone and don’t have somebody to distribute chores too.
You’ll need to polish your project management skills as a business owner to evaluate which jobs have the most business value and which may be delegated. Labeling your list of chores as critical or urgent is an excellent place to start. As a rule of thumb:
- Important jobs are those that are critical to the long-term success of the business but do not have to be completed immediately.
- Critical ones require urgent attention and are required to keep your business going. They should always be given top priority.
Stephen Covey’s Time Management Matrix is a useful tool for determining which chores to prioritize. This simple chart will assist you in categorizing your project list into four major categories: urgent/important, not urgent/important, urgent/not necessary, and not critical/not necessary.
#10. Consider the big picture
It’s easy to get caught up in the minutiae of daily life. Any problems that develop may make you wonder why you established your business in the first place. But remember those reasons, and focus on your overall success rather than tiny setbacks – that’s what will keep you moving forward in the long run.
How To Become a Small Business Owner
We’ve included the most important steps to becoming a small business owner.
- Create a small business idea.
- Business name
- Make a small business strategy.
- Get funding for your business.
- Register and license your business.
- Create the company’s vision.
- Create your squad.
- Start your small business with the best business website.
Small Business Owner Salary: Things to Consider
Many Americans aspire to own their own small business. People may be enticed by the idea of freedom, autonomy, and hard work on something that is entirely theirs. Your business might possibly be a big success.
According to PayScale, a company that conducts compensation research, the annual salary of a small business owner in the United States in February 2023 ranged from around $30,000 to around $146,000. The average annual salary for a business owner was $63,560.
#1. Experience
A variety of factors influence where you might fall on the average compensation spectrum for small business owners. One of the most important is experience. Business owners with less than 20 years of experience tend to make between $52,000 and $62,000, according to Payscale. Small business owners typically earn around $75,000 per year after 20 years of expertise, though.
#2. Gender
The salary disparity that affects most industries impacts a small business owner as well. According to FreshBooks research, self-employed women earn 28% less than self-employed males. Also, 20% of self-employed women believe they must price less than men in order to attract and retain clientele.
How to Determine Small Business Owner Salary
You’re out of luck if you’re seeking for a magic formula for calculating the ideal wage for a business owner. There is no single way to make that choice. Nonetheless, it’s helpful to know some fundamental numbers to help you along the way.
Think about the compensation options available. A straight salary option is the simplest in terms of accounting because the payments are extremely obvious in the records. A salary + bonus or commission arrangement is another option. This allows you to get monthly payments as well as additional payments if business is good. Some owners also prefer compensation in the form of stock options, which may be less complicated at tax time.
#1. Profits from a Business
The first thing you’ll need to know is what your business can afford to pay you. If your business is a startup that hasn’t been profitable, you may need to delve into your savings. In the early stages of a business, some business entrepreneurs do not take a salary at all.
#2. Living Costs
You may try paying yourself based on your living expenditures. You can calculate the least amount of money you can take. This can be accomplished by calculating your monthly living expenses and multiplying them by 12. Hence, if you normally live on $3,000 per month, you should aim for a salary of at least $36,000 per year.
#3. Market Rate
Finally, examine what a comparable position may pay you for comparable work. How much could you earn on the free market given your expertise and skills? To determine what compensation would be appropriate for your industry, consult the Bureau of Labor Statistics, trade periodicals, and trade associations, as well as other small business owners.
Reevaluating Your Salary
Make careful to examine your compensation on a frequent basis once you’ve determined it. If your business is still in its early stages, you should reconsider your wage every six months or so.
You may choose to transition to annual compensation reviews if your business is more established. As the owner, your salary will obviously be determined by the success of your business. If your business is performing well, your compensation will increase. If your business is less profitable, you will most likely have to reduce your income.
As a business owner, How Should I Pay Myself?
As a business owner, you can earn money. You can also earn a salary with the option of receiving an annual bonus, giving you more flexibility. Stock options could likewise be used to compensate yourself. But, from an accounting standpoint, drawing a fixed annual income is the simplest method to pay oneself.
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