The average small business in the United States makes an annual income of $61,756. This figure was current as of June 2022 according to payscale.com. The income of a small business owner may vary depending on the industry and specific location. It also fluctuates depending on how long you have been in business.
It does provide a general idea of what small business owners can expect to earn though.
Of course, income is not the only factor to consider when starting a small business. In this article, we will discuss some of the factors that determine your income as well as some of the pros and cons to being a small business owner.
What is a small business?
The vast majority of businesses in the United States (99.9%) are classified as small businesses. Meaning they have 500 or less employees. Here are some facts about small business you might find interesting:
- Almost 90% of small businesses have fewer than 20 employees
- Freelancing is on the rise, with more and more people working on their own
- Most small businesses start with less than $10,000 in capital
- Only half of all small businesses will last more than 5 years
- Cash Flow is one of the biggest problems small businesses face
Most profitable small businesses to own
Some of the most profitable small businesses to own and run include:
- Food Trucks
- Personal trainer
- Vacation rentals (such as Airbnb)
- Electronics repair
- Selling courses (marketing/business, academic, hobbies, language)
- Marketing professional
So, if you have a particular interest in or skills in these areas, they are businesses you might want to consider getting into for yourself because they tend to do much better than a lot of others.
Least profitable small businesses to own
There are small businesses that have a high chance of failing as well. Maybe you can be successful in some of these other businesses. Also, money isn’t everything, your enjoyment in your work is a big factor to many. However, it is important to consider these are not the most profitable in general:
- Real estate
- Assisted living/retirement (though there is growth in this sector)
- Car dealer
- Grocery store
- Specialty retailer
- Liquor store
Many of you may be thinking about some of the exceptions to this rule. I happen to know many people who have excelled in several of these categories. However, I can also say that as someone who has tried three of these types of businesses, it’s tough. I had mild success for a time with two of them, but failed miserably in another.
The problem is that for every super successful real estate agent, there are a hundred who are barely scraping by. These types of businesses either require a lot of money to get started with slim profit margins, or they have a low barrier of entry, allowing a ton of people to get into it.
Pros of being a small business owner
This is my favorite part of being a small business owner. All of the advantages. There are many that I really enjoy, personally. Here’s some of the best things about owning your own business:
- You’re in charge: This is probably the number one thing small business owners love about their work. You get to call the shots. Of course, you have to answer to your customers or clients. But, ultimately, you are the boss. You can make your own schedule. If you want to take a three-hour lunch, you can do that. Granted, you may not want to make that a habit. But, the point is, you have the power to make decisions about your workday.
- Creativity: When you’re in charge, you also get to be creative. You can come up with new ideas and put them into action without having to get approval from anyone. This is a great feeling, and it can really help your business to grow.
- Income is not limited by your employer: This is a big one. When you’re self-employed, your income is not limited by your employer. You can make as much money as you want. Of course, this is limited by how many clients or customers you have and how much work you can do. But, the potential for income is unlimited. You’re in control of how much money you make.
- Choose where you want to live: When you’re self-employed, you can choose to live anywhere you want. That might change to some degree once you establish your business, but you get to choose where you want to start. Secondly, some small businesses, like digital marketing, allow you to live anywhere you want in the world.
Cons of being a small business owner
As much as I enjoy owning my own small business, it isn’t perfect. There are drawbacks. Here are some of the things to be aware of before you take the plunge:
- Financial risk is yours: This is probably the biggest downside to small business ownership. When you’re self-employed, you’re responsible for your own financial stability. If your business fails, you could find yourself in a tough financial situation. This is why it’s so important to have a solid plan and to be prepared for the worst.
- Long hours: Many small businesses start to work their way into your personal life. You might be taking calls at all hours of the day or busting your butt even harder because you know it all comes down to you. This can be tough to handle, especially if you have a family. You might need to schedule time for turning off your phone or taking a vacation. However, that is hard to do, especially in the early phases when you desperately need the business.
- Stress: Because of the two things just mentioned, it can lead to a lot of stress. That is where loving what you do really helps. It also helps if you are able to make more money faster too. That can alleviate some of the stress that comes with small business ownership.
- Jack of all trades: When you just get started, you are doing all of the work. So, you do the stuff you hate sometimes. For me, that was bookkeeping and some of the other menial or time consuming tasks. It is really important to do those things, but they are not always the most fun.
- Employees: Hiring is one of the most difficult parts of having a small business. Whether it is just a virtual assistant, or the manager for your shop, it is important to find someone you can trust to help you run things. It is also important to find someone who shares your vision and is excited about the work. This can be a difficult task, because bad employees can steal from you and they can destroy the reputation you are striving for.
Clearly, it’s not all sunshine and roses, but these downsides are one of the reasons people don’t start their own businesses too.
Other things to consider if you want to become a small business owner
The hardest part of a small business is just getting it to become profitable enough for you to quit your full time job.
It takes a lot of dedication and hard work, but it is so worth it when you see your business grow. Seeing that trend of growth is empowering and incredibly satisfying.
Here’s a few tips for getting started:
- Do your research: Don’t just start up a business without knowing what you are getting yourself into.
- Create a solid plan: This includes your financial plan, your marketing strategy, and your goals for the next few years.
- Be prepared to work hard: This is not a get rich quick scheme. It takes time, dedication, and a lot of late nights to make your small business successful. But, if you are willing to put in the work, owning your own small business can be one of the most rewarding experiences you will ever have.
So, there you have it. These are just a few of the things to consider if you are thinking about becoming a small business owner. It is not an easy road, but it can be so worth it in the end. If you have what it takes, go for it! Your small business could be the next big thing. At least, for you and your family.