Your Own Business – A Case Study on Its Risks and Rewards

Introduction

Entrepreneurial ventures are a vital part of the economy. For the individual entrepreneur the potential exists to fulfill dreams and become financially independent. Over time we have seen entrepreneurial businesses grow into powerhouses, but also apparently successful business that went down the drain. An interesting observation is that entrepreneurs within successful businesses are sometimes unhappy and even depressed. This case study highlights the various risks and rewards that some of these entrepreneurs experience (names are fictional).

When everything goes wrong

Eric was in his late forties when an entrepreneurial opportunity presented itself. He was an accountant by profession and in a senior position at a medium-sized firm. A new franchise in the automotive industry was offered to him in another town. The opportunity was too good to ignore. Eric resigned, sold his house and took the money to start the business.

The franchise did not turn out to be what was promised. The franchisor was not very honest and Eric was not an entrepreneur at heart. He was passionate about cars, but not about the more technical aspects thereof. In the end the following potential risks became reality and it had serious consequences:

  • Social risk. When Eric and his wife left town they left their supporting structure and circle of friends behind. He worked long hours to build the business. The regular and pleasant social weekend get-togethers were something of the past. Their teenage daughter also had serious problems that they found difficult to cope with.
  • Financial risk. Eventually the business collapsed and Eric was declared bankrupt. At this stage he was in his early fifties.
    Career risk. Eric resigned from a good job with a good pension fund. When everything turned sour he tried to go back to his old firm. There were no vacancies. He accepted a lower paid job as an operational manager at a small entrepreneurial concern.
    Psychological risk. Eventually too many things went wrong with Eric. He got divorced, is very bitter today and often comments that he needs to work till the day that he dies.
    Is it worth it?

To have your own business can really be the best thing that you ever do (for yourselves and others). It is, however, very important to objectively look at it and to make sure that it fits your personality and risk profile. Entrepreneurship is not for everybody. The potential rewards must be balanced against the potential risks.

Copyright© 2008 – Wim Venter

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