Entrepreneurship can fuel economic growth under the right conditions and when people become entrepreneurs for the right reasons. Furthermore, they are seen as the risk takers and trailblazers who shape the future economy. While these perspectives are valid, but not explain the whole story. Behind the scenes of every successful venture are countless hours of hard work, uncertainty and personal sacrifices that contribute to their personal success. Different students used platforms like Quizlet for quick summaries and flashcards, which have both advantages and disadvantages. The common disadvantages are financial risk and work-life imbalance. This article explores two disadvantages, along with the complexity of its nature.
One of the most significant disadvantages of entrepreneurship is the financial risk involved in it. As the start of any business requires an upfront investment, which may include personal savings, borrowing funds or taking money from an investor. It is different from traditional employment in which a paycheck arrives at regular intervals. Moreover, Entrepreneurs mostly face salary issues for months or even years without consistent income. In most critical cases, they do not get proper earnings on whatever they invested in their business. On the Quizlet platform, the flashcard for the disadvantages of entrepreneurship might summarise with this statement: “entrepreneurs may cause a high financial risk due to business failures”
Most entrepreneurs are not able to receive a regular salary in the early stages of their business. It occurs when the client delays payments, the supplier might increase their prices and the increase in an unexpected expense. This unpredictability makes it difficult to plan for the future, pay off debts or make large personal purchases. However, the psychological impact of not knowing about the future condition, such as being unable to pay their rent or cover other finances, may be a risky condition for them.
In many cases, entrepreneurs fund their ventures through credit cards, personal loans or even mortgages. Under any circumstances, if the business fails, then it will ultimately cause them a high Debt or may lead to Bankruptcy. According to the Bureau of Labour Statistics, as reported by Fundora, "20% of small businesses fail in their first year and 50% of small businesses fail after five years in business." This reality highlights the common disadvantage of entrepreneurship.
Another disadvantage that is mostly overlooked is opportunity cost. Entrepreneur who gives most of their effort with money into a startup give up their stable jobs or higher education opportunities. If the venture fails, regaining lost time and income is more difficult for them. On the other hand, even if the business becomes moderately successful, it will not provide half of the benefits that a traditional employee can get through their incentive packages. It may include the health insurance, paid leave or retirement contributions.
Another critical disadvantage that is often mentioned in the Quizlet flashcards is stress and a lack of work-life balance, with the statement “ entrepreneurs mostly work more than 60 hours a week, which leads to burnout. Entrepreneurship is one of the resources economists categorise as integral to production, the other three being land resources, labour, and capital. An entrepreneur combines the first three of these to manufacture goods or provide services. They typically create a business plan, hire labour, acquire resources and financing, and provide leadership and management for the business.
Entrepreneurs are frequently subject to a great number of professional stressors caused by their work activities and thus making them potential candidates for burnout. This phenomenon may threaten their health as well as their new ventures. Indeed, it has some detrimental effects because those new business owners have few resources, energy and skills that help them to deal with the psychosocial risks coming from the entrepreneurial burnout. A self-report survey to examine the psychiatric conditions among 242 entrepreneurs and 93 comparison participants shows that mental health differences directly or indirectly affected 72% of the entrepreneurs in this sample, including those with a personal mental health history (49%) and family mental health history among the asymptomatic entrepreneurs (23%). In addition, entrepreneurs reported experiencing more depression (30%), ADHD (29%), substance use (12%), and bipolar disorder (11%) than comparison participants.
External stressors are the things outside of the entrepreneur that drive burnout from working from home, and due to other things like deadlines, work situations that create stress. On the other hand, unclear boundaries between work and personal life often make it tough to switch off or can also contribute to more stress. This condition makes business more difficult to grow with peace or perspective. Even vacations or breaks are overshadowed by emails, emergencies or the fear of losing momentum. This hustle culture is mostly glamorised by the surroundings that cause extreme sacrifice for success.
However, entrepreneurship offers opportunities for creativity, independence and financial gain, but also comes with the serious disadvantages that are particularly simplified in the learning tools like Quizlet. A new entrepreneur should be aware of the disadvantages of financial risk and stressful conditions, so it will be helpful to create a better financial plan, mental health support, or to make clearer boundaries between work and personal life.
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