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?

Jack was in his mid thirties when he and his partners had the opportunity to do a management buy-out of the manufacturing company that they worked for. Over the last seven years they turned the company around from making a loss to a company that is doing exceptionally well. Outsiders would say that this is the ideal situation to be in. Jack is experiencing the following reward:

  • Financial rewards. Jack became a dollar millionaire. He always lived within his means and he and his family can easily sustain a good living without him needing to work an extra day in his life.

Unfortunately Jack also sees himself as being trapped in a catch-22 situation. He feels that the price he pays for the financial rewards is too high. He often expresses the following negative impacts on his life:

  • Social risks. Jack had spent so much time out of the country that he grew apart from his friends and family. He feels he was not there for his father when he passed away on one of these trips. He also feels that his children’s is growing up and he is not there to experience it.
  • Psychological risks. Jack finds it difficult to balance the work situation and his personal life. At this stage he has a serious problem with depression. Fortunately his colleagues support him exceptionally well and they have formulated a plan for all of them to exit the business in the near future.

The fruits of success

Marc is a serial entrepreneur who started his first business in his early twenties two decades ago. He is very ambitious, made several mistakes and went bankrupt twice. Six years ago he started a business in a niche area of property development. He has an absolute passion for this line of business and in a short period became extremely successful. He thoroughly enjoys his success and believes that all the risk-taking and hard work was worthwhile. He experiences his rewards as follows:

  • Financial rewards. Marc is worth several million dollars and he used enough of this money to give him a passive income that affords him and his family a life of luxury.
  • Social rewards. Marc was always a very social person and managed to keep his social life intact. Today he is enjoying much of his social activities with friends on overseas trips and at his holiday farm and beach house.
  • Independence rewards. Marc always enjoyed being his own boss. He often said that he would rather sleep in a park than work for somebody else. In the end this attitude and determination paid off.
  • Growth rewards. On a personal level Marc used the opportunity to grow as a person. He learned to fly, did a lot of self-study to improve himself and people respect him in all walks of life.
  • Contribution rewards. The ultimate reward is the ability to give. Marc is giving a large proportion of his time and money to charity.

Summary

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